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The Challenge of Driving Sustainable Growth

John O'Rouke and Karen Dale Torre

Introduction


The current state of the global economy is hardly the ideal environment in which to pursue a growth strategy. Most of the Eurozone (with the exception of Germany) is predicted to show less than 1 percent growth in GDP until 2014, and in the US growth may be pegged around 2 percent. Chinese manufacturing activity contracted at the fastest rate in seven months in June, driven by falling exports and weak domestic demand. Japan posted a monthly trade deficit with the EU in May—the first since records began in 1979—driven by weak European demand. Even India’s GDP grew at only 5.3 percent in the first quarter of 2012, almost 4 percentage points less than the first three months of 2011, when the growth rate was 9.2 percent.

It is clear that multinational businesses based in almost every developed and developing economy will need to grow accustomed to new market dynamics in which growth is slowing or slender and there are fewer but riskier opportunities for expansion.

So how do companies pursue a growth strategy when the odds are stacked against them? Part of the solution lies in the resolve of businesses to change their practices, to eliminate business and IT complexity, to embed more-agile processes, to strengthen customer and brand loyalty, and to make smarter, risk-based decisions around investment and growth opportunities that safeguard their position for the long-term.

Reducing Business Complexity


The elimination of business complexity is a constant challenge for most organizations but clarity of purpose and systems initiatives that contribute to the delivery of strategy should be high on the list of priorities. Two developments that have yielded notable success in reducing complexity and setting the scene for long-term growth are shared services and the cloud.

Shared services allow varied processes and practices from across the organization to be standardized and excess staffing levels to be removed. Introducing cloud computing into the systems landscape not only saves money but also encourages business agility, giving organizations the much-needed headroom to respond flexibly and quickly to new market opportunities.

Central to the responsiveness of an organization is the quality of its management information and its ability to capture and communicate a healthy mix of leading and lagging indicators that can provide better insights into its prospects for success. By using dashboards and scorecards in the same performance environment an organization can encourage better strategic alignment and operational analysis leading to much more confidence in long-term plans and sustainability.

Enhancing the Forecasting Process


It is also important to increase the frequency of forecasting—constantly “testing the temperature of the water,” formulating scenarios, assessing risk, and assigning probabilities. In this context, rolling forecasts are regarded as delivering superior accuracy for businesses facing constant change.

However, promoting sustainable growth is about increasing the top line as well as reducing costs. Customers can be fickle, and in many industries the internet and globalization have increased competition and lowered barriers to entry. Customer retention is vital to long-term growth, but do organizations know enough about their customers, such as their level of satisfaction and propensity to buy in the future?.

Leveraging Social Analytics


The rising influence of social media and its ability to encourage or dissuade customers from buying presents an enormous opportunity. Measuring “sentiment” for assessing brand loyalty, customer retention, and even sales forecasts is becoming a business-critical tool. Social media analytics offers massive potential for understanding customer behavior and securing long-term relationships and, by extrapolation, sustainable growth—aided by CRM analytics that can provide deeper insights into customer behavior, likes, and dislikes.

Finally, despite the bleak global trading environment there are both resurgent economies and pockets of market activity that offer superior returns. The difficulty is that new markets and acquisitions are often accompanied by greater risk. Modeling techniques such as Monte Carlo Simulation can bring more sophistication to the forecasting and planning process by leveraging mathematical techniques to set more realistic expectations about the range of possible outcomes and to incorporate risk weightings into the investment appraisal process. Risk mitigation measures and key risk indicators (KRIs) incorporated into forecasts help to ensure that organizations are not dissuaded from growth strategies but properly balance their risk appetite (or capacity for risk) with new opportunities.

Sustainable growth is surprisingly difficult to achieve and the evidence shows that very few companies, probably less than 20 percent, are able to drive growth consistently from one decade to another. But new technologies and techniques are helping to clear out the clutter and streamline processes so businesses can devote more of their energy to value-adding activities—such as strengthening customer loyalty—that contribute to long-term success. But sustainable growth is also about seeking out new markets, judging what’s on the horizon, and taking a risk-based approach to evaluating opportunities that can provide above-average growth prospects down the line.

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