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The Strategic Growth Framework

February 22, 2018

There are 3 key steps to determining the right growth strategy for your business:

Vision for Growth


Understanding what growth means for your business is the starting point.  Otherwise, as they say, “if you don’t know your destination, any path will get you there”.


Just like the difference between Speed and Velocity … 


A good way to conceptualise what strategic growth looks like is by comparing the concept of speed to velocity. 
 

If you paid attention in science lessons at school, you may recall that speed is defined as the time it takes to get from one place to another; whereas velocity adds the dimension of direction to speed. Another way to say this is that velocity is speed in a given direction.

 
A common tale to illustrate this difference was to measure the velocity of one person travelling at a faster speed, but taking an indirect route to their destination. Whereas the second person, travelling at a slower speed but in a straight line, arrives at the destination first. The second person had a slower speed but a higher velocity (and you would assume, was less out of breath when they got there!)


The moral of the story is the first person was travelling with more speed, but the second with greater velocity.


If you apply this analogy to growth in business, unfocused fast growth can be compared with speed, whereas strategic growth would be compared with velocity. How does this play out in real life?
 

What is your business vision? 


Ask most business owners what their vision is and the number one answer is a goal about size.  And this is usually an expression of the turnover of the business, or a proxy of it.

 

Whilst turnover is an accepted value driver for market listed public companies, the reality is that very few owner operated businesses are, or ever will be, listed on the stock exchange. 
 

Therefore, the assumption that the business will be fundamentally more successful the bigger it gets is a common misconception. This assumption often drives the pursuit of fast growth at any cost.
 

Preferable for a privately owned business is to be clear about what the end game is for this business, and in turn, to understand what will be the most effective driver for growth to achieve this vision.

 

Whilst not a comprehensive list, some of the various strategic objectives for growth may include:

  • Increasing profitability & dividend growth

  • Speed to market / market prominence

  • Economies of scale / achieving breakeven point / increased margin

  • To widen distribution channels / decrease reliance on key principals

  • Create market robustness / lesson vulnerability to competition

  • Increasing equity valuation multiple

Being clear about your Vision for Growth is the starting point for executing successful strategic growth. 


This is the way to create maximum business velocity.

 

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