Achieving the four imperatives for successful growth models
PA’s work and research in the area of profitable business growth leads us to conclude that successful growth models evolve from business environments where the four imperatives for profitable growth have been achieved. These are:
PA’s framework above illustrates not only the four imperatives and their key elements but also the required sequencing of the first three and how adherence to, and integration of, the fourth is fundamental to long-term success. Below we discuss each imperative in turn, summarizing the myths and truths behind each one
Healthy business
A healthy business is fundamental to growth because growth is dependent on appropriate and timely investment. Investors in turn must have confidence in management and its employees.
This can be achieved by applying value-based management principles, a strong track record and honest performance appraisal. Management must take tough decisions. Letting go of poorly performing businesses and stopping growth projects with poor returns prevents the drain of resources from the business and the confidence of investors.
Attractive positioning
Achieving sustainable competitive advantage in an attractive market is a fundamental strategic goal. There is no point in bringing good ideas to market if the returns can be taken by stronger players.
By achieving attractive positioning, competitive ambition, valuable customer selection, and supplier, channel and partner bargaining power, businesses maximize their best new ideas.
Continuous innovation
Being complacently profitable and competitive is simply not enough. Eventually, ambitious competitors or new entrants will come up with a better way of doing things. All of the respondents who helped us with our follow-on discussions were surprisingly firm on this point.
Continuous Innovation harnesses the power of early market opportunity evaluation, refreshing and extending the customer experience, and aligning marketing effort with competitive position, to ensure that innovative competitors do not overtake the business.
Sustainable momentum
Profitable growth brings its own problems; the company grows too; the seams of current opportunity will soon be mined out. To sustain profitable growth, a company must extend its reach. Yet the open communication and creativity that fostered earlier improvements and innovations may be stifled by the increased formality of management and control that comes with an increase in size.
Sustainable momentum addresses business 'growing pains' and threats from followers, by using acquisitions and partnerships to consolidate market success and by establishing distinctive organizational capabilities that help turn great ideas into great businesses. We demonstrate how to act on these imperatives in our report 'Long-term profitable growth'.
