GROWTH IS UNDERVALUED

Sustained growth is widely accepted as being fundamental to business success and yet most companies do notseem to be managing it effectively. Andy Brent looks at the causes of this paradox and how it can be overcome

Businesses need sustained growth, yet most lack a proper strategy to achieve it. Andy Brent

looks at the solutions

It is generally accepted that sustained growth is the beating heart of an organisation. But a robust rhythm of healthy sales results has been transplanted by the murmurs of stagnation among major consumer brands. Boards and marketing departments are standing over the patient reading the vital signs as normal. And yet the difference between a growing company and a stagnating one is comparable to a healthy athlete skipping gloriously over the finish line and a one-time champion staggering to the end.

Data shows that growing companies have lower costs, better margins, superior employee morale, an appreciating share price and a demonstrably longer chief executive tenure. As Mckinsey put it a few years ago: “Growth is magic!”

So why aren’t we better at it? And, more importantly, why aren’t we talking about the lack of it more seriously? Business growth is increasingly weak: a Bain survey a few years ago concluded that “nine out of ten management teams fail to grow their companies profitably”, while a large analytical study by author and business thinker James Allen showed that “90% of companies fail to hit the growth targets in their annual reports”.

That is symptomatic of a bigger problem. I call the contrast between the importance of growth and the failure of most companies to manage it effectively “the growth paradox”.

In my book The Growth Director’s Secret, I suggest two theories that explain the disconnect.

No accountability

First, most companies don’t take growth seriously enough. Of course, hitting the numbers is important in every business, but growth is treated as a byproduct of what happens when everything else is going well.

The laser-like focus and accountability for business functions such as personnel or budgeting are absent from the serious business priority of achieving growth.

Less than 5% of major consumer companies around the world have a growth director position on their senior teams. In contrast, 100% have a chief financial officer, about 90% a chief marketing officer and about 80% an HR director and an IT director.

How confident would you be in delivering your bottom-line numbers if your company did not have a chief financial officer? Or in developing the right infrastructure, training and development programmes without an IT or HR director?

And yet, in the crucial area of growth, senior management accountability is unusually lacking. Without clear accountability, it is unlikely that a business will have a clear growth strategy, executive alignment around growth priorities, sufficient resources allocated to drive growth, metrics to measure propensity to grow or the customer insights needed to position a business for growth.

The business world is just starting to wake up to this. Coca-cola’s recent high-profile replacement of its chief marketing officer with a chief growth officer signals that at least one major company understands how executive focus could transform product promotion into growth.

Autopilot decisions

But there’s a second problem. Most businesses fail to grow sustainably and profitably because they do not understand core truths about how consumers navigate hundreds of tiny decisions each day, exposing companies to the “big growth mistake”.

The big growth mistake is the assumption that most category purchases are up for grabs and the way to grow is to secure more of them than your competitors. This is just plain wrong.

Most purchases, in most categories, are simply not available to other brands. Many companies fail to understand this and waste time, resource and money chasing sales that they are unlikely to secure. Here’s why: most of the time, to cope with complexity, we make purchase decisions on autopilot from a small portfolio of favourite brands. Autopilot shopping accounts for more than 75% of purchases in all categories and, once chosen, autopilot brands are changed only occasionally.

Crucially, our brains subconsciously screen out attempts by other brands to lure us away. Because people do not waste much time considering the relative merits of one product over another in the same category, most efforts to switch our purchasing through expensive promotions, high-impact ads or complex media plans are wasted.

Autopilot decisions are made subconsciously and driven mostly by emotional factors. Conventional research tools that the business world relies on interact with our conscious brains and work rationally rather than emotionally. So they are of little use in understanding how to secure the autopilot preference conferred by our emotionally driven subconscious brains.

The key to growth is to understand how to become the dominant autopilot choice in your category.

For chief executives keen to elude the growth paradox, a positive first step is to assign accountability for the growth agenda or, better yet, appoint a growth director with the power and resource to effect transformational change. For chief marketing officers, now is the time to step up, seize accountability for growth, get to grips with the ways neuroscience research can help discover key moments of brand selection and establish your brand as the obvious autopilot choice.

If growth is what you want – and, let’s face it, it’s what all companies need – then this could well be the medical miracle you were hoping for.

Andy Brent is the author of The Growth Director’s Secret, a book that investigates the growth paradox. He has held marketing director roles at brands including Burger King, Sky, Barclays and Boots, where he commissioned the ‘Here come the girls’ campaign