Steady growth is an important goal for most business leaders, especially in an inflationary environment where economic uncertainty prevails. Organizations that can grow even as markets contract will come out on top. Improving EBITDA now, while navigating economic unpredictability, will support stable growth and fund a sustainable future.
Sustaining growth during a recession requires bold leadership that transforms processes and people – with people playing the most important role. It’s easy for leaders to focus on survival, but taking an offensive approach is the best way to emerge stronger than ever.
In this second installment of the Perfect Storm series, we’ll be diving into managing growth. Be sure to read our recent blog where we outline what comprises a Perfect Storm, which we define as the unusual combination of events in today’s business world that have produced an especially powerful and difficult environment for leaders to navigate and lead their companies into the future.
Key areas of impact for managing growth
Navigating through the Perfect Storm demands prioritizing your efforts. To manage growth in an unstable economy, emphasize these areas:
- Commercial excellence: During an economic downturn, make sure your people stay close to your current customers and understand their changing needs. This allows for more cost-effective cross-sell and upsell opportunities. Importantly, identify those customers that make a greater impact on your revenue and which ones have a higher cost to serve. Develop bespoke plans and revise your commercial strategy for each so it reflects profitable margins throughout and an understanding of your supply chain costs per customer.
- Pricing strategy: Avoid the temptation to cut or raise prices across the board. Costs increase at different rates—knowing the entire channel costs for each customer and product is crucial to maintain profit margins. To do this, use robust data analytics to develop pricing tools that consider your end-to-end costs. Then, make sure your sales team understands new pricing strategies and stay the course! A sale for the sake of a sale is not as important as a sale that provides profitable growth.
- Budgeting: Everything is changing, and fast! How do you budget for 2023 when we don’t know the rate of inflation, how a recession will affect you, or the supply chain impacts on your business? Start by identifying variances between planned and actual performance to date, then identify optimization initiatives and process improvements to close those gaps. Consider creating a series of models that looks at market demand changes based on known economic forecasts, and support those models with different operating scenarios. Don’t let the short-term economic conditions derail you from your long-term strategy and investment opportunities, especially as you grow your customer base through strong commercial and pricing strategies. Make sure your budgeting models are inclusive of opportunities to seize market conditions.
- Customer excellence: The Perfect Storm is a big challenge for your customers, too. As they face continued price increases, providing exceptional customer service matters more than ever. One study found 58% of consumers will pay more to receive great service. Ensuring your people are aligned with your company’s values and vision is the first step to provide outstanding customer service to all of your clients, regardless of the revenue volume they may bring.
5 value creation levers to sustain growth
Within the key areas of commercial and customer excellence, pricing strategy, and budgeting, your organization can start pulling some specific value creation levels today to increase value and reduce costs. Here are some levers we recommend you start looking at so you can get ahead of the competition and grow faster than the rest:
- Improve R&D cycle time, invest in innovation, and monitor market demand changes: Meeting today’s challenges requires new products and services. Recognizing the evolving needs of your customers and shifts in market demand will help ensure that your product and service offerings remain relevant. This, in turn, puts added importance on getting products and services to market faster. Reducing your research and development (R&D) cycle time enables this, allowing you to test out new market segments, gain customer feedback, and expand your offerings. To do this, make sure you have a clear process to approve conceptual and prototype product/service changes, ensure all stakeholders in the process are identified, and understand how to move this along without unnecessary delays. Tie this to your strong commercial excellence strategy and you can get ahead of the pack!
- Conduct True Profitability analysis: In the midst of a Perfect Storm, businesses that are focused on managing growth need to be analyzing their True Profitability across all products and customers. Use a data-driven approach that provides real-time insights into supply chain costs compared against revenue streams across all products and customers. This helps you focus your effort on where it provides the most benefit for the company. To many, a True Profitability analysis is an eye-opening experience of hidden costs through unknown data.
- Strengthen key account management: Weathering a Perfect Storm means managing and maintaining relationships with your key customers. Strengthening this foundation of your business, and ensuring these relationships reflect True Profitability, provides a bedrock for navigating these uncertain economic times. Place special attention to how you are managing client portfolios and if you have a strategy in place that is being implemented on a daily basis to advance each portfolio. Understand your customer segmentation and drive sales efforts to focus on those accounts that have the highest impact through focused account plan execution.
- Prioritize salesforce management: Your salespeople have the keys to growth, you’ve known that for years but it’s now time to ensure they are properly trained and managed. You want to ensure that your sales leaders can understand where and how their sales team is spending their time, what kind of pitch they are using, and if it matches your commercial and pricing strategy. Additionally, they should have insight into if your salespeople have weighted the value of their customers based on cost-to-serve and customer True Profitability, and if they can truly articulate the value of your offers. Strong sales leadership is your key to success! If you haven’t already, galvanize your sales leadership to grasp all the levers of growth through the Perfect Storm so they can support their team through active leadership skills.
- Keep an eye for M&A activities: How you budget for 2023 and beyond should remain alert for opportunities to seize the market and grow your business. Recessions will make some businesses vulnerable and you may want to look at investment and divestment opportunities to either augment your value proposition or release cash so that you can make those important investments. Harsh economic times are known to be opportunistic moments of growth for those that are constantly looking to improve the value that they provide to their customers. This is where knowing your long-term vision is critical! With a very clear vision of where you want to take your company, you’ll be able to look for external growth opportunities.
Assess your organization and get a roadmap to implementation
Managing growth should be a top priority as you work to steer your business through the unique challenges our current Perfect Storm presents. To emerge from this Perfect Storm successfully, start analyzing your organization using the five value creation levers above. You don’t have to act on all of the levers at once, you may find that some are more fit for you than others or you may already be acting on some of these levers with your improvement team. The first step, regardless, is to know where you are today. From there, you can develop a roadmap—either internally or with the help of Proudfoot—to accelerate change and create solutions for sustainable growth.
Proudfoot is the first organization of our kind to recognize and approach the current climate for CEOs in this way. We’re currently working with clients worldwide to help them manage growth during these unprecedented times. By working alongside clients today, and over the past 76 years, we know how to help you not only cash the check on all of these initiatives but also engage with your people so that they get behind the change, drive the change, and maintain the change. In any time of evolution, but especially during volatile and uncertain times, it’s important that any transformation program you embark on brings people along and provides your employees the skills they need to realize the value of change, for themselves and for your company.
In the next installment of our Perform Storm blog series, we’ll cover how to manage operations during inflation, including supply chain strategies and working capital management best practices.