Tag Archives: Business Strategy

Growth Management: The Critical Success Factors

Since the middle 1970s, there has been a noticeable change in the business makeup of the American economy — from the managerial economy of the 1950s to the entrepreneurial economy identified by Peter Drucker in his 1985 book, INNOVATION AND ENTREPRENEURSHIP. I believe J. P. Industries (JPI) was one of those companies.

Now, the companies that have been started and emerged in the past decade or so are seeking ways to employ growth management to direct their businesses for the future.

We view that challenge in the terms once expressed by the noted British author and politician, Benjamin Disraeli. Said he: “Change is inevitable. In a progressive country, change is constant.” And I will change it to “accelerating”

Change is evident everywhere – governmental regulations, business cycles, national and global economies, public elections. All affect how businesses grow.

The questions which those changes create, are questions which most managements ponder regularly. As JPI  grew from a start up to annualized sales in excess of $600 million, we arrived at some answers that have worked for us.

Largely, our direction is determined by what we have identified as “growth management.” To us, this has several elements. We’ll discuss three specific elements here. Later in the article, we will return to the definition and additional factors which have been important to our company.

o  A sound “growth management” plan.

o   Reasonable, attainable goals.

o  A flexible, adaptable but Decisive management process.

Critical Factors for Growth Management

You must have a plan to succeed … or you never will, but be flexible and decisive.

That is a belief we all share; it is part of our vision for the business. By planning, we mean consistent, regular review of all operations – competitive elements, numbers, people needs, new technologies we can employ in manufacturing, market shares and direction, and not necessarily in that order or limited only to those elements.

A second “critical success factor” to plan and control growth is to maintain a fluid style, to be adaptable, flexible, and opportunistic. That is, constantly be positioned to take advantage of strategic growth opportunities. This is difficult to do, particularly in an older company. However, it can be accomplished through fostering the “entrepreneurial spirit”, through motivational techniques, communications, and appropriate rewards to those who help build and manage growth.

Indeed, growing any corporation requires a blend of techniques to motivate and reward those who grow businesses.

Here are several additional factors for a company’s managers to have in mind about growth:

1.  Globalization. The world is becoming the market place. Companies must learn to contend with planning growth in a variety of nations, not just domestically. Companies must become versed in cultures of countries where they do business – and speak the languages of the people in those countries.

2.  Understanding Markets, It is not sufficient to just package and ship domestic products. To grow, companies must know the intimate details of how to sell in many nations – distribution channels, pricing, hidden elements.

3.  A Questioning Nature. It is becoming more necessary to be “hands on with details.” People involved in managing growth need to know what questions to ask, when, and how.

4.  Adeptness to Technologies. A variety of new technologies are impacting all businesses. These must be understood by those directing growth. Trends with these must be identified and directed. New computer software, manufacturing methods, and other advancements in technology must be utilized to boost productivity.

5.  Building Teams. People must subscribe to the vision of the company in which they are managing growth. They must understand the role, direction, and philosophy of the business.., and work to make it happen.

6.  Size Is A Key Element. Problems with growth occur as companies get larger. Somehow, as people are added, bureaucracies form, new layers of management appear on the organizational chart. As a business grows, it is wise to be very precise about what new services or managerial functions must be added, which can be acquired outside, or done in existing operations.

7.  The Simpler, The Better. Do not permit redundancies to occur. They create overlap. Keep organizations simple with direct reporting relationships, accessibility to people who have the information. Use new and emerging computer technologies, such as computerized executive information systems, to deliver information in ways that are immediately useful to all involved in the growth aspects of the business.

8.  Communications. Many companies pay it lip service. We believe communications is a business discipline just like finance, sales, or manufacturing. We diligently practice communications at all levels. We work to have employees at all levels understand the company. The core of our efforts in this area are simple, plainly worded mission statements and fundamental management systems.

Finally, we work hard to effectively conduct the basics of the business –the blocking, tackling, and routines which are repeated daily. When taken together, these make up performance and help us to manage growth.

Now, we’ll go back to the way we have defined and practiced “growth management.” There are three major components to growth management: strategic foundation, leadership development, and human resources commitment. Each of these components has certain key elements.

Strategic Foundation

Our vision when the company began in 1979 was to build a durable goods manufacturing business in developed industries by acquiring existing but underperforming companies. Further, it was to improve the operations we acquired, to meld them into strategic business sectors, and to manage them for growth.

We did not seek high technology (product-wise) businesses. Rather, we opted to utilize high-tech manufacturing methods to produce low-tech products –gaskets, bearings, camshafts, bushings, toilets, bidets, showers, hardware.

Our criteria for acquisitions included the following:

  1. Add companies which leave us consistently balanced in market segments which are growing,
  2. Mitigate the effects of issues not in our control, such as business-cycle variations, national economies, politics, governmental regulations, taxes.
  3. Offer synergistic benefits to at least one existing business segment.
  4. Have established market niches.
  5. Have identifiable advantages over competition.
  6. Offer potential for sound long-term growth.
  7. Have a relatively quick profit improvement potential, as well as good balance sheet, cash flow generation potential, and reasonable purchase price.

During the process of negotiations for the acquisitions, we develop a detailed action plan, a “how to” document which covers the first three years of that business. We manage to that plan, immediately upon closing the deal, always maintaining the strategic posture of flexibility, of being ready to take advantage of opportunities when they arise. And they always do.

We never take the success of a new business for granted. We monitor results and evaluate our action plan to insure that it is being properly administered. We make changes, adapting to business conditions as events warrant.

Leadership Development

This second component of growth management is equally important. You need a timely process for adding management as the company grows. You must foster an atmosphere to create management interaction. You nave to encourage personal growth.

As a company grows, delegation is imperative for survival. New management people must be added to bring needed skills and experience to the management of growth.

Beware, however, that you do not build a top-heavy corporate staff and hierarchy that you automatically drive up the complexity and overburden the decision-making process. Again, simplicity is the key.

Human Resource Commitment

People motivation and skill development is the third equally important part of managing growth. Human resources must be cultivated with the same, if not greater, diligence as capital, property, and equipment.

We have a corporate philosophy, “Better Makes Us Best”, which assists us in this area. The philosophy is simple: by encouraging every one of our more than 7,500 employees to do better each day, the entire corporation benefits. We ask all members of the J. P. Industries team to set goals, to strive to reach them, to learn from mistakes, and to work to overcome obstacles and challenges and become better, and better, and better.

Key Points in Summary

  • Change is inevitable. Adjust to it because it will not adjust to you.
  • “Growth management” means a sound plan, reasonable goals, and a flexible opportunity-oriented process.
  • Factors important to growth management: globalization, understanding markets, questioning nature, technological adeptness, team building, size, simpler is better, communications, and instilment of motivation to do better.
  • Execution of fundamentals equals performance.

Growth management’s main components are: strategic foundation, leadership development, and human resources commitment.

“Dynamic Management of Growing Firms – A Strategic Approach” by Lorraine (Hendrickson) Uhlaner and John Psarouthakis; Univ. of Mich. Press, 1998.

This book has its roots in the field of entrepreneurship but it straddles the fields of strategic management and organization effectiveness. It is the result of an extensive research effort and hands-on experience. Buy this book.

Think Strategically but Flexibly and Decisively for Success

Think Strategically but Flexibly and Decisively for SuccessWe live in a time when business strategies must be dynamic, flexible and responsive to the ever changing and fuzzy conditions around us. The success of a business depends, even more so today than ever before, on managerial leaders who think strategically and have a well-defined but flexible, proactive strategy formulated on not “enough” information much of which is “fuzzy” and they implement decisively.

Such decisive course is charted by leaders that understand the process of management and the basic elements of competition within a free market economy. They are intellectually agile, flexible persons who can anticipate change and respond smartly and timely to new realities.

During the years of my entrepreneurial activities we examined a couple thousand businesses in the USA and Europe that were failing to perform well and were in the verge of financial collapse. We looked for and identified the basic reasons that caused the underperformance of these enterprises and found the following basic but avoidable factors: The absence of bold thinking; The absence of strategic thinking; Proliferation of products not relevant or non competitive to the market; Plethora of employment non relevant to the competitive line of products that, correspondingly, created unnecessary high costs; Managers have become salary takers, devoid of any sense of entrepreneurship or competitive urgency. It was simple to conclude that management of such companies has abandoned any sense of such dynamic but flexible strategy formulation and, therefore, gradually move toward degradation and failure.

Briefly, if a business is to succeed must have a “dynamic” and “innovative” strategy developed and implemented by able and skillful decisive managers that understand the importance of having flexible strategies containing alternative components of action and further more understand the process of decision making for the effective application of the strategy.