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Legacy Approach to Top Line Growth Execution Not Enough for Today's Recovery

06.25.13

Although the overall U.S. economy has generally expanded since the end of the Great Recession in June 2009, a new report indicates that growth may be stalling and executives navigating this recovering economy should take heed.  The Institute for Supply Management’s May 2013 Report on Business indicates that growth in the U.S. manufacturing sector is slowing, a possible indicator of a broader trend that crosses sector lines.  ISM reports that the May PMI™ registered 49 percent, a decrease of 1.7 percentage points when compared to April's reading of 50.7 percent (a reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting). And while GDP has improved over 2009 and 2010 levels, recent quarterly performance indicates a slowing trend of GDP growth – as illustrated below by www.tradingeconomics.com.

Trading Economics

This news comes as managers in every sector grapple with charting a new execution plan for growth that suits the changed economic landscape.  After years of hunkering down, reducing costs and retooling product and service lines to match scaled back demand, managers must demonstrate competency of consistent top line growth and exceeding corporate growth goals.  

At a recent CEO round table attended by Ducker Worldwide -a CEO of a multi-billion dollar business further emphasized this expectation:  “ We have done all of the easy stuff to generate performance, now we have to focus on year over year top line revenue growth – otherwise the CAPEX we put into our plants to raise efficiency would be viewed as wasteful."    

However, Ducker Worldwide Managing Principal Chris Fisher says business leaders today must first understand the new dimensions of the playing field, especially if the market continues to soften as suggested by May’s PMI™.  “Shareholder expectations have shifted post-recession; they expect aggressive growth amid a generally improved economic climate.  But in order to see solid top-line growth in an uncertain market, managers need to change how they act on new demand data to make growth goals attainable in this new ‘Recovery Economy’.”

Refreshed data facilitates agile, accurate decision-making                                               

Understanding and solving the customers’ needs better than the competition continues to be a basic tenet of corporate growth, so executives should gather new data on how customers may be changing post-Great Recession. 

“Almost every market is measurably changed after the downturn, and managers need to know how their individual market has changed.  The winners in the recovering economy will be the players who reject obsolete market data in favor of actual on-the-ground competitive research and refreshed voice-of-the-customer metrics, coupled with extensive analytics,”said Curt Volkmann, Consultant at Ducker Worldwide.  And while European markets have been slower in recovery than their Asian and North American counterparts, Volkmann cautions that the region won’t stay mired in recession forever.  “European managers should be prepared to collect new customer research once the economy starts turning around there. The 27 EU countries and their populations have a high level of variability, making an accurate landscape assessment there even more critical.”

The right data, processed correctly, can also offer managers agility in decision-making and highlight the need for a course correction long before growth plans are hampered.  However, because the post-recession economy is so vastly and permanently changed, analytics can only take a business so far – people still need to act and move toward a new goal.  “We are seeing best in class corporations apply the FIST model – Factors, Implications, Strategies and Tactics – to help integrate and process information accurately and translate that into meaningful growth plans,” Fisher says.   

FIST Model

In recent consulting efforts led by Ducker Worldwide, this approach has led to change in focus and strategic intent that would not likely have been there.  Many companies are taking the time to refocus their business and try to do things differently – often a necessary step to outperform historic metrics.   Results can be seen rather quickly – as noted by one Ducker Worldwide client CEO:  “We have been layering-in many aspects of the Ducker plan.  This has created better proactivity, accountability, responsiveness, and ownership…May and now June are off to good starts in terms of the business & strategic drivers”.

Encourage Teams to Acquire and Apply New Thinking

Aligning a team toward a growth goal, as opposed to chasing many different opportunities, can be a paradigm shift for managers long-focused on survival.  "There's a certain amount of creativity that was necessary to come through the downturn, so the survivors have created a flatter organization that's more inclined to try to do a little bit of everything.  A good market can be a blessing but also requires some discipline from the team to not chase every opportunity that arises once conditions improve."  Fisher suggests that discipline can be found in solid data.  “Without current data about the changing economy or evolving customer needs, you can have the right team members doing what you think is the right thing but in actuality the organization is focused on the wrong things.”    Similarly, Volkmann suggests that companies should focus extensively on gap analytics, customer and competitive benchmarking and game theory to develop precision in their growth planning efforts.

Recently a global building products manufacturer entered the Great Recession in trouble and spent the downturn focusing on growth planning.  The Ducker team partnered with management and found the company lacked a strong vision in addition to its senior team being misaligned.  In the past five years, the company has invested in a plan that produced 5X growth over pre-recession numbers, and included a new organizational structure, a rebranding campaign, and an acquisitive strategy that moved the company into the Top 3 position in their market heading into the construction recovery.  

Respect the legacy but embrace the recovery – differently  

Whether or not smooth waters lie ahead, one thing is certain: managers experiencing the unfamiliar territory of the Recovering Economy must leave behind legacy issues and habits.  Fisher advises managers to look at growth opportunities under the lens of the new economic landscape but ensure the core business strategy is backed by teams who are aligned and have fact driven plans for execution. "Corporate leaders have done excellent with what they can control, the toughest part is next – and it’s alright to ask for help – and execute - differently" Fisher concludes.

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