What Do Sustained Growth Companies Know that Others Don’t?Posted: July 6, 2012
What’s required to grow on a sustained basis?
We hear this question a lot, so we decided to share a few qualitative and quantitative insights on growth. Before we jump to insights, some context setting is useful.
Sustained Growth is Hard, but Not Impossible
Our research of S&P 500 company performance from 1996 to 2006 shows that just 6% were able to sustain growth for 10 years running, where as 31% sustained it for five years straight during the 10 year period. A closer look at sustained growers vs. non-growers reveals some interesting differences:
- Companies that sustain growth for 5 and 10 years achieve compound annual growth rates of 12.7 and 13.3%, respectively vs. 4% for companies that don’t grow consecutively.
- Sustained growers across 5 and 10 years also grow their sales forces as higher rates, with compound annual growth rates of their sales forces of 1.91 and 3.1%, respectively, compared to a -2.2% compound annual growth in sales by companies that could not grow consecutively.
- As sustained growers across 5 and 10 years grow they decrease the proportion of sellers as a percentage of the overall workforce by- 2 and -3% per year, respectively, where as companies that do not grow consecutively see an average increase of 3% in the proportion of people in sales.
In summary, serial growth companies: realize a flywheel effect where consecutive years of growth begets higher growth overall growth, they grow their sales forces faster than companies that do not grow consecutively and they grow their sales forces at a slower rate than their overall work force.
So What Drives Sustained Growth Companies’ Ability to Achieve High Sales [Capital] Efficiency?
Our experience suggests that sustained growth companies draw on six levers to drive growth:
- Focus narrowly on growing sub-segments within markets. Sustained growers are exceptional at reviewing their growth history and analyzing segments to identify pockets of growth that they can serve efficiently. Become a master at thin slicing your markets to identify pockets of growth, the benefits are significant; 2-4x growth over average is possible in many sub-segments.
- Segment the sales force into specialized groups targeting segments with similar needs and buying processes. Specialization creates efficiency across the sales process and heightens focus on customer experience. Organizations that fail to specialize do so at their own peril. Too often, Sales leaders develop sales investment cases at the margin which contain flawed assumptions driven by historical experience in different markets under different sales processes. For more, visit my previous post on marginal cost justifications for sales force expansion.
- Regularly assess sales force coverage. Having the right number and types of resources covering your target segments is essential to maximizing revenue capture and sales efficiency. Yes, adjusting coverage is unpopular with the field, however, it’s essential to managing productivity and cost of sales, particularly as markets mature. If you are facing maturity or are already there, bite the bullet and create a coverage realignment process.
- Invest in defining, updating, and consistently following a sales process. Surprisingly few sales forces consistently follow a defined sales process, and fewer still regularly revise the process with customer input. This lack of discipline breeds waste, inefficiency, and customer discontent.
- Tightly align sales and marketing. Creating tighter alignment between sales and marketing, particularly in targeting, awareness building, and lead creation reduces inefficiency by preventing the expenditure of sales resources on unqualified opportunities or early, less valuable steps in the sales process. Serial growers know that maximizing quality lead volume is critical to sales efficiency and impossible, with the prominence of the web, for sales to do one its own.
- Invest in a sales management system. Serial growers consistently have strong sales management systems that clearly focus on managing activities to achieve interim goals which lead to business outcomes. Creating this linkage enables managers to utilize predictive metrics and have coaching conversations with reps that lead to skill development and behavioral change. See my previous post for more on this topic.
Now get out there and start working on these levers, you need not approach them in order. There is incremental value in each one, and perfect alignment across all six requires constant tuning.
If you are pursuing serial growth or have achieved it, we’d love to hear from you. Please comment here or @Evergreengrowth on Twitter.