A free monthly newsletter on growth, market expansion and profit

Vol 1 No. 4

March 2014

In This Issue

Are You Singing In The Rain?

Thought From James

The Profitable Growth Race

 

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Catalyst for Action

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Welcome to the latest The Race For High Growth Newsletter. Our mission is to help you make wise decisions about identifying and quickly instigating profitable investments in high growth markets and to build a prosperous business. The format is set up to enable you to rapidly apply and adjust the ideas to your own business. As I encourage all my clients, we learn best by doing, not over-thinking a concept or excessive procrastination. Feel free to ask questions and I will happily answer them if your reference TRFHG.

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http://twitter.com/JamesBerkeley

Each week you will find 5-6 pieces of advice for profitable growth personally and professionally. Join the thousands who read these "quick hits" every morning.

Are You Singing In The Rain?

Emerging from Winter in the Northern Hemisphere, businesses and people have overcome unparalleled cold temperatures in North America, floods in the United Kingdom, heavy snows in Japan, political strife in Thailand, worsening air pollution in China and a great many other hardships. Yet, we are hitting all time stock market highs on key bourses in New York, London and elsewhere. Prime residential prices in global cities are near to or surpassing all time records. Outbound travel from China and the less obvious countries such as Indonesia, Nigeria, Colombia and so on is hitting near records. Businesses and people are remarkably resilient even when politicians do their best to disrupt progress.

We are though seeing a marked re-evaluation of the short-term and long-term potential and the actual results attained in key markets for most mid and large-sized organisations.

This past quarter's round of earnings calls from North American and European multinationals has demonstrated increasing "clear water" between those businesses and indeed, whole sectors, who are operating in highly favourable (online retail, healthcare), moderately favourable (banking, utilities) and unfavourable (newspapers) growth environments.

For profit centre heads, senior global executives and others in the hot seat, here are some fast-track questions to make sense of the future:

  1. What in a single sentence or two is the value proposition attached to each product, service or relationship we currently provide? (i.e. how is the client or consumer better off)
  2. What is the ideal growth environment for success? (for example, open, low-inflation economies with high disposable wealth per capita, rapid growth of a highly literate middle class population with long life expectancy, high internet, computer and mobile telephone connectivity and usage, low competition, high barriers to entry)
  3. In the markets we are currently in, what distinctions have changed with the growth environment in the past 12 months or so, what impact will that have on our assumptions that underlie the profitable growth of our core offerings and over what duration? (Distinctions = cause of the change in the growth environment. Impact= none, temporary, partial, permanent. Duration = 0-6 months, 6-12 months, 12+months)
  4. What action is required now?
  5. Who is accountable for the results?
  6. How do we best communicate that to our key constituents to elicit the desired response? (customers, shareholders, employees, lenders and other communities)

The growth environment is fluid by nature. Most effective profit centre heads and their people move swiftly and maintain a high level of focus and discipline when catastrophic events hit. It is the slower, developing negative growth environment factors that are often overlooked. Executives and managers continue to stick to their assumptions and ride the wave of investment with blind faith. The problem with that is that the longer we disregard those changes in the growth environment, the harder and less effective corrective action is.

Equally, ripping up assumptions on the back of "one-off" events is neither a path to profitable growth or instilling confidence in your ability to arrive at your destination. So the outstanding profit centre head (the individual with profit and loss responsibility), needs to have or rapidly acquire the right behaviours, skills, resources and experiences, to anticipate change in the growth environment, the impact on their assumptions and the ability to quickly take action such that the business remains in the fast lane.

That is not so difficult to do, assuming you are looking at the horizon not simply reacting to the car in front of you or the one that speeds by.

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Thought From James

When we visualise the ideal growth environment, the reality is that we rarely find all those prevailing conditions at any one time. I liken it to how often in life do you find your personal relationships, your career, your social life and your home in a perfect equilibrium. Invariably, there is a "moving compromise" of sorts. So the same applies in the markets that you seek to profitably grow and expand in. You apply good judgment, you maintain sensitive stimuli and you remain alert to changes around you.

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The Profitable Growth Race

"The investor of today does not profit from yesterday's growth." — Warren Buffett

There is an old horse racing axiom "pace makes the race". The point being that races such as the Kentucky Derby or the Melbourne Cup can often be decided by the early fractions that are may be too fast, too slow or somewhere in between. Such that it provides a sufficient test to separate the great from the good or an insufficient test to allow the great and good to be upset by the ordinary.

The same concept applies in high growth markets, particularly in mid and large size organisations and the performance of leadership, business development and sales teams tasked with profitable growth. Assumptions are made, which are largely based on a perfect paper exercise about the market potential for rapid growth and expansion. Competitors, unless it is a monopolistic market, with access to varying levels of capital, people and physical resources, are required to make good judgements about how fast or slow to deploy it in order to end up winning the race.

In some high growth market opportunities what sounds like fast fractions might actually be a tad slow because of a lightning-fast growth environment. Conversely, seemingly slow fractions could be quite quick.

Here is a quick remedy:

  1. Seeing the performance of your competitors, or indeed those operating in a market you are considering entering into, can you determine whether the prevailing conditions in the past 1, 2 or 3 years were favourable to those early movers or the late arrivals?
  2. Was their deployment of capital, people and physical resources unusually fast or slow in that market? If there is little separation between the results of the strong and weak competitors, it is quite possible the best businesses went too slow. Equally it is possible to rationalise a strong competitor's loss on the basis that they went too fast. In other words, when the business or the leadership and sales team get more favourable growth conditions for the early mover, they can be far more successful in the next race.
  3. Once you identify those performances and upgrade or downgrade the performances, the real reward comes when those businesses and the people perform again so you can either bet on or against them.

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