09Aug2011

Profitable 15% CAGR

Growth is essential to maintain any business. With the GDP growing at 8.6% CAGR in India, a CAGR of about 15% for the top line of an Indian enterprise can be a stretched but realistic goal. It is very obvious that any growth must be profitable.

Profitable growth can be achieved either with value addition or cost optimization. A combination of both would be the ideal strategy. In this blog I try to explain how these two strategies can be adopted and with what methods one can achieve profitable growth.

The first step would be to prepare the portfolio of products and services and classify them as Unique, Scarce and Plenty (USP) based on i) availability in the market, ii) effort and time required to copy and !!!) known innovation potential.

Value addition becomes the main strategy for the unique products and services. The products and services classified as plenty must adopt mainly a cost optimization strategy. The ones identified as scarce need to use a combination of value addition as well as cost optimization.

Though it may seem very motivating to do business only with the unique products and services, it must be noted that over time these naturally move to the plenty category. Maintaining products in the plenty category is essential for the organization health as this keeps the organization fat under control and therefore mandatory.

Proactively defining the technology and competence roadmaps (Organizational Health Check Blog) followed by realization of these is the basic approach for profitable growth through value addition.

Establishing a thorough integrated MIS with structured and cascaded reviews (Sustainable Performance Blog) with a strong SDCA/PDCA (Learning Cycle Blog) apart from selective offloading, smart vendor management and excellent resource utilization becomes the basic approaches for profitable growth through cost optimization.

Of course both the strategies go hand in hand and have to be put in practice with a proper business plan, budgets and resources. A strong coaching culture (Perpetual Learning Blog) will ensure that these strategies become a culture and implicit in an organization.

One can do self check of the need to get an outside support for the development of a strategy for profitable 15% CAGR once a self-assessment of the organizational health check is done as we normally use a thermometer to check the fever before going to a doctor.