Finding the formula for growth

Dr. Burkhard Schwenker, Felicitas Schneider, Dr. Christoph Kleppel

2004

Operational excellence and successful growth strategies go hand in hand

To get the growth algorithm running in "perpetual motion", companies must be ready and able to grow, and must shift their strategic and operational focus accordingly. This is the only way to trigger a self-perpetuating process that can promote the company to the ranks of global or industry-specific outperformer.

What we have said so far can be summed up in the following statements about growth:

• Growth is the only way for companies to achieve sustainable – i.e. substantial and permanent – increases in value.
• Since free cashflow is essential if a company is to invest in growth (directly, by providing the funds for investment, and indirectly, by boosting the company's market value and thus opening up attractive external financing options), it is imperative for companies to strive for operational excellence.
• This being the case, there is no inherent contradiction between comprehensive restructuring programs and growth strategies. On the contrary, this combination may be a necessary condition to quickly generate free cashflow. Whenever a company has set its sights on growth, restructuring becomes an integral part of any forward-looking management strategy.
• The existence of opportunities for growth always signifies a compulsion to grow. If rivals are quicker to recognize and exploit these opportunities, a company will inevitably see its own position deteriorate.
• Fundamental growth patterns always work in two dimensions, i.e. they help achieve two goals: to reduce costs and generate cashflow on the one hand, and to grow on the other. Precisely this duality is the essential key to self-perpetuating growth.