Our experience suggests that for most companies growth is opportunistic and ad hoc. Many leaders struggle with the transition from one stage of growth to the next. They are good at reacting to gaps in the market or seeing market opportunities but less successful at making the shift towards a more professional and systematic approach which is necessary if the business is to achieve the next stage of growth. The result is that many businesses fail to deliver their growth objectives or achieve their growth potential.
This is backed up by research which shows that although two thirds of business owners want to grow their business, the majority don’t achieve their aspirations. Many business growth initiatives fail and only 1 in 10 companies achieve significant growth. This suggests that the majority of companies fail to successfully make the transition from one stage of growth to the next.
So what are the challenges that act as barriers to growth? Over the past four years the Matrix team has carried out over 150 strategy workshops with the leaders of growing companies. These workshops provided an opportunity for business leaders to review their markets, products and capabilities. The outputs from the workshops have given us a unique insight into the strategic challenges facing the growing business and some of the reasons why many businesses struggle to grow. As part of the workshop process the business leaders were asked to highlight the main strategic weaknesses of the business. The table below summarises the responses from the 150 companies:
(% of companies highlighting each area)
So what are these results telling us. Marketing comes out on top of the list, followed by Management Expertise and then Organisation Systems and Financial. However, further analysis of the issues covered under Management Expertise shows that that the main areas covered under this heading include lack of direction, lack of expertise in key areas and lack of depth of management. Indeed, if we combine the totals for Management Expertise (27%), Lack of vision(12%), Dependence on the owner (5%), and Lack of time (5%), then this suggests that leadership issues have been highlighted in around half of the companies.
The next two areas Organisation Systems and Financial are not surprising given that survey was with growing SMEs. Developing Systems (and Procedures) will always be an issue in any emerging business and finance is a weakness in many growing companies, particularly in the current economic climate.
From a development perspective we would suggest that the two core functional areas which need to be considered are Marketing and Leadership. Marketing is crucial in driving business growth while leaders are the key decision makers and drivers of change within any growing business.
The fact that marketing came top of the list comes as no surprise to us. Previous research which we carried out with business leaders in 2009 indentified that most companies spend less than 2% of turnover on marketing activities. In addition, when asked the question “ How many new marketing initiatives have you undertaken over the past year (new approaches or new messages)?”, 45% of respondents answered one or none and 80% answered 3 or less. This lack of spending and lack of activity flagged up to us that effective marketing is a serious challenge for the leaders of growing companies.
Further analysis of the issues covered under the Marketing heading identified the following recurring themes:
• Poor marketing message
• No clarity about the best tactics to use
• Lack of a systematic approach
• Lack of experience or expertise
• Limited investment in marketing
These issues are consistent with our previous research and experience.
Marketing in SMEs can often be regarded as something of a “black art” and as such presents many frustrations for the business leader. This research suggests that many leaders don’t understand what tactics work best and how much to spend to deliver their growth objectives. Little effort seems to being made to assess or measure effectiveness and as a result spending/investment decisions are fraught with confusion and uncertainty. Marketing is one of the main drivers of growth and unfortunately it appears to be a fundamental weakness in many businesses.
The outputs from the strategy workshops provide more evidence about the nature of the leadership challenges in the growing company:
• Lack of skills and experience
• The need for vision and direction
• Need to move away from the dependence on the owner
• Creating time to deliver growth plans
Again, the results of this research are consistent with our understanding of the leadership issues facing the leader of a growing business. Our Highest and Best leadership approach is about helping leaders to focus their time, energy and resources on growing their business. Successful business growth can only be achieved if the business leaders identify their Highest and Best areas and focus their actions and activities on these areas. This requires greater personal discipline. more effective time management, an increased ability to get more from your people and the development of strategic skills. These areas are directly related to the leadership challenges emerging from the strategy workshop process.
The pace of change and development within any business is inextricably linked to the pace of change and development of its leaders. This is particularly the case in the growing business where the leader is usually the owner and therefore key driver of growth and change. In order to achieve their growth aspirations and the achievement of the business potential the leader has commit to personal and organisational changes which tackle the barriers set out above.
The lessons from this research have again brought home to us the critical importance of developing Leadership abilities and marketing capabilities to enable the leaders of growing companies to deliver their growth objectives and achieve their growth potential.