The growth agenda – how to transform for success
Companies determined to achieve responsible growth must transform using every 'lever' at their disposal
When planning for transformation, every organisation has a range of levers at its disposal, all of which are crucial for delivering growth. And all are interdependent.
Marketing is one common starting point as businesses focus on reaching new customers and keeping existing ones engaged. Sales is another priority, as is the commercial lever that controls pricing, promotions and margin. Creating an experience built around customer insight and expectations is a compelling opportunity for differentiation, and service is critical for customer retention. Then there is innovation and staying relevant with new and improved products and services.
However, while each of these levers is important in its own right, argues Dr Colin Light, Strategy& and Customer-Led Transformation leader at the consultancy PwC, the real skill in transformation is to combine them in the most powerful way for your industry and individual organisation. Dialling up marketing might be a crucial step in the consumer goods sector, say, while a greater focus on experience may be more appropriate in healthcare or education.
“While change is now imperative for all businesses, the right levers to pull, and the extent to which you need to dial each lever up or down, will vary by industry and by individual organisation,” Light says. “The challenge is to find the most effective route to new growth that delivers value for all your stakeholders. Increasingly, that means ensuring that growth is delivered responsibly, meeting demands for a renewed commitment to ethical practices and sustainability.”
While change is now imperative for all businesses, the right levers to pull, and the extent to which you need to dial each lever up or down, will vary by industry and by individual organisation
Kenny Wilson, CEO of iconic global footwear brand Dr Martens, says the quality and durability of his product is paramount. But the balance of experience, marketing, sales, service, pricing and innovation is essential for growth.
“The biggest driver of growth is brand value and that is driven by the product. If the product disappoints, none of the other factors are important,” Wilson says. “But the product on its own isn’t enough either. In every market, we ask ourselves what will a consumer pay for a pair of Dr Martens and that is a combination of what they think about the product, the service they get – in person or online – the channels and the experience. It’s about how they feel when they put on a pair of Dr Martens and that’s to do with marketing, positioning and the emotional content not just the physical content of the product.”
Organisations need to balance these levers appropriately, and remain responsive enough to adjust that balance and adapt as needs dictate and priorities change. And speed is of the essence. For some time now, powerful structural shifts such as digital disruption and the need to confront climate change have put businesses under growing pressure to identify new sources of value. But the Covid-19 crisis has brought matters to a head. As business leaders consider how they can “build back better”, they must also realise there is no one-size-fits-all model for transformation. Answers will, to some extent, depend on the current position of the organisation and the impact of the pandemic, but the question of how to pay for transformation is an integral one for all organisations. Given the impact of the pandemic, funding pressures are particularly acute for some businesses.
But the first step for every organisation is to develop a vision of the future. If transformation is to be a genuine step-change, there must be consensus on what the step-change is leading to. Establish that and there will be an end point from which to work backwards, so that organisations can plot a route to where they want to be.
“Your roadmap to transformation needs an author or a group of authors who can take charge of change and make it happen,” says Charles Baden-Fuller, Professor of Strategy and leader of the Strategy Group at Cass Business School. “Business model change is going to need board-level commitment and engagement.”
The challenge is how you change your whole business model – fundamentally, how you engage with your customers and how you monetise them.
A common mistake, warns Professor Baden-Fuller, is failing to recognise the importance of these levers working in combination. “The challenge is how you change your whole business model – fundamentally, how you engage with your customers and how you monetise them.”
This idea resonates strongly with Kugan Sathiyanandarajah, a Managing Director at KKR and Head of Europe for KKR’s Health Care Strategic Growth investing efforts. “For healthcare companies, the shift to value-based pricing is a particularly key transformation driver, whether that is proving the value of biopharma drugs or understanding the customer at an individual level within other sub-sectors,” says Sathiyanandarajah. “But that relies on change across the organisation, with digitisation and data-driven decision making.”
Every business needs to think about an approach to customer centricity that works for them, adds Sathiyanandarajah. “The growth of precision medicine – providing the right drug to the right patient - is one example of that,” he says. “But so is the shift to digital health, which enables people to secure the care they need on their own terms.”
It’s another example of why the holistic approach is so important, insists PwC’s Light. “No single lever of change will deliver the transformation required,” he says. “You’re looking to pull as many of these levers as possible, but in the nuanced combination that is right for your organisation and for all the stakeholders - not just shareholders - that relate your brand and what you stand for.”