Is there such a thing as 'bad' growth?
The retail markets in the region and Dubai’s in particular are booming. Most retailers are registering high growth rates and have aggressive plans to expand their operations in home — as well as regional — markets and beyond. They are using a variety of routes such as organic, acquisition, joint ventures and mergers to achieve
The retail markets in the region and Dubai’s in particular are booming. Most retailers are registering high growth rates and have aggressive plans to expand their operations in home — as well as regional — markets and beyond.
They are using a variety of routes such as organic, acquisition, joint ventures and mergers to achieve these high growth targets. ‘Go for Growth’ is the current mantra. Even international retailers are also riding on this fast train, working with their master - and area development - franchisors setting stretching targets.
All the macro-economic indicators for Dubai are very favourable with Dubai rated fifth in the AT Kearney Global Retail Development Index and second in Global Retail Apparel Index. The sun looks to be shining all the way for retailers. Or is it?
Maybe now is the time to pause and take stock. It is an old saying that ‘Nothing fails like success’. The history of retail, service and other businesses shows that many of the strategic growth initiatives to deliver against ambitious plans fail, if these initiatives are not managed effectively.
This growth race is putting a lot of pressure on people/resources/capabilities and infrastructure with increasing degrees of organisational complexities underpinned by diverging cultural perspectives in home, regional and international markets.
It is, therefore, critical to choose and implement the right context to manage strategic growth initiatives successfully. According to research from Booz/Allen/Hamilton (BAH), many of these initiatives fail, more often than not, because insufficient attention is paid to the process issues around the creation and execution of the strategy in the specific context of the company and the marketplace in which it operates.
To achieve superior growth and above average performance, it is vital that businesses realise that they need to focus not only on ‘what’ (growth strategy) but also ‘how’ (the execution).
Our work in MENA region and Asia, which builds on earlier BAH work, suggests that there are six “rights” businesses need to focus on to achieve success in growth initiatives:
1. Right scoping - Who generates initiatives? Who selects? How? Branding, segmenting, targeting and positioning issues.
2. Right people – Selecting right people; training, team dynamics, motivation, capabilities/competencies issues; balancing creativity vs. efficiencies.
3. Right investment – How much? When? Where? How long? Maximising bang for the buck; stopping too early vs. throwing good money after bad.
4. Right culture – Cultural understanding/grounding/ application; keeping it going- all in relation to people/ products/services.
5. Right execution – Right KPIs, processes and systems and feedback loops; monitoring; right involvement at ‘all’ levels of organisation; managing politics; creating right alignment within the organisation.
6. Right governance – Decision rules; information flow; issues related to focus, consistency; maintaining momentum with right, timely and relevant intervention; coaching, mentoring, supporting, praising; leading vs. letting go.
It is acknowledged that businesses differ in their approaches to these six ‘rights’. Our work indicates that there are significant variations in senior and middle managements’ involvement in formulating and executing growth strategy. There appears to be five ‘common’ approaches to growth initiatives:
1. Collegial – Growth ideas emerge from everywhere through creative process; semi-democratic decision process.
2. Goal setting – Top management sets a vision of growth, gives objectives and then stands back.
3. Context setting – Senior executives create framework and ‘rules of the game’ for emergence and implementation of growth initiatives but refrain from day-to-day involvement.
4. Directing – Top management sets the vision, the goals for content, process and time-line with a top-down approach.
5. Hybrid – Mixture of one or more of the above approaches.
Our work also suggests that no single approach consistently outperforms all others. The choice relies mainly on four factors: the characteristics of the company; business sector; nature of specific growth initiatives; and culture of the owner, management and the organisation.
In summary, the pressure on businesses to grow is intensifying in the region as demand side is still growing significantly. This poses several important and complex challenges, against the backdrop of constantly changing consumer and market place dynamics. It is critical that the business choose the right approach to attain the desired goals.
It is worth remembering that there is a ‘good growth’ but there is also a ‘bad growth’ and it is important that the senior management can distinguish between the two high growth targets.
By: Prof. Nitin Sanghavi