The growth journey of India Inc is passing through a different phase. It is also a difficult phase. The phase is different and difficult as compared to the earlier decade, where businesses witnessed huge growths. The environment has become relatively volatile, uncertain, complex and ambiguous due to both global and national issues. Many businesses are facing difficulty in growing and that too profitably.
I have been working with many such organizations and found five challenges they face with respect to growth. I have also been working with them on resolving these challenges by adopting change process aimed at making their organizations more adequate and ready for growth.
1. The Market Challenge
When the market itself is not growing or there are alternatives available in the market for the customers, growing the business becomes difficult. The challenge also arises when there is an over dependence on single market or on single product/ service line or methods of manufacturing. I have also come across businesses where over dependence on a single customer (e.g. in OEM driven ancillary businesses) becomes a challenge. The internal side of the challenge manifests itself in the form of organizational processes and capabilities developed only from the perspective of single product, service, technology, market or customer.
It’s not that such organizations do not attempt at developing new lines of business but any attempt to move beyond the existing is difficult, to say the least. Its something every CEO must seriously introspect upon even before the crisis starts to unfold. It takes time to build alternative business lines and a timely action is very important.
Solution- Define New Markets
2. The Fixed Cost – Variable Revenue Challenge
Cost in itself is not a challenge. After all, who can do business without incurring costs? The real challenge is when costs become fixed and revenue becomes variable. The upside is certainly good but downside is extremely harmful. Many CEOs are struggling with this challenge where in an eventuality of low revenue growth, the impact comes directly on profitability. Some of the common fixed cost heads they struggle with are the employees cost, over heads and the financial costs.
How can these costs be made variable is the endeavor of these CEOs. It’s a business model issue and involve decisions like disrupting the existing value chain, creating a new value chain, digitizing the value chain, building information based decision making, driving innovation, creating new relationships with suppliers and partners, exploring outsourcing of non core activities, building extended organizational capabilities etc.
Solution- Redesign Business Model
3. The Capability Challenge
If the first challenge was about lack of opportunities, this challenge is about inability to tap the opportunity knocking at the door. The capability challenge is the lack of organizational systems’ development to handle growth. In many such organizations the market offers growth opportunities, but the internal bandwidth is so clogged that their ability to deliver becomes highly compromised. Such organizations are in the early stages of their life cycle and do not focus adequately on developing the systems and processes as they transit over to the subsequent stages. They continue with old ways of working, which were relevant when they were small.
Their decision making is generally centralized at the top, use of technology is low, process metrics are either not defined or data not available, formalization is low, people are not skilled, practices are not standardized and institutionalized. In a nutshell, the organization lacks discipline required for handling available growth opportunities. It more often than not creates chaos for itself.
Solution- Streamline Processes
4. The Leadership Challenge
Leadership challenge is one of the important dimensions of the capability challenge but deserves a special mention. The founder or promoter CEO faces the dilemma of letting go of the control in favor of decentralized decision making and institutionalization of policies. Another related and relevant phenomenon the promoters face is that of succession planning. Many of them want their next generation to join the board. The second line of command needs grooming to take up independent responsibilities. How are these transitions managed has a big bearing on the capability of the organization and its ability to handle growth.
The emergence of multiple power centers, the power parleys and the power struggle, which often accompanies such transition, can be detrimental to the health of the organization if not managed and contained in time.
Solution- Recast Leadership
5. The Funds Challenge
Financial resource is the life blood of any business. Many businesses find funds challenge hindering their growth potential. There are many reasons for which the funds challenge may emerge. Some of these challenges are external (like high interest rates, market downturn, liquidity issues etc.), while others are internal (like lack of focus on collections, cash flow issues, big leveraged buyouts, bad investments etc.).
Solution- Cut Waste and Conserve Cash
Of course the biggest challenge happens when multiple or all of these five challenges arise together. They are interrelated and one challenge feed into the another. As a CEO you must introspect upon the following five questions.
– Is your organization aware of the challenges it faces?
– Which of these challenges is your organization currently facing?
– Are some of these challenges still latent but may emerge in future?
– Are you taking coherent steps to deal with these challenges?
– How are you dealing with these challenges?