It’s when you are given that target for next year, and suddenly you feel a tenseness in your upper back. It’s the “stretch goal,” and if you were doing athletics it might be fun, but in the context of your P&L leadership, this is a goal that if you miss it, the consequences will be real. Meet it and you grow your team, generate bonus pools and maybe get a new job. Miss it and you’ll be reducing your “costs,” slimming down your team and looking into a reduced role.
I have come to call the distance between organic growth and your target as “the gap.”
The gap is the shortfall that you experience when the pace of your year-over-year P&L growth falls below the organic targets that are expected by your shareholders and senior leadership. Most firms set an overall objective for the upcoming planning cycle, and then decompose the needed business results into sub-goals that are given to the P&L leaders as their targets. Each of these goals then becomes that standard by which your performance will be measured.
In the middle of my manufacturing operations career, I was tasked with leading a product group that had enjoyed fantastic year-over-year performance, and then had fallen on much tougher times. The senior team had set some very challenging goals, and frankly there was not a lot of patience to improve performance. We had some new product on the drawing board, but nothing that would be ready to move the needle for some time. Because of this, I learned quickly how to find areas that would unlock some value pools that were embedded unseen in the firm.
So where do you dig in? Well you may be tempted to call R&D and press them to move up all the dates on that new product or service. But what I’ve learned, is that there are systematic, proven and repeatable pathways that can give your R&D team the time to do their work right, and still meet your needs for business results.
Keep in mind, that If you have this challenge, you need to be committed to make some dust.
3 Ways to Unlock Your Hidden Growth
Run rates of teams are deeply ingrained and established over a long period of time, and you need to show up with your best diagnostic and influence skills to make progress. Once you’ve made the shift and have the ability to connect with your team and acknowledge the mutual challenge that you face, you can use this list of ideas to activate some work to find the needed upside.
Issue #1: Your sales and distribution team works in “a zone.”
If your firm has established channels, it’s a very good bet that the distribution team has settled into a pattern of serving those clients they know best, and have reduced their efforts in winning new leads that they don’t believe you can serve. We humans are pattern-making machines, and since it takes 10 times more effort to win the new account, the average distribution team will self select existing over new.
To go to work on your sales “zones,” you need to either go yourself, or bring on a skilled surrogate who will get out to the front lines and see what the value transfer and new client development looks like. This involves deep customer interviews, forensic work at trade shows and conferences, and a look at substitutes to your current offerings from outside your market.
This work needs to be approached with a very open mind, as you will find great insights in the most unexpected places: for example, a radio shop leader in an influential transportation department was instrumental in opening up a large business niche by being a highly-engaged beta partner. Through careful listening and a mindset of releasing new, mutually beneficial value, very significant new margin can be found.
In my case, we found that our successes had moved us to “farmers:” those sales teams who are good at working existing clients, vs “hunters” who are able to find a new path and client.
Issue #2: Your existing business metrics are hiding growth in plain sight.
I worked with a client who rigorously reported their market share using a vetted third party to deliver the data quarterly. The reports always showed that they were in the top 2 for every category that they surveyed. You know what’s coming next, right? There was an adjacent product category that was a substitute for their own product that was not on their radar. And when it came out of their “blind spot,” it had revenues and margins that were eclipsing their own. This other firm went on to develop a public market cap of a billion dollars, while this client remains a small fraction of that.
On the metrics, you need to periodically develop a completely fresh, organic view. There are always ways to get an unbiased look, and by hiring people known for stepping out of the box to review the structure of your data collection systems, you will save yourself getting blindsided by another firm.
Issue #3: Your people are only bringing you a small slice of “what’s going on” in your market space.
It’s not that they are doing it maliciously, it’s just that you have built systems that provide direct pipelines for information that confirms the “as is” strategy and path that you are currently taking. Your customer service people are not bringing you requests for strange prototype offerings. You are not looking over the returned or terminated products or services to find the deep whys until they exceed a certain threshold.
For your internal “listening,” you need to get exception reports in place – set up systems that absolutely bring all the crazy requests and unusual returns to your attention quickly. Either make the phone call yourself, or have a trusted right hand aid find out what’s up. I have personally found multi-million dollar markets using this technique. Best-in-class firms set aside time to receive minority reports and seek disconfirming viewpoints.
In my example of the product line I was working with, there were several new low volume, high margin businesses that were lurking in that data. And frankly, we found enough margin to keep the team intact.
These are examples of pockets of potential growth that exist in nearly every firm. The harder news is that it takes real work to access them and to get the potential growth to show up as real dollars and cents on the P&L. Each of the above opportunities sits inside a well protected pocket of human behavior and established systems, and you need to go to work on creating new behaviors through cycles of insight, application and follow through.
The good news is that every one of the above actions will make your business more robust and will help you to be a better leader, as well. If you found this conversation valuable, and would like to talk about how to access this growth potential inside your group or organization, it all starts with a 20-minute virtual cup of coffee. To get started, give me a call at 847-651-1014, or click here and set up a no strings attached phone call.
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