Barriers to Growth

Many companies have been affected by the current economic crisis. For some, this was the end. For the rest, it’s possibly a good time to observe revenue behavior and think about recovery or growth.

Aside from external factors, such as the economic crisis and covid, there are many internal factors that can impact the growth of an enterprise. They include weaknesses in the company’s strategy and organizational factors related to talent, org structure and functions.

Weaknesses in Strategy. Not all companies question and review their strategy regularly. A wide range of entities leave strategy on a secondary level. From those who grow in messy ways, to those who fall victims of their own success. Whichever the case, if the company understands well its market, how trends impact it, what differentiates them from the rest, and has mindful positioning, it’s more likely to be able to respond to market changes, benefit from opportunities and make the best use of its competitive advantages.

When a company grows in a disorderly way, without a clear path, it loses sight of opportunities, acting on what is easy without looking at the whole picture. For example, an entity can diversify too fast and separate from its core business prematurely acting on perceive opportunities and, thus, loosing its base revenue. Another example is a growing company that has operational problems masqueraded because of growing revenues, when demand reaching a certain level, they cannot perform well, and revenues fall.

In the case of companies that are victims of their own success, many things can happen. Having a successful core business, they stop innovating and entering new businesses because they don’t want to go through the growth curve and are used to the high margins of the core business (i.e. Kodak). On the other hand, they can have an overestimation of the value of the brand and face another reality when a competitor brings a disruptive price or value proposition and takes away a big chunk of the market.

To avoid this, it is necessary to invest time to think about the future, understand trends, and structure efforts. Make the important questions. For example, if the current market is saturated, ¿what other adjacent markets or industries could the company enter to keep growing? ¿what trends threaten our revenues? ¿how can we be better? ¿who could we be allies with? Understanding the industry in more dept and contrasting that to the differentiators and capabilities of the company, allows us to establish a clear positioning, understand what to offer and to whom, and how to grow in time. Developing a structured growth plan, that looks a few years ahead, is the first step to avoid stagnation.

Organizational weaknesses. Talent is key to the growth of a company. When an enterprise depends on a few key people, and looses then, it suffers much in the process. Limited knowledge, experience and capabilities can also affect growth. If the company saw its number of employees go down because of the pandemic, or if it does not reach basic expectations, it must correctly size its workforce. These are some of the reasons why it’s important to have the necessary people on the team and give them opportunities to grow. This is especially important in companies without a formal talent development function.

But talent is not the only organizational weakness that can affect a company’s growth. Lack of organization and prioritization can wear out anyone. Beyond strategy, when there’s lack of clarity in the functions and responsibilities of each person, many end up doing thing in which they are less productive, the everyday work eats market opportunities. Furthermore, having a clear structure for decision making is crucial, not having clear decision rights clearly defined and properly centralized or decentralized can delay decisions at the board, CEO and middle management levels. And delaying decisions hinders growth. In order to grow, there must be an effective and efficient operation in place, and an understanding of structural weaknesses to ensure the company has the capacity to enter new businesses in a profitable way. The barriers to growth are many and it is important to recognize them. An enterprise that knows its competitive environment and its capabilities, that understands what to invest in and where to improve, that can make the time to visualize the future and plan, that nurtures its team and its constantly improving, is a company ready for growth.

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