How do you avoid the Big Growth Mistake?
Many businesses and their directors are understandably reeling from the current chaos as a result of Covid-19. It has affected every facet of our lives - work, home, community, the globe. Planning and thinking about business growth is far from our minds, when first and foremost, we’re focused on how to survive this extraordinary upheaval intact.
The good thing is that it won’t be like this forever. You’ve likely already put contingency strategies in place, and now is the time to consider how to position your business for growth, so that when the post-Covid starting gates open, you’re ready to take the lead.
It’s generally accepted that sustained growth is a key indicator for long-term success in a business. Growing businesses manage costs and margins better, have healthier employee morale and share prices, and importantly for business leaders - longer executive tenure! Everyone wants a piece of that, right? But research indicates that only around 10% of companies grow profitably for any sustained period. According to Bain, “even in the best of times, analysis shows that 9 out of 10 management teams fail to grow their companies profitably.”
Profitable growth is really important, yet companies are surprisingly bad at delivering it. This Growth Paradox is a serious issue for the commercial world – and it begs the question… Why?
I believe there are two main reasons:
Lack of focus. A lack of focus manifests itself through businesses trying to do too much, appealing to too many customers and spreading themselves too thinly. While it might be vital to grab every possible sale available to you to pull your business back on track post-Covid, it’s no use wasting resources and chasing after sales that are never going to be yours! Profitable, sustainable growth requires a forensic focus on who your highest potential customers are, what proposition you can deliver that makes you the natural first choice for your sweet spot customers and how you get your organisation to focus on delivering that! If you don’t have growth on your executive agenda at least quarterly, you’re not giving it enough attention.
Customer decision-making. One of the fundamental mistakes businesses (big or small) make is assuming they understand how their customers make purchase decisions and choose between the countless brands, products or services on offer. Businesses don’t understand core truths about how customers navigate the hundreds of decisions they have to face each day. Too many business leaders believe that their customers make decisions in a considered and rational way and as a result, assume that all purchases are up for grabs on any given day - this simply isn’t the case. We call this The Big Growth Mistake.
The world of neuroscience and behavioural economics (and in particular, the Nobel-winning work of Daniel Kahneman) has shown us that the vast majority of our decision making is influenced by our System 1, subconscious ‘brains’ which help us to make decisions in autopilot mode so that we don’t become overwhelmed. These autopilot decisions are driven not by rational thought, but much more by emotional and intuitive factors. We’re hard-wired to work in this way.
Leaders who understand how these factors influence their customers’ buying behavior and develop propositions that satisfy their customers’ emotional needs as well as their rational ones, are much more likely to become their customers’ autopilot choice and drive sustainable, profitable growth.
Sandy Groves is the co-founder and managing director of Think Again, an international strategy consultancy which helps companies to understand why their customers choose them and how to become the autopilot choice!
If you’re interested in finding out more about how understanding your customers’ decision-making can unlock profitable growth, join us at the 10.00am webinar session on 28th April 2020.
How I use the IoD:
I’ve been an IoD member for a number of years and recently my co-founder and commercial director joined too. For a small, but rapidly growing business IoD membership has a lot to offer. The Business Information Service has researched potential pipeline opportunities for us and we’ve used the advice line for tax and legal queries. We use IoD lounges across the country and the Pall Mall premises as a base in central London for meetings. The East Midlands IoD team are so welcoming and their events are great, and in particular, I really value being part of the Nottingham Mastermind group – it’s a bit like having an impartial advisory board. I’d also add that the government lobbying and support from the IoD on behalf of small businesses and directors during Covid-19 has been excellent.
Founding Partner at Think Again
IoD Webinar: Your Customers are on Auto-Pilot