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Speed Review: The Value Growers

Speed Review: The Value Growers

Speed Review: The Value Growers

Achieving Competitive Advantage through Long-Term Growth and Profits

by Joerg Rockenhaeuser, James McGrath, Michael Traem & Fritz Kroeger

Four A.T. Kearney consultants lay out the principles that will help companies achieve “value-building growth” — the superior revenue and value growth that generates the most shareholder value over time. One principle: Be prepared to invest. In other words, try to get more out of more, not more out of less.

Review

Build Your Company's Revenues and Value
Growth is a vital component of any company that wants to prosper in the competitive future of global business. In The Value Growers, A.T. Kearney consultants James McGrath, Fritz Kroeger, Michael Traem and Joerg Rockenhaeuser have turned crucial data gathered from more than 1,100 international companies into strategies for achieving "value-building growth" - the superior revenue growth and value growth above peer group average that generates "the most shareholder value over the long term."

Focus on Revenues and Profits
One of the main strategies advocated by the authors is for managers to simultaneously focus on top-line (revenue) and bottom-line (profit) growth. They say companies that do this outperform their peers in value creation by a margin of 50 percent, and increase their shareholder value at an average annual rate of 22.2 percent, compared to companies that focus solely on profit growth and only achieve a 14.7 percent increase in shareholder value.

To give companies in today's economy the impetus to achieve growth that improves share price over time, The Value Growers is broken down into three parts:

1. The Growth Code. Most CEOs admit that their companies are only growing at half of the speed that they could, the authors write. The leaders of more than 350 global corporations blame "their own strategies as the greatest barriers to growth and their own corporate structure as the most critical bottleneck."

To achieve the ever-elusive goal of value-building growth today and tomorrow, companies must "find the right balance between profit and growth as strategic co-objectives," the authors explain. Striking "an uncompromising balance on all fronts," the authors write, can help companies avoid the extremes that create less shareholder value in the long term. "Strong, stable growth is the decisive factor behind share prices," they write.

2. The Routes to Value-Building Growth. To explore the various approaches and strategies that companies can use to move closer to value-building, the authors use Hershey's, FedEx and Nokia as examples of companies which overcame simple growth and escaped from underperformance. To succeed, companies need to stop wasting their managerial resources on getting "more out of less" and should work to get "more out of more." Instead of fearing risk and choking off investment, the authors remind corporate heads that investment "is central to developing innovative products and bringing them to market."

To go for growth, they say companies need to:

  • Establish a clear, quantitative vision focused on growth.
  • Create a decisive growth culture and entrepreneurial mindset and smooth the controller mentality.
  • Establish a growth supporting structure.
  • Acquire selectively to gain market share and expand geographically.
  • Reinvent and deepen relationships with customers.

3. The Future of Growth. Exploring current and future challenges of companies facing changing market trends, the authors offer insight into dot.com companies that need to either grow up or fold up. They say Cisco, Sun Microsystems and Yahoo! exemplify companies that have grown profitably in the changing economic climate. The authors see America Online's merger with Time Warner as an example of a company taking a step toward rekindling its "top-line growth."

E-business, they say, "is simply traditional business in disguise," and they expect to see the "e" disappear when all companies are on board. Even then, they explain, business will "live and die on its ability to generate value for customers and investors."

New Strategies
Using instructive case studies about the corporate successes and failures of companies like Intel, Microsoft and Hyundai to guide their strategic principles, the authors offer a how-to on the importance of corporate growth and the ways any company can tap into new strategies for increased shareholder value.