An Honest Discussion about Organic Growth

As long as I’ve been in the CRM space, I’ve struggled with the fact that the technology was being sold as a guarantor of growth when it was never clear how that would happen or if it ever happened. Coming out of the banking world where I had reviewed thousands of business plans, financial projections and results, I always had a bad feeling about the truth in such claims. As the CRM industry continues to grow, year after year, I have to ask those of you who have made the CRM technology investments in your business if you have realized those wonderful predictions of 25% growth that I’ve heard many sales people boast? There is strong evidence to the contrary.

The Corporate Executive Board published a study (and a book forthcoming) called Stall Points. It paints a picture that everyone reading this should think long and hard about. The study shows that the growth claims of CRM vendors are baseless. It also shows that the projections many companies use as the basis for their business plans are equally baseless. There are certainly companies that are able to sustain long term growth; but not many. Their study took a 40 year view of companies in the Fortune 100. You may say “ha! I’m not in the Fortune 100″. Well, if you were sustaining the kind of growth you’ve been projecting for the past 20 years, shouldn’t you be? In fact, changes in the technological landscape are shortening the lives of Fortune 500 companies as well. 50 years ago, the average life expectancy was 75 years, than it dropped to 40-50 years and now it’s less than 15 years. Here are a few facts uncovered in the Stall Point study

“Only 5% of companies are able to sustain an inflation adjusted rate of growth of more than 6%”

Ouch!

“The other 95% of these companies reach a point where growth simply stalls, to rates at or below the rate of growth of GNP”

Double Ouch! But there’s more!

Of the companies whose growth stalls, only 4% are able to successfully reignite their growth rate to even 1% above GNP growth”

Three strikes, you’re out!

Companies spend a lot of time employing tactics which seem to work in the short run, but simply cannot sustain themselves over time. Even the companies that create an innovative product or service don’t seem to know how to replicate that success, once competition is able to catch up. And this is not a gradual thing. These stalls happen quickly and the picture is fairly ugly.

Why does this occur, and what can be done to avoid it? There is good news and there is bad news. The bad news is that the 5% will likely never change because companies tend to have a short-term execution focus once all the strategy planning is over. It’s pretty simple; people are incented on short term, company-centric measures. This is how it’s always been, and there is a considerable amount of momentum opposing any forces aligned to the flip-side, or customer-centric approach.

Here’s the good news. You can join the 5%, but a number of things will have to happen first.

  1. Senior leadership must face the reality that innovation doesn’t happen magically, or repeatedly. Innovative products, services, business models (and messaging) comes a systematic approach to locating unmet needs.
  2. Value creation for shareholders is driven by value creation for customers. You can’t create value for/with customers until you understand what they value (both table stakes and unmet needs)
  3. Every strategic initiative must be aligned to this common understanding of what customers value; and efforts segmented appropriately
  4. The organization must then execute these initiatives profitably; by understanding which customers are the most valuable within these segments so marketing spend is profitable and effective at the customer level. One size fits none.
  5. The entire process must be repeatable.
  6. Only invest in technology that enhances the new capabilities discussed above.

Not everyone will be in the 5%, but there is so much you can do to get much closer. Take the time to understand the competitive capabilities you will need to develop within your company. Create an environment where people don’t fear this change and organize it around the customer, and not the products and services you sell. Also, understand that just like your company, a going concern, both capabilities and content created with them will need to change over time, as customers change, technology changes and constraints are introduced

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