Key To Business Success Is Growth

San Jose, CA, Nov. 3--Many American, European and Asian corporations have succumbed to a no-growth paralysis that threatens the health of the domestic and international business community, Michael Treacy asserts in his latest book, "Double-Digit Growth," according to the San Jose Mercury News. It's a provocative and controversial claim in an era when the pursuit of growth for growth's sake is being re-examined. The former Massachusetts Institute of Technology management professor says growth is a matter of choice. A commitment to growth is a choice to succeed, while not growing is a choice to fail, Treacy insists. "Growth is the oxygen of business, the key to business life or death. Growing enterprises thrive; shrinking companies vanish. Why, then, is a lack of growth the dirty little secret of today's corporations? Why are so many companies, in fact, blocked, stalled or stunted?" Treacy asks. Treacy's list of major corporations that are in no-growth mode or are registering growth rates in the lower single digits contains surprises, including profitable and noteworthy companies such as Intel, AT&T, Revlon, Gateway Computer, Motorola, IBM, Caterpillar and Sun Microsystems. The author maintains that he could go through the list of the Fortune 500 companies and the Fortune Global 500 and underscore "case after case of supposedly healthy businesses in a comatose state of feeble growth, no growth or actual shrinkage." Their problems, he maintains, cannot be blamed on today's faltering economy. "Throughout the heady 90s, these major companies hardly grew at all. While others boomed, they straggled along in slow motion, sometimes not going bust thanks only to creative accounting," Treacy writes. Treacy then offers a new approach that can continually yield double-digit growth. The key ingredient of his recipe for double-digit growth is what he calls a "portfolio of growth disciplines." The five disciplines are: • Improve the company's customer-base retention. • Increase market share gain. • Know where growth in your market is going to happen. • Penetrate adjacent markets. • Invade new lines of business. Regarding the first discipline, Treacy cautions against reliance on customer loyalty programs. "Customer loyalty is a contradiction in terms--an oxymoron...Sentimental customer loyalty doesn't exist," Treacy writes. He argues that to keep its customers, a company must continue to offer them a better value proposition. At the same time, however, the incumbent company must use the advantage of incumbency to shape the customer's value criteria and make the cost of switching too expensive. That, of course, is why Treacy's second discipline--calling for increasing your marketshare--can be the toughest road to growth. His third discipline, effective market positioning, is the easiest, Treacy says, because it only requires a company to establish a presence early in the fastest-growing segment of the market. Of course, finding that growth segment can be tricky. Penetrating adjacent markets, the fourth discipline, requires a company to thoroughly consider whether its core operating capabilities provide it an advantage in that market, and whether that company will be able to build or acquire the necessary additional capabilities to compete effectively in that market. That differs from the fifth discipline, invading new lines of business, where a company's core capabilities have little or no advantage. This is dangerous territory, where the skills and aptitudes of the seasoned investor--rather than those of a good manager--must come into play, Treacy cautions. "So don't get carried away. Be skeptical about the apparent adjacency and when a sexy deal beckons, take a cold shower. Above all, learn to take off your manager's rose-colored glasses and peer through the lens of an investor whenever you see anything remotely like a new market," Treacy writes. Most of the book is devoted to showing how several companies are using the growth portfolio of disciplines. In addition to such well-known companies as Wal-Mart, Harley-Davidson, Starbucks and Dell, Treacy examines some companies that are doing extremely well but are largely unheard of by the general public. Among those spotlighted are: Johnson Controls, average net profit increases of 18.6% annually since 1995; Mohawk Industries, average gross profit increases of 17.2% and average net income increases of 29% since 1997; Paychex, average gross profit increases of 20.9% and net income gains of 29.6% since 1997; and Biomet, 15.3% average gross profit increases and 16.9% average net income growth since 1997.