An Industrial OEM Looking for Growth in All the Wrong Places
T&Co has worked closely with dozens of market-leading organizations on an issue that remains elusive for many management teams – delivering profitable, above-market organic revenue growth.
Based on a T&Co analysis of over 500 growth initiatives, we found that the actual impact of any individual growth initiative varies dramatically from the expected result. Why? Internal factors are often to blame but so are the realities of unexpected market dynamics and competitive factors.
To stem the risk of ‘picking winners’ among a short-list of growth bets, we partner with our clients to deploy a system-based approach to core business growth centered around a robust growth portfolio.
Our client, a global Tier 1 supplier to industrial equipment manufacturers, had a leading market share, expanding operating margins, solid free cash flow, and a revenue growth problem. Their growth plan was principally centered on market growth and pricing actions, with 3-4 “big bets” in adjacent markets with a long time to impact the bottom line. Despite their outsized profitability and FCF, they were being penalized for five years of flat revenue growth with third-quartile stock performance relative to their peer group!
Management was feeling pressure from the Board of Directors and a growing group of activist investors demanding above-market growth performance, and they turned to T&Co for support.
We worked with the management team to drive steady change across key elements of the business and operating model to drive a sustainable and measurable return to positive organic revenue growth that was both above market and, in the top quartile relative to its peer group.
We started by partnering with the CEO to resetting the Firm’s growth goal and to create a strategic growth vision – focused not on his traditional hallmarks of gross margin expansion, operational efficiencies, and cash flow, but on delivering above-market growth. The result was the CEO’s conviction in an above-market growth ambition for Core Business and the relaxing gross margin expansion hurdles.
With a clear growth goal in place, we collaboratively worked with the organization – across their North American, EMEA, Asia-Pacific, and South American units – to deeply assess market core opportunities and to build, test, and deploy an expanded portfolio of 18 core business growth initiatives. The initiatives were centered on winning market share in core markets versus a historical emphasis on pricing actions and ‘big bets’ in adjacent categories. And they spanned the gamut of aftermarket services, underpenetrated core segments, and doubling down on high market share segments.
The company’s growth decision-making historically was closely held by the CEO and there was limited structure and accountability for managing growth at a market segment level – top talents were focused on operational functional excellence vs. growth.
To ensure our client achieved expected results, we also helped to implement systems & controls to allow for ensuring accountability and repeatability of the growth planning process. We developed, trained, supported, and coach a new role responsible for deploying core growth initiatives – Market Managers. Market Managers were given authority and influence over key marketing, sales, service, product/engineering, and finance functions required to truly deploy growth initiatives. And, each had clear, agreed-upon ownership to drive results for a discrete set of initiatives in the growth portfolio.
Within two years, our client was seeing great results – double-digit core revenue growth while maintaining operating margins, free cash flow, and return on assets performance. Investors noticed too, and their stock performance jumped to the top quartile relative to peer group!
If you’d like to hear more about this case or discuss any core growth issues that your organization faces, please reach out to Richard Schwartz.