This is an insightful piece of work by Sanjay Khosla and Mohanbir Sawhney, published recently at Strategy+Business. Though people could argue that nothing new in this proposition, and companies did actually narrowed their expansions and growth plans, and focused more on their current offerings and inititated massive gigantic cost-cutting and optimization engagements, nonetheless, Khosla and Sawhney aims, as far I understood, to strategize the whole process and practice, and proposed a 7-step structured process to follow. Growth by focus should deliberately replace the growth by more in good times as well and not only on bad times. It should be the way of doing and running the businesses onwards.
Below is a snapshot from this nice article, while you can visit Strategy+Business to read it in full. Also, I am copying the comparison sheet to differentiate between both thoughts. Awesome!
Faced with economic headwinds, many global corporations are struggling to grow their businesses profitably. In the consumer packaged goods business, for example, the worldwide recession has hurt premium brands as consumers have traded down to cheaper brands, private labels, or generics. In the retailing business, same-store sales are flat or declining for numerous companies. Meanwhile, many business leaders continue to seek growth by extending their existing product lines and brands, as well as by entering new geographic regions. After all, growth is supposed to be about “more” — more products on the shelf, more categories, more brands, and more markets.
However, this approach is exactly the opposite of what business leaders should do to drive increased revenues and profits. A typical “growth through more” strategy diffuses the organization’s efforts. It increases the complexity of the organization and its operations. We have found that “growth through less,” or more precisely “growth through focus,” is the best prescription for growth, regardless of the economic environment. This conclusion is based on our own experience in three well-known companies — Kraft Foods, Unilever, and Fonterra Brands (a dairy products business based in New Zealand) — on three continents over 10 years. In all three cases, a deliberate strategy of focusing on a few markets, brands, and categories produced impressive revenue and profit expansion. We have learned that seemingly mature businesses can be energized by making fewer but larger bets and by focusing relentlessly on executing a simple but powerful vision.
Growth through focus is not as easy as choosing what strategic bets to make. Rather, it requires the leadership team to follow a systematic approach that spans everything from strategy and vision to execution and measurement. We propose a framework that consists of seven steps that an organization must go through in its quest for growth through focus. Our framework is grounded in three key ideas: focus in strategy, simplicity in communication, and empowerment in execution.
Growth and the Winemaker’s Logic
To understand the logic behind growth through focus, consider what winemakers know about getting the best out of grapevines. Grapevines are very vigorous. With abundant water and nutrients in the soil, they tend to grow into large, leafy plants. However, overly vigorous vines produce lower-quality wine and smaller crops. When growing conditions are too rich, grapevines grow more leaves and become tangled. Leaves take nutrients away from grapes, which contain the seeds for future growth, and create shade, which inhibits ripening. To improve the quality of grapes, winemakers carefully prune grapevines and remove excess bunches of grapes to reduce yields. The remaining bunches ripen more fully and ultimately produce more concentrated wine.
Many companies, in effect, behave like inattentive vintners. Growth initiatives are often overstimulated with money and leadership attention. The result is lots of activity and a large number of growth projects, and this activity often does not correlate with outcomes. Quantity does not mean quality. To improve the quality of growth, business leaders need to cut back on marginal products, brands, and markets so that they have a better chance of winning in their chosen areas of focus.
Following the winemaker’s logic, company leaders must overturn conventional thinking about how to manage the organization, processes, and people for growth. (See Exhibit 1.) For example, a conventional core belief about growth is that companies need to extend their product lines and brands and to expand their categories and markets. Leaders hope that the more arrows they have in their quiver and the more targets they have to shoot at, the more bull’s-eyes they will score. But in reality, growth often comes from fewer but stronger arrows aimed at fewer targets. The engines of growth are focus (fewer brands, fewer categories, and fewer markets) and simplicity (simple vision, simplified execution, and simpler organization designs). Conventional thinking also assumes that although complexity adds cost and makes the organization less agile, it is inevitable in a large global company. But complexity is an avoidable enemy of growth if you know what you are doing.
The logic of growth through focus also suggests a very different view on planning and leadership. Many companies tend to make long-term strategic plans, but they often have a short attention span in execution. CEOs and business leaders get seduced by doing something new and different well before the strategy has had time to play out. We recommend the reverse: Plan quickly and then stay the course for a long time, as long as five years. Leaders should resist the temptation to change strategies too often. ”