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Is your business fit for growth?
The strategy model made for sustainable success
A huge number of businesses find sustainable, profitable growth out of reach. PwC’s Consulting Leader, Craig Rice, and Fit for Growth Leader Scott Mitchell look at what these organisations are missing.
Ninety percent of businesses are focused on growth, though they see clouds looming that could cast a shadow on their plans. They want growth, but are they ready for it?
To help positively answer that question, PwC has created a strategy model called Fit for Growth, which goes back to basics and shows organisations the way to structure themselves for continued, maintainable, profitable progress – even under the pressures New Zealand businesses are facing.
PwC’s Fit for Growth Leader Scott Mitchell and Consulting Leader Craig Rice explain what’s different about this refreshed approach.
What is Fit for Growth?
"Fit for Growth is PwC’s strategic approach to helping companies become structured for sustained growth," Scott begins.
"It highlights three very tangible ingredients of success for a company to outcompete and flourish, year on year, in a very sustainable way.
"First, the proven model ensures businesses identify profitable revenue streams, and then what capabilities make them stand out to provide a competitive edge. The next ingredient is an honest look at investment and cost allocation, reallocating these towards the areas that support those unique capabilities. The third aspect is rewiring the organisation to support the mission of putting resources into the right, growth-ready areas of the business."
It sounds simple, but it's not easy. It starts by honestly understanding how your business is performing today, what you should focus on and what you shouldn't.
Are you Fit for Growth?
To help give businesses a barometer of their readiness to sustainably grow, PwC also created the Fit for Growth Index – a ranking to help organisations determine and understand the real reasons why growth might be out of reach, and what to do about it:
1. Ready for growth: In some industries, the number of organisations at the top of this scale are in the single digits. They're firing on all cylinders, have defined what they're good at, have made smart investment decisions around that and created an organisation that truly supports their agenda.
2. In the game: Such businesses are on the right track and almost there, but they’re missing that third ingredient. They need to fine-tune the way their organisation is set up to enable sustained growth.
3. Capability constrained: These companies have a sound strategy and know their capabilities, but that’s only half the job. They're crying out for more discipline in their execution to improve.
4. Distracted: Almost half of the companies we studied fall into this category, with a strategy that isn’t targeted enough and tough decisions yet to be made. Distracted companies struggle to stay strategically focused and on track.
5. Strategically adrift: Lacking a clear strategy, with priorities that aren't well defined and finding themselves too reactive to the situation around them, these businesses cut costs from the wrong areas and spend money on unproductive resources. Expenditure is reactionary without a greater agenda to base it on.
Where does your company fit? The truth is, even those who are deemed 'Ready for Growth' have work to do to activate their full potential. These organisations have already made some necessary changes and, through that process, will likely understand there's always room for improvement.
Meanwhile, if you're not yet in the top category, the question is: how do you close the gap on those growth champions? For one, it's important to put your efforts into the right areas.
Focusing your efforts
"Fit for Growth goes to the very core of your organisation," PwC Consulting Leader Craig Rice explains.
"When we look at how organisations make themselves fit for growth, the overwhelming opportunities are around looking at 'what' your company does, rather than the traditional cost-reduction approach that focuses on 'how well you do it'.
"The majority of businesses aim to change how well they do things as part of their transformation – through changes to organisational structure or operating systems. While this can get them somewhat closer towards their goals, the benefits are marginal (say 5-10% in cost reduction).
"Compare that to changes in service offering – the 'what' you do – and those benefits can yield tenfold."
The first step
So what are the initial steps any business can take to get on a Fit for Growth journey? Scott shared some parting insights.
'Fit for Growth is about making businesses leaner, stronger and more financially fit," he says. "The first step is having an honest conversation around your position, structure and overall ability to grow."
As the new strategy model continues its roll out throughout New Zealand, we're interested to hear how organisations of all types see their growth agenda.
If you’d like to learn more about the Fit for Growth model, PwC’s Strategy& has published a new book, aptly titled ‘Fit for Growth: A guide to strategic cost cutting, restructuring and renewal’. It’s a culmination of research and on-the-ground consulting work written to help businesses around the world understand the simple, often neglected ingredients that are proven to inspire sustainable progress.
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