Grow to be great

Dwight L Gertz and Joao P A Baptista, Free Press, NewYork, 1995, $25hb

Review by Mark McKergow
 

"No company ever shrank to greatness" is the subtitle of this well-timed andstraightforward publication. Consultants Gertz and Baptista set out to re-examine routes to growth in the wake of the current focus on downsizing and re-engineering, using material gathered from surveys of 1000 companies. Whilst there is nothing here that is fundamentally new, the authors succeed in combining concepts and case studies in a way which could well be useful to working managers and directors.

Inside the front cover, Gertz and Baptista present a schematic diagram summarising their findings on means to growth. Possibilities include focusing in customer value, on the channels through which the products appear, and the way in which the business is executed. I like to get the "big picture" at the outset, and this kind of presentation is to be encouraged.

So how DO companies grow? The authors address this early in the book, stating their view that there are growth potentials for most, if not all, businesses.(The exceptions come later!). In their studies, Gertz and Baptista have looked for companies which have succeeded in growing both revenue and profit during the period 1988-1993. They take time to debunk some myths which have started to appear around the subject of growth and how difficult it is - for example that growth is much more difficult in a recession, that big companies can't grow, and that growth is only for the fast players in hot-shot industries like pharmaceuticals. From their data, the authors have shown that these myths are not real - more likely, they provide excuses for unimaginative managers faced with making some interesting choices. I was particularly interested to read of fast-growing businesses in such unfashionable sectors as paper or chemicals, where double-digit growth is being achieved now by some (but by no means all) the players.

So don't large corporations grow mainly by acquisition? Yes and no - it's one possible route, but not an easy one. Other possibilities include "customer franchise management" (supplying superior value to carefully defined groups of customers), superior new product development(how much of YOUR business comes from new products - if it's 5% rather than 50%, you're not in the game), and "channel management" (which the authors rate as the most overlooked approach - selling through different channels and establishing new customers).

This idea of taking a close lookat channels is one of the book's strongest sections. Taking case study examples, like Dell, Staples (office supply warehouse) and Starbuck's (a coffee company), we find that each found a new channel to new customers. Dell sold PCs by mail order and developed a means of establishing very directly what their customers wanted. Staples started the move to stationery and office supplies warehouses in the US having noticed that these products were usually bought from small shops at the end of a long distribution and mark-up chain. Starbuck's have changed the coffee market in the US by presenting coffee as a high-quality drink for discriminating consumers (anyone who's ever drunk standard US coffee will appreciate just how revolutionary this idea is!), and used convenient channels - kiosks at airports and bookstores, direct mail, superior restaurants - to get their product over. They did anything rather than take on coffee purchasers in supermarkets, where the battle was traditionally fought. Sadly, even Gertz and Baptista can't convey one absolutely key factor about Starbuck's - their coffee is breathtakingly good!

Towards the end of the book, thesubject of superior value as a key concept emerges. The authors warn of being over enamoured with customer satisfaction as a focus (as sometimes seen in TQM), when total customers satisfaction can still lead to falling sales, because the only people still talking to you are either the only ones for whom your product is still suitable, or the only ones who haven't yet switched brands. Value is defined here as "quality, however the customer defines it, at the right price". This talk of the importance of the customer defining quality rather than the business is most important, and is a good example of these authors awareness of the world as a complex web of perceptions and different individuals. They are refreshingly careful of presenting some possibilities, rather than being seen as providers of a gospel truth.

This book is well assembled and timely, and gives some interesting pointers to ways ahead for companies leaving their fixation on the middle lines in their accounts, and looking to the top and bottom lines. The only major downside is that the book will not win any awards for visual presentation - inside the cover it is blandly put together and failed to excite my eye, which might keep it out of the running in the airport bookshelf stakes.

And times when not to grow? Since you ask, they are: when survival is the issue, when financing is simply unavailable, when the owners (in a family business, for example) would be better off without growth, and when the business needs to shrink first. Shrinkage is, of course, a means to returning to growth, not an end in itself - and that is the key message of this book.
 

"Grow to be great", Long Range Planning 30,pp 137 - 138 (1997) (Book review)