The Growth Wheel
We have developed a tried and tested formula for generating company growth
Our formula is simple: C(1) + C(2) + S + D, where C(1) = conventional growth, C(2) = capabilities, S = smart transactions and D = disruptive moves. Most CEOs like continuous performance, but what really adds value is bold moves and breakthroughs.
But bold moves and breakthroughs require taking a little risk. A 25% increase in a CEO’s age leads to a 4% fall in the company’s share price. These two factors are linked; as we get older, our willingness to take risks gets lower. Keep in mind that the average CEO age is 55.
And as their company’s share price goes down, CEOs often look outside of the company for ways to create maximum value. An example of this is making acquisitions or forming smart partnerships to promote company growth.
“what really adds value is bold moves and breakthroughs”
When working with CEOs, I often get asked about growth. I believe that growth can be split out, like slicing a wheel into 4 Quadrants. We call this the Growth Wheel.
The 1st Quadrant is Conventional Growth: focusing on new products, markets and customers. However, I believe this type can only ever create 1-2% of growth in companies.
The 2nd Quadrant is Use Capabilities. This means taking all the existing assets, skills and knowledge in the company to create something new of commercial value. BT did this when they took all their telephone wires and infrastructure, and created with it BT Broadband.
The 3rd Quadrant is Smart Transactions, using M&A, JV and partnerships in a new way to create value.
The 4th Quadrant is Disruptive Moves. These are moves that disrupt an entire industry, changing the rules of the game. Companies do this by coming up with new, pioneering, entrepreneurial moves - and doing them.
The Growth Wheel
“Conventional Growth can only ever create 1-2% of growth in companies “
Ideally, I’d like to see a company execute all 4 Quadrants really well, but I want you to focus on Smart Transactions and Disruptive Moves as these are the two that have the potential to generate super returns and catalyse amazing growth.
How do we utilise the Growth Wheel?
To bring the Growth Wheel to life, let’s use examples from my own company: Xinfu.
For our Conventional Growth, we looked to Australia for a new market. We filmed several episodes of CEO Guru there for the BBC, transformed several businesses and established a position to handle the region.
Our fantastic CEO Masterclass is an example of Use Capabilities - having worked with CEOs for over 30 years, the online resource summarises CEO best practice and makes this knowledge accessible to a wider audience.
As for Smart Transactions, Xinfu is entering into value partnerships where we don’t work on just a fee basis, but on a partnership where we share in the value we add to a company.
Lastly, as for Disruptive Moves - we’ll let you know soon!