Mind the Gaps

 Concerns over technological disruption, globalization, growing inequality, and the environment are ubiquitous. Despite these challenges, we believe businesses can sustain growth at an affordable cost, not just to the business but to society and the planet as well if the (growth) gaps are closed.

Our motto: Profit can be meaningful, provided that it serves a purpose.

ROUNDMAP™ IS A CREATION OF EDWIN KORVER, CEO OF CROSS-SILO BV, THE NETHERLANDS

2.1 - CLOSING THE GAPS

Studies show that 80% of organizations fail to achieve their desired growth targets in terms of revenue and profitability. Closing the growth gap ─ the gap between growth aspirations and growth activation ─ is one of the applications of the ROUNDMAP.

A growth gap may occur due to:

• Inadequate considerations of the opportunities for growth, i.e., the attainability of growth.
• The limited capacity of the organizational infrastructure to support successful execution, i.e., the serviceability of growth.
• Adversarial forces inside or outside the organization ─ think of Porter’s Five Forces.
• So-called growth traps ─ deeply embedded assumptions that can lead firms into misconceptions about growth opportunities.
• Fleeting competitive advantages ─ reducing the growth cycle, forcing firms to rotate through the cycle much more quickly.

2.2 - GROWTH PROJECTIONS

Let’s have a look at a typical growth cycle (bell curve) of a single line of business:

To appreciate a level of growth that is both attainable as well as serviceable, we’ll have to make sure that any misconceptions about growth, the growth traps, often caused by inadequate market research, are removed from the equation. This will give us the green line. If current growth does not match the green line, we’ll need to consider what causes the growth gaps (the misconfigurations).

By assessing the operation, ROUNDMAP Certified Professionals will be able to reveal what causes these gaps. This brings forth an actionable plan which may include changes to be made to the infrastructure, business strategy, business model, market segmentation, partnerships, revenue streams, marketing strategy, cross-functional collaboration, individual mindsets, or the customer development process.

2.3 - STANDING AT THE EDGE OF A CLIFF

Additionally, we need to account for disruption, whether due to fleeting competitive advantages, gradual changes in demand, or even shock effects like a virus outbreak, as it makes no sense to work toward a discontinuous future.

While the Corona crisis may be a once in a lifetime occurrence, shock effects are far from exceptional. During one of our assignments, we identified a single point of failure (SPoF) in our customer’s value chain: the company sold 90% of its merchandise via one channel. We were able to convince the CEO to mitigate the risk and offered to transform the out of date website into a fully integrated webshop. When the SPoF gave way, revenue dropped by 90% and everyone panicked. But we came prepared and sales rebounded within days.

About 10 years before the event, we had to deal with a similar shock effect ourselves. As a serviceprovider, we rented a large number of server racks in a datacenter, some IP-space, and an internet uplink; all from one supplier. When we received a call from the datacenter that our supplier had filed for bankruptcy, all hell broke loose. It took five days and nights of relentless efforts and a lot of capital, to untangle our operation and make it out of this trap alive. It was a tough lesson to learn but since then, SPoF’s are a red alert on our radar.

2.4 - EQUITABLE GROWTH

As forementioned, ROUNDMAP is designed to drive sustainable growth. The difference between sustaining and sustainable growth is that sustaining growth means to keep growth at a certain rate, regardless of the costs, while sustainable growth is the ability to sustain growth at a rate that doesn’t require the firm to sell its stakeholders short ─ we prefer to call this EQuitable Growth.

EQuitable Growth aims to:

• Identify and develop growth opportunities,
• Identify and mitigate threats/risks,
• Close growth gaps (misconfigurations),
• Elimate growth traps (misconceptions),
• Account for interruptions (scenario planning and simulation),
• Uncover what makes a brand or product relevant (now) and significant (future),
• Increase awareness of a firm’s Corporate Social Responsibility,

by means of:

• Encouraging experimentation with active senior-level sponsorship,
• Assuring a growth mindset with steadfast cross-company alignment,
• Reskilling the workforce to match the rules of the digital economy,
• Rethinking the business model to create a better future for all stakeholders,
• Repurposing resources to allow idle capacity to be put to good use,
• Replicating succcessful business models to create new lines of business,
• Designing nimble and agile operating lines.

By encouraging frequent experimentation in small groups, companies deemed ‘excellent’ by Peters and Waterman, authors of In Search of Excellence, managed to create an abundance of opportunities while mitigating threats before becoming manifest.

2.5 - HORIZON MODEL

Both McKinsey and IFF* encourage senior executives to pay equal attention to ‘Three Horizons of Growth’ (Horizon model):

1. Horizon 1 = ‘Keeping the lights on‘ ─ driven by optimization and sustaining innovation (change).
2. Horizon 2 = ‘Building future ventures‘ ─ driven by disruptive innovation, operating in known markets.
3. Horizon 3 = ‘Imagining the future‘ ─ driven by disruptive innovation, entering uncharted waters.

See image below:

(*) The Three Horizons of Growth framework has two sources. One is a collaborative effort by the IFF (International Futures Forum), published in the book Three Horizons by Bill Sharpe. The other source points to McKinsey, published in the book The Alchemy of Growth by Mehrdad Baghai et al.

2.6 - SITUATIONAL GROWTH™

Our perception of growth is slightly different. We believe growth should be perceived as ‘situational’ ─ given the internal and external forces ─ which has led to the belief that Situational Growth™ (compare: Situational Leadership) has four ways of manifesting itself:

1. EXPLORATION ─ Discover new product-market fits and business models
2. EXPLOITATION ─ Scale the operation, benefit from economies of scale, and increase market share
3. EXPANSION/EXTENSION ─ Find new markets while optimizing performance and reducing costs
4. EXPIRATION ─ Delay expiration for as long as possible while looking for new opportunities for growth

During each of these manifestations, a gap may occur: we may overlook profitable revenue streams, try to expand the wrong ones, or start change-initiatives while we should initiate transformation, and so on.

While the primary concern of management is to operate existing product-market centers as cost-effective as possible, ensuring predictable outcomes (high quality, a responsive customer service, etc.), revenue may suddenly turn south, changing the situation we’re in. During Expiration phase, it is the responsibility of leadership, besides defending existing revenue streams, to encourage creatives and fund innovators, operating at the edges (Red Monkey by Jef Staes) of the organization, to explore new opportunities for growth.

Mastering Situational Growth™ or Situational Mastery™ focuses on developing transactional and situational awareness to drive corporate Performance Readiness, while Situational Leadership®, developed in the eighties by Paul Hersey and Ken Blanchard, focuses on the relationship between leaders and followers, to increase individual Performance Readiness.

To select the most effective style of corporate leadership, we’re using the term Conditional Leadership™. It suggests that to lead a company in a certain timeframe, and given the internal and external conditions that may influence the business, the style of leadership needs to adapt.

These two frameworks, Conditional Leadership™ and Situational Leadership®, will greatly determine a firm’s capacity for Growth Activation™ *.

(*) We’ve derived the term Growth Activation™ from the term Marketing Activation (the execution of the marketing mix as part of the marketing process) and Customer Activation (motivating customers to move to the next stage of their lifecycle faster than they would on their own).

2.7 - MIND THE GAPS

Growth gaps are often the result of a series of misconfigurations. We’ve addressed some of these gaps in more detail here: Mind the Growth Gaps. It is important to realize that every gap has an adverse effect on the desired outcome that will not go away until it’s identified and dealt with. Compare: Growth traps are misconceptions about growth opportunities.

m

2.8 - VENTURE DESIGN

Even if you are not familiar with the (eight) principles of excellence, mentioned in In Search of Excellence by Peters and Waterman (1982), you shouldn’t be surprised to learn that the way successful companies operate today resembles those that were researched by the authors. Indeed, as the renown economists, Schumpeter and Kondratieff uncovered, history tends to repeat itself in so-called business cycles.

The organizations that were deemed ‘excellent’, such as Texas Instruments, IBM, McDonald’s, and Hewlett-Packard, were extremely nimble and entrepreneurial, had a strong culture, were customer-driven and human-centric, highly disruptive, and often very effective ─ they were true frontrunners; much like their present counterparts, Microsoft, Google, eBay, Amazon, Netflix, and Tencent.

Today, we’re seeing a similar approach, driven by fleeting competitive advantages, which is now referred to a Venture Design (VX):

The VX-approach is to intentionally set out to conquer a market, based on opportunities for growth that have not been explored before ─ by anyone. It doesn’t perceive the core competences as a holy grail. On the contrary, employees are allowed to explore any opportunity, as long as it serves a real customer need and is highly scalable.

Compared to the Horizon Model: these brave companies choose to ignore Horizon 2 and jump straight in Horizon 3, with Agility, Creativity, Determination, and Courage (AC/DC).

In Systems Theory: “A system is said to be in a transient state when a process variable or variables have been changed and the system has not yet reached a steady state.” In other words: a system is in a transient state as long as it is in a change state.

Before you jump on the VX-bandwagon, consider the fact that a multi-core operation does increase complexity dramatically. More on this subject can be found here: Where to find future growth?

"Fast and roughly-right decision-making will replace deliberations that are precise but slow."

~ Rita McGrath, Harvard Business Review

https://bit.ly/3wM9OTS