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How to Grow a Business

Updated on October 4, 2012

Types of business growth

Every business wants to grow. To achieve growth, one must understand the two major types of growth: horizontal and vertical. Broadly speaking, horizontal growth means expansion into new markets or industries, while vertical growth refers to going deeper in one's existing market. If a car company begins manufacturing motorcycles, this is an example of horizontal expansion. Increasing sales of existing car models is an example of vertical expansion.

Many companies, very adept at recognizing new opportunities in any market, fall into the trap of pursuing horizontal opportunities as a way to increase cash flow or enhance profitability for a short period of time. This approach often entails significant new costs. Ultimately, this effort fails to deliver results because it is not congruent with the underlying realities of the company.

Growth comes from inside

For growth to be effective and sustainable, it must originate from within the company. It is often tempting to pursue growth by adding new markets and new types of business models onto existing activities. When pursued in a reasonable and judicious manner, this can provide good results. However, this is not the stuff of long term, sustainable business growth. Unless this new business is being undertaken for its own sake, with a new business model or as a new company altogether (in which case the current company is being significantly overhauled), it is not appropriate to expect it to deliver significant growth.

Companies that achieve any significant level of success improve themselves in various ways from the inside out: cutting costs, increasing sales, improving management, streamlining operations and delivery, improving customer service, enhancing product development, or other efforts. The company has spent the vast majority of its time, resources and energy on its core business. And that core business represents its primary strength.

Paul Leinwand of Booz and Company has said:

Too many companies pursue growth via acquisitions, or adjacent markets, or expansion into emerging markets. They look everywhere but inside the company. The companies that do grow sustainably do so because they invest in a few differentiating capabilities and leverage what is uniquely strong about the company to grow where they will win.

Innovation and creativity

Just as important as maintaining focus on core strengths and competitive advantages is cultivating an innovative and out-of-the-box mentality throughout the organization. Only when new and unusual ideas are welcomed and encouraged from all levels will authentically new opportunities be discovered. Whether an egalitarian structure (where many people can entertain and criticize new ideas), or a hierarchical one (people must offer new ideas to their superiors), everyone in the organization potentially has something to offer. As long as a company is not taking advantage of the knowledge within itself, it is losing opportunities for improvement.

In addition to employees and the strategic leadership, the opinions of customers and clients can often turn into valuable insights for growth. These can be obtained through customer reviews, polls, surveys or other methods. The company must be open to new opportunities from all channels.

Eliminating waste

When it comes to growth, waste can come in a variety of forms, from the obvious like unnecessary costs or investments, to less measurable and more indirect examples such as wasteful habits that have accumulated over time. Thinking about growth primarily in terms of external opportunities rather than internal qualities and strengths will more often than not lead to wasteful activities. It will waste resources, time and money, and further encourage unhelpful ideas.

Growth in business

Since each organization is different, specific tactics for achieving growth will vary. For some, sales and marketing will be the path to growth. For others, it will be improvements in operational efficiency. But regardless of the individual business, it must strike the right balance between discipline, focus and commitment to core strengths on the one hand, and flexibility, creativity and openness to new ideas on the other.


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