Only a small minority of companies succeed in creating shareholder value over long periods of time, even when they manage to grow revenues. Many companies enjoy temporary spurts of growth, only to see their gains erode under the onslaught of competitors. And even those who achieve sustained revenue gains are often surprised to find no corresponding gain in shareholder value. Yet a handful of companies do succeed in growing revenues, net income, and most importantly, shareholder value for extended periods. Our research has shown that these few companies demonstrate four common characteristics:
1. An ability to properly define and remain focused on their business’ “profitable core”;
2. A relentless pursuit of business adjacencies that leverage and strengthen the profitable core;
3. The ability to anticipate and quickly react to major industry structural changes; and
4. Processes that eliminate or circumvent the inherent organizational inhibitors to growth.
This Thought Piece, the first in the series, is intended to provide a factual foundation for the discussions on growth and value creation that follow, and to debunk the many myths and misconceptions about how companies grow and create value.
Authors: Chris Zook, James Allen
Source: Bain & Company
Subjects: Best Practices, Strategy