Pakistan’s economy has been growing slowly over the past two decades. Annual per capita growth has averaged only 2 percent, less than half of the South Asia average. Regardless of the reasons for slow growth such an economic scenario presents businesses with a much tougher environment to operate in. Growing a business is a matter of do or die. Majority of the businesses that were unable to show any growth in the last decade are faced with decline and ultimate closure.
Pakistan’s economy has been growing slowly over the past two decades. Annual per capita growth has averaged only 2 percent, less than half of the South Asia average. Regardless of the reasons for slow growth such an economic scenario presents businesses with a much tougher environment to operate in. Growing a business is a matter of do or die. Majority of the businesses that were unable to show any growth in the last decade are faced with decline and ultimate closure.
During the last few years we have seen declining trends in the economy with more recently some signs of recovery with GDP growth at 3.94 percent against a decline of 0.47 percent last year. Business growth however has been more sporadic. Large sale manufacturing (LSM), for example, recorded a 15-year high growth of 9.29% during the first nine months (Jul-Mar) of the current fiscal year, but had reported a contraction of 10.12 percent last year.
These trends, however had been affected by the pandemic related conditions and the high growth is more linked to economic based V shaped recovery rather than any structural changes. Overall business growth trends are expected to somewhat mirror the economic growth as has been witnessed in the past. Regardless of the performance of the economy, business growth is however getting tougher in the face of new market dynamics including rising consumer expectations, increasing competition, and digital disruption.
For businesses to seek transformation and growth it is critical that they redevise their strategy to drive growth beyond economic trends. This requires identifying new market opportunities they need to capture. Any business targeting growth must identify where the growth is today and where it will be tomorrow, whether that’s in their current sector or an adjacent one.
Even before the pandemic, business building had become more important for existing companies looking to use innovative business models, products, and services to meet the threats and opportunities of a digitizing world. The Covid-19 crisis has accelerated and intensified that trend. In many industries, the pandemic has rewritten rules and upended assumptions, all the while diminishing—or threatening to diminish—existing revenue streams. Replacing lost revenues, of course, requires finding new forms of growth. This could be through acquisitions also but that is an expensive approach. Moreover, organic growth often creates far greater returns for shareholders than any business acquisition strategy, even during more normal times. The best approach towards organic growth has always been business building and most companies that have followed the organic growth model have expanded through launching new products, services and markets.
Growth is not only beneficial to shareholders as it creates value but also benefits organizations and their customers, opening up new opportunities for employees and creating additional resources for innovation. It’s hardly surprising, then, that growth would be the top priority for almost every business. In the wake of COVID-19, many companies are now looking for growth to help them quickly recover revenues and steady their business. For others, growth is a way to gain market share, capitalize on disruptions in consumer behavior, or lay the foundation for sustained success for the future.
However, achieving and sustaining growth is hard—and it’s not for lack of will or effort. Many companies have pushed well developed and well-executed programs on a range of initiatives, from customer experience to sales effectiveness, that have shown success in delivering revenue. The issue, however, is that these promising results often stall out or deliver only a small portion of the company’s full growth potential.
As the traditional avenues of business growth become less attractive, many businesses find the appeal of new venture strategies harder to resist. Though difficult to implement and often slow to repay investment, these strategies offer the promise of facilitating entry into new business areas with innovative, usually technology-based products. In case of large companies with many layers of management and detailed control systems, ventures offer the special promise of recapturing some vital spark of entrepreneurial energy. However, with such new venture ideas much attention is paid to either the startup or stardom concept — the most exciting idea (but has yet to make a profit) or the star that began small but expected to become a worldwide powerhouse, with huge earnings.
Such new venture strategies have few success stories though and this is not what a company or business should focus on. Businesses need to focus on the key variables that have traditionally supported the core business model and contributed to their companies’ growth over a period of five to 10 years and the processes they followed to achieve it.
Such variables involve the strength and efforts of primarily the core team and leadership of the business not only including their skillset but also their personal connections used over the years to support and grow the business.
Beyond the core team capabilities, trust and reputation of the business built over time is also critical for sustainable growth. Performing successfully with existing customers, garnering reputation for integrity, and creating value is how the businesses grow and in future target new customers.
These core variables provide the businesses critical support for growth but have limitations to support that growth beyond a certain level. Afterall in a developing market like Pakistan where economic factors, regulations and limitations drive business opportunity there is only a certain level of growth possible and the management team is constrained in terms of their capabilities for growth regardless of their experience and reputation.
Growth plateaus are therefore quite common especially for local businesses, and they occur when businesses seem to have exploited all available opportunities in their current industries. To continue growth, therefore the core team must encourage and devise strategies to transfer their capabilities to new business sectors including possible vertical or related industry initiatives.
Continued growth requires the business to out-innovate its competitors—not just uncovering unmet customer needs to find profitable niche opportunities but also using technology to enter new markets or go to market in new ways.
New sources of growth come from redesigning business models, creating something new, and exploring disruptive services. New business models don’t have to be complex; they could involve tapping into new sales channels to reach different customers, for instance, or introducing new services to support an existing product.
Businesses that can employ design thinking to create new products and services that will address unmet needs, reach unserved segments, or support entry into adjacent markets can expect continued profitable expansion and growth at a time when consumers can choose from the best products that global marketplaces have to offer.
Developing these capabilities clearly has implications for talent and skills. Digitization and automation are beginning to make new demands on workforce skills, with marketing and sales likely to be among the functions most affected. Up to 40 percent of sales activities can be automated with today’s technology, and that number can go up to 50 percent as technology advances. The same is applicable with some of the other core functions as well.
Most importantly, the most critical need for business growth is a leadership mind-set. Top growth leaders are obsessed with growth and committed to keeping their business on a growth trajectory. They have a key role in developing a well-crafted story to help people at all levels understand what changes are in store, what the business is striving to create, and how new ways of working will affect what they do every day.
Growth today drives not just performance, but survival itself. Businesses with the brightest prospects are those that know where to find pockets of growth, how to capture that growth now and in the future, and how to build a growth engine for sustainable success.
The writer is a staff member
