Stretch!: How Great Companies Grow In Good Times and Bad


Stretch! shows business leaders how to achieve sustained businessgrowth even in the toughest economic times. A.T. Kearney surveyedsome 29,000 global companies over fourteen years and studied morethan eighty companies in depth, in order to determine how the bestcompanies continue to grow in good times and bad. Based on thisextensive research and on the best practices of the most successfulcompanies, this book presents a practical, step-by-step plan forpositive organic growth.


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Stretch! shows business leaders how to achieve sustained businessgrowth even in the toughest economic times. A.T. Kearney surveyedsome 29,000 global companies over fourteen years and studied morethan eighty companies in depth, in order to determine how the bestcompanies continue to grow in good times and bad. Based on thisextensive research and on the best practices of the most successfulcompanies, this book presents a practical, step-by-step plan forpositive organic growth.

Stretch! offers a four-stage framework for growth, then outlinesthe precise steps for implementing each stage. Contrary to acceptedwisdom, research shows that growth has little or nothing to do withindustry maturity, geography, or business cycles. Strong andsuccessful growth is possible in any industry, in any region, atany time–growth isn’t dependent on outside factors, buton the internal actions a company takes.

The book begins by describing the current predicament forcompanies that find their growth has flatlined, then usesintriguing case studies to illustrate the four stages ofgrowth:

  • Operations: dramatically improve internal processes such asproduct development, sourcing, quality, delivery, customer service,sales, and pricing
  • Organization: find the organizational structure that best suitsthe company, determine opportunities for value chainreconfiguration, evaluate and adjust compensation, reward, andincentive programs
  • Strategy: reinvent the core strategy, stretch brands, andextend lines, focusing on the value proposition offered to thecustomer
  • Stretch: expand the business frontier, venture into newterritory, break down barriers to create new products and reach newcustomers, markets, and geographic regions

Truly great companies find ways to grow no matter the currentstate of the economy or the business climate. They focus oninnovation and calculated risk, continuously improving products andjumping into new opportunities to secure future sales. Theyunderstand that growth should be accomplished through a combinationof mergers and acquisitions, product innovation, organizationalefficiency, and new markets. Stretch! lets you follow the lead ofthe most consistently successful companies in the world with aproven, step-by-step plan for sustainable growth.

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Product Details

  • ISBN-13: 9780471468936
  • Publisher: Wiley
  • Publication date: 12/12/2004
  • Edition number: 1
  • Pages: 272
  • Sales rank: 1,355,563
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.00 (d)

Meet the Author

GRAEME K. DEANS is a Vice President at A.T. Kearney, where he leadsthe company’s global strategy practice, and Chairman of A.T.Kearney Canada. He specializes in business and marketing strategy,organizational design and effectiveness, and corporaterestructuring, and is also the author (with Fritz Kroeger) ofWinning the Merger Endgame.
FRITZ KROEGER is a Vice President at A.T. Kearney and the author ofnine books on restructuring, growth strategy, and mergerintegration, including The Value Growers.

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Read an Excerpt


How Great Companies Grow in Good Times and Bad
By Graeme K. Deans Fritz Kroeger

John Wiley & Sons

ISBN: 0-471-46893-2

Chapter One

Mapping the Challenges and Hurdles to Growth

Growth is a universal mandate for business leaders. Every CEO talks about it. Every annual report highlights it. Every equity analyst values share prices based on it. The term blue chip refers to a company that seems to have an impenetrable growth model-sustainable, profitable organic growth creation in both good times and bad-that makes it a foolproof investment.

But the conclusions we've drawn from our research, and the focal point of this book, show a different picture. Growth was easy to come by in the boom times of the 1990s. But when the market soured, there was a subtle, yet perceptible, shift in how executives approached the issue of growth. The rhetoric among CEOs stayed the same, but the actions behind the words slowed to a standstill. In a down market, few seem willing to invest in creating a growth engine for their companies. Or, when faced with a tough quarter, growth projects invariably rise to the top of the funding casualty list. Although this helps to achieve short-term cost-cutting gains and hold the share price steady, it sacrifices long-term growth. Another common misstep is to obfuscate growth by pursuing ill-conceived and poorly executed mergers.

Many of these tactics filter down from the top, where compensation packageseffectively encourage this behavior, for better or, often, for worse. Most packages, for example, penalize CEOs for investing in growth and force them to resort to short-term profit improvement programs. Although this approach maximizes the value of stock options, it leads to cost cutting by throttling back on longer term value creation necessities such as product development and brand building. This mind-set often works for a year or two, but over a longer period, it virtually guarantees that competitiveness, growth, and shareholder value will be destroyed.

In this chapter, we examine the state of growth as it is perceived-and misperceived-among today's top executives and their companies. We begin the discussion with one of the most telling findings of our research: CEOs confess they are able to realize just 50 percent of the growth potential of the firms they lead. A 50 percent success rate is a number that no executive is satisfied with, and the fact that it's now the norm offers little consolation. This performance gap, as disconcerting as it may be, represents a huge opportunity for potential increases in share prices, as well as in the economic development and wealth creation capabilities of nations. Taking advantage of this opportunity begins with finding the answers to some key questions: Why is it so difficult to overcome the barriers to growth? Why are directors, executives, business advisors, and management consultants so much less successful in implementing growth than they are in bringing about efficiency improvements, reducing costs, and reengineering business processes?

The Growth Challenge: It's More Than One Summit

Want proof that growth is the biggest management challenge in business today? Do you need to be convinced that growth is hard to come by? Look at the plight of four companies-all global leaders, flagship components of the prestigious Dow Jones Industrial Average (DJIA), and synonymous with growth. The only problem: They aren't growing.

1. Procter & Gamble: A global consumer products powerhouse, Procter & Gamble (P&G) is often cited as the world's leading marketing and brand management company and is a mainstay example in classrooms and books, including Tom Peters' blockbuster In Search of Excellence. In the late 1990s, P&G's growth engine propelled it to Asia, where the company made aggressive moves into the high-growth markets of China and Southeast Asia. Despite its efforts, P&G grew at a rate of just 2.4 percent compounded between 1997 and 2002. This is slower than the U.S. economy, which grew at a rate of almost 3 percent.

2. International Business Machines: Under the helm of CEO Lou Gerstner, Big Blue achieved what many consider to be the most successful-and highest profile-corporate turnaround ever. Gerstner stormed into new markets, including business consulting and software solutions, made several large acquisitions, and created significant internal growth engines. Yet its growth rate between 1997 and 2002 was only 2.4 percent-the same as P&G and just as far behind the growth rate of the U.S. economy.

3. Coca-Cola: Surely Coca-Cola, the world's most recognized brand, enjoys stellar growth rates. A marketing powerhouse and the dominant soft drink in both mature and emerging markets, Coca-Cola is also one of the largest equity holdings of Warren Buffett, the legendary stock market guru. But Coca-Cola also faces growth challenges. Between 1997 and 2002, it grew at a rate of 3.3 percent.

4. Disney: Finally, there's Disney, the global entertainment powerhouse. From movies and television to theme parks and retail stores, Disney is everywhere there are children-and parents seeking to keep their feisty offspring amused. In recent years, Disney has gone global, opening theme parks in Europe and Asia. But although the company's reach has expanded, its growth rates have not: From 1997 to 2002, Disney grew at just 0.7 percent.

Some might argue that times today are tough and it is difficult to generate growth. Others might say that these four companies are simply maturing and will never be able to recapture the heady growth rates of their youth. We disagree. In fact, we argue that growth is possible in any company, at any point in the business cycle; it is a mind-set and a way of doing business, and companies that are bigger, smaller, older, or younger than these four can achieve it.

Throughout this book, we refer to the concept of growth as a business model that creates sustainable, profitable organic revenue increases over a substantial period of time. In this context, growth does not refer to short-lived spurts achieved by picking up on the latest industry trend or by stopgap cost cuts. To close that 50 percent gap, executives must strive to create a growth engine in their companies that will lead to sustainable competitive advantage, higher share prices, and a fun, innovative, and exciting workplace.

We found that many CEOs take a simplistic approach to growth. After a recent presentation to a group of senior executives in Chicago, the CEO of a US$4 billion company approached us and said, "I really liked your presentation-it has great stuff-but what I'm really looking for is the silver bullet."

Other clients say that their core business model is profitable but maturing and believe that new growth is virtually impossible to realize. The common cry among this group is, "We're stuck!" But the most frustrating cases we've encountered are those in which a company began on a strong footing by developing a suite of solid growth programs, only to curtail them when the investment funds required to implement them get squeezed.

Our response in every single case is the same: There is no silver bullet to growth, there is no panacea, and there are no shortcuts. If this is not the most popular answer, it is, without doubt, the most truthful one. Organic, sustainable growth comes only through carefully laid strategies and obsessive attention to execution. Along with this-and just as important-it requires long-term investment and patience.

A comprehensive growth model is complex, particularly when compared to other performance levers and initiatives at a CEO's disposal. How easy it is to reduce costs with a large-scale strategic sourcing project. An area is targeted, results are tangible, and the time period is defined by months, not years. How easy it is to slash both product delivery times and costs by 50 percent and increase delivery reliability up to 99 percent through a supply chain improvement initiative. These business improvement strategies have strong CEO appeal. The level of disruption or intrusion on the company is clearly defined, the time line is short, the risk is low, and the probability for success, which is easily measured by equity analysts, is high.

In this light, it becomes clear why CEOs, with such a cache of tried and true strategies to choose from, can justify postponing those longer term, decidedly less straightforward plans. But this is precisely the reason that growth initiatives are so rarely fully realized and the potential remains unexploited. Growth requires the successful integration of all the firm's activities; the entire value chain, the sales and the supplier market, strategy, and operations must all link, both for today and tomorrow. As the case studies in this book illustrate, building a growth engine in a company requires years-not months or quarters. It requires self less behavior from senior management teams. It requires taking some risk and spending investment dollars in the anticipation of making even more in the future. The bottom line is that a good growth strategy is not easy to conceive or to implement.

Another important characteristic of growth is remarkably simple: Growth is inevitable. Regardless of the industry, at least one of your competitors is growing. Even in industries that are contracting or struggling through hard times, at least one competitor always finds a way to grow, even if it is at the expense of other competitors. Consider Southwest Airlines, which continues to prosper and gain market share while all the other major airlines in North America teeter on the edge of bankruptcy. What is Southwest's growth formula? Good, reliable customer service at a reasonable price. Sounds simple, doesn't it? In the steel industry, a notoriously tough business in which to achieve growth, Worthington Industries holds an equally impressive track record.

The inevitability of growth is also reinforced by our Endgames consolidation research, which we delve into in greater detail in Chapter 4. Companies can solidify their competitive position in a consolidating environment in one of two ways-either by being the most aggressive grower and acquirer or by simply surviving and growing while other competitors exit the business. Toyota has used this second method as the basis for its success in the global automotive industry. It has grown organically and produced the most competitive products, while its competitors have either exited the business or suffered declines in competitiveness.

Many Popular Growth Concepts and Strategies Have Failed

The notion that growth strategies are difficult to develop and execute has been proven time and time again over the past 10 years. During the 1990s, many growth strategies soared to popularity, only to achieve mixed results in the end. These included economic value added (EVA) and other financial strategies, special purpose entities (SPEs) to unlock value through creative financing, and Internet-based strategies to attempt to cash in on the dot-com boom.

An EVA growth strategy, for example, helps managers take an almost surgical view of their businesses' financial performance and make strategic decisions as a result (see Appendix). This tool can work wonders in rising stock markets, but it often leads to strategies that are detrimental to long-term growth. The shareholders of companies that actively embraced EVA-including Coca-Cola, Eli Lilly, and Hershey's-know all too well the damage it can inflict on share price.

No single business metric can be a panacea, and EVA is no different. In a comparison of profitability data and EVA data taken from the Coca-Cola 2002 annual report (see Figure 1.1), several interesting points emerge. First, economic profit has a high correlation-90 percent-to the current year net income. If this is the case, CEOs who adopt EVA may have conflicting motives and may be more prone to make short-term profit enhancement decisions than proponents of EVA care to admit. Second, EVA appears to be more stable as a business metric when conditions are good, as in the period from 1992 to 1997. As business conditions became more challenging, the economic profit metric may have provided Coca-Cola's managers with a distorted image of its standing.

Other popular growth strategies suffer from various flaws as well. Special purpose entities and financing subsidiaries became popular as a supplementary growth engine in the 1990s, particularly in asset- and capital-intensive businesses. The idea behind these strategies is that companies could boost their growth and profits by exerting more control over their entire value chain. In turn, they could unlock value from their core business through creative financing. Again, these models worked well in a rising market, but as the economy turned south, so did the prospects of many companies that favored these strategies, including Enron, PerkinElmer, and Bombardier.

Finally, the dot-com boom created one of the most unrealistic growth mind-sets imaginable. The realities of growth seemed to vanish: Companies enjoyed boom times with endless funding and instant growth. Seemed is the operative word in the previous sentence. Such misconceptions about the dot-com revolution have since been laid to rest as companies continue to regain lost footing.

Internet start-ups such as the Internet Capital Group, Ariba, CMGI, and others attained market capitalization levels of tens of billions of dollars, eclipsing many of the DJIA component companies. From 1997 to early 2000, they seemed to have found a growth model that would last for decades-only to have it fall dramatically in the following months as reality set in.

The growth mantra about the convergence of media content and distribution has led to huge investments in licensing third-generation (3G) technology, especially by European telecommunications companies. Although this new technology has taken years longer than anticipated to become a reality, it is finally receiving the overwhelming consumer acceptance that was originally anticipated. Investments were financed primarily through billions of dollars of new debt, which is now being written off, causing huge losses for shareholders.

The convergence concept also led to several huge mergers in the media industry. At the time, the merger of AOL and Time Warner was expected to usher in a new era of tremendous growth and profits; today, it simply marks the pinnacle of Internet madness. The companies announced the deal based on the growth theory that AOL would control broadband Internet distribution and Time Warner would provide a content engine. As it turned out, the high valuation for AOL was unwarranted, and the Internet became flooded with content that consumers were not willing to pay for.


Excerpted from Stretch! by Graeme K. Deans Fritz Kroeger Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents




Part I: The Growth Landscape.

Chapter 1: Mapping the Challenges and Hurdles toGrowth.

The Growth Challenge: It’s More Than One Summit.

Many Popular Growth Concepts and Strategies Have Failed.

The Coca-Cola Challenge: Growth Hurdles at the Turn of theCentury.

Can We Overcome the Growth Challenge?

Chapter 2: The Consolidation Game.

Learn by Example.

Chapter 3: Governments Can Help and HinderGrowth.

Industry Growth Rates Vary by Country.

Governments Promote Specific Target Industries.

Mixing Business and Politics on the Endgames Curve.

Heightened Levels of Protectionism.

A Brief World Tour.

Lessons Learned.

Part II: The Case for Growth.

Chapter 4: The Growth Objective.

Find the Right Path.

; Pulling All the Right Levers.

Chapter 5: Getting Ready to Grow.

Positive Aspects of Growth.

The Impact of Industry Consolidation.

The Growth Diagnostic.

Part III: The Stretch Growth Model.

Chapter 6: Introduction to the Stretch GrowthModel.

A Tale of Two Strategies.

Decentralized and Unified.

Chapter 7: Operations: Removing Bottlenecks andBarriers.

Operations-Driven Growth at Wal-Mart.

1. Sourcing and Vendor Management.

2. Product and Service Quality.

3. New Product Development.

4. On-Time Delivery.

5. Superior Customer Service.

6. Sales Effectiveness.

7. Pricing Strategy and Execution.


Chapter 8: Organization: Creating High-PerformingCompanies.

Goldman Sachs.

Eliminate Friction.

Break Down Growth Barriers.

Sara Lee.

Improve Decision-Making Processes.

Align Compensation and Growth.

HSBC Holdings.

Chapter 9: Strategy: Exploiting StrategicLevers.


What Industry Are You Really In?

What Is Your Customer Growth Strategy?

What Distribution Channels Fuel the Best Growth?

Which Countries Should You Compete In?

What Is the Best Product Portfolio?


Where Do Mergers and Acquisitions Fit In?

Robert Mondavi.

Chapter 10: Stretch: Achieving ExtraordinaryGrowth.


Value Chain and Business Model.

Customer Base.


Partnership and Risk Sharing.

Distribution Channels.


Convenience and Customization.

Geographic Reach.


Johnson & Johnson.

Part IV: Execution and Conclusion.

Chapter 11: Organizing for Growth: ResourcingImplementation Considerations.

Gaining the Conviction for Growth.

Selecting the Right CEO for Growth.

Establishing a Growth Culture.

Organizing for Globalization and Geographic Expansion.

Chapter 12: Reengineering Your Business Processes forGrowth.

Basic Enabling Processes.

Innovation: The Birth of New Products and Services.

Growth Portfolios.

Managing Merger and Acquisition Decisions.

Chapter 13: Future Challenges for Growth.

Reasons for Hope.

Growth Prospects for Major Regions.

Growth Predictions in Key Industries.

Stretch into the Future.

Appendix: Overview of Economic Value Added (EVA) andOther Value Frameworks.

Pricing Strategies.



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