Very few firms are able to achieve sustainable growth (both top line and bottom line) over a period of time. Most companies find it difficult to sustain growth even over a period of five years, D. Shivakumar, Managing Director, India, and vice president, Nokia, has said.
Quoting various studies to bolster his ideas in a 30-minute presentation, Mr. Shivakumar said at any point of time, only 30 per cent of the companies have grown faster than Gross Domestic Product and Inflation put together. “The reference benchmark is that your topline growth has to beat GDP growth and your fixed costs must come down at a higher rate than inflation,” he told members of the Confederation of Indian Industry at a fellowship evening hosted by UniverCell and CavinKare, on Saturday evening.
He went on to state that only five per cent of firms show profit and growth over an eight year period and over 15 years, this goes down further to only one per cent of firms. Only one in four firms achieve profitable growth over four years.
Mr. Shivakumar went on to dismiss the role of size in growth, explaining that big corporations go through two hurdles: the first at the 30-40 billion dollars range and the second at the 50-70 billion dollars range. Very few companies manage to get out of that. However, in terms of geographic regions, there are clear areas of focus, with France doing very well, the United States scoring on profit and in Japan, it becomes very difficult to recover capital because of its locked economic system.
The challenge for companies today is to meet predictable profitable growth. To achieve this, it is essential that the top 10 per cent of the leaders in the company speak a common language, work harmoniously with each other suspending their own silos of work, communicate goals to the rest of the company and how well they manage the stakeholders. When the top management embraces these concepts, then sustainable growth is achieved.
Mr. Shivakumar also insisted on having a good quality of assumption, focus on the direction, the right destination and looking at what blocks of competitive advantage could get one to the destination. These blocks could be competencies, innovation, brands and distribution. It is important not to overlook the cycle times for product and plan the business strategy with current market inputs.
In terms of human resources, he expressed his belief in training top management to develop skills and deepen commitment to the company, celebrating profitable growth and rewarding employees who help achieve targets. Finally it is important to figure three-to-five years out, anticipating changes: How will the business look over the period, how will money be made? What people capabilities will be required to secure profitable growth, he added.
C.K.Ranganathan, chairman, CII – Tamil Nadu, said it was important for a business to understand and decode customers and engage with them on a continuous basis.