The ten rules of growth

That has not been easy to accomplish over the past 15 years. Corporate growth slowed dramatically after the global financial crisis, with the world’s largest companies growing at half the rate they did before 2008. Furthermore, increases in capital investments outstripped revenue expansion, compressing returns. Now, with a slowing global economy, rising inflation, and geopolitical uncertainty, growth that delivers profits and shareholder value may become more elusive still.

Ten rules of value-creating growth

Value-creating growth is a crucial objective for businesses aiming to thrive in today's competitive market. To help you understand the principles that drive such growth, here are ten rules that businesses should consider. To understand how organizations can try to overcome these obstacles, we studied the growth patterns of the sample companies through various lenses. Our findings suggest ten imperatives that should guide organizations seeking to outgrow and outearn their peers.

1. Customer-Centric Approach

2. Continuous Innovation

3. Market Research

4. Scalability

5. Strategic Partnerships

Put competitive advantage first

Competitive advantage is the key factor that sets a company apart from its competitors and allows it to outperform them in the market. It encompasses various aspects such as unique products or services, cost leadership, superior customer service, strong brand reputation, innovation, and efficient operations. Putting competitive advantage at the forefront of a business strategy is crucial for long-term success and growth. A high return on invested capital (ROIC) indicates a business model powered by a competitive advantage. Companies that generate stronger returns attract and deploy more capital, a virtuous cycle that enables them to grow faster and generate still higher returns (Exhibit 3).

Don’t be a laggard

Being a laggard refers to someone who is slow or resistant to adopting new technologies or practices. In today's fast-paced digital world, being a laggard can have negative consequences for individuals and businesses alike. Here are some reasons why you shouldn't be a laggard. Outgrowing your industry implies a strong business model—an advantage rewarded by capital markets whether you’re in a fast- or slow-growing industry. Furthermore, companies that manage to win market share away from competitors are likely to beat the growth expectations reflected in their share price, unlocking even stronger returns.

Turbocharge your core

When developing a growth strategy, often the first question on a CEO’s mind is, “Where should that growth come from?” To help find the answer, we categorized revenue increases among our sample companies into growth within the core industry (their largest industry segments at the start of the study period), in secondary industries (smaller but still significant revenue contributors in the first year of our time frame), and in new industries (segments where the companies did not initially have a presence).

Look beyond the core

Our study found that, on average, 80 percent of growth comes from a company’s core industry and the remaining 20 percent from secondary industries or expansion into new ones (Exhibit 4). However, these figures varied among sectors during our study period. For example, industrial companies generated a full third of their growth from new industries, while utilities consolidated toward their core business areas more than other sectors.