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 10 Tools You Can Use Monday Morning
 by Ram Charan (nonfiction)

 Published by Crown Business
 Member of the Crown Publishing Group
 a division of Random House, Inc.
 ISBN: 1400051525
 Copyright (c) 2004 by Ram Charan


The Challenge of Profitable Revenue Growth

Growth is the elusive goal at the top of everyone's agenda.

There are three reasons why it's proving difficult to achieve.

First, the balance has gone too far in the direction of cost-cutting at the expense of revenue growth. More thought and time have been given to tools like Six Sigma and actions like restructuring, achieving size through acquisition, and looking for opportunities to consolidate in an industry undergoing upheaval than to revenue growth.


Until nine months before, Carter, a store manager for the Furniture Globe chain, thought he had the best job in the world. As the person in charge of the "place to go for all your home furniture needs," he had for twelve years supervised what he thought of as "his store" in suburban Miami. He had turned in steadily increasing sales and earnings numbers year after year. He was always in the top 10 percent every time the 217-store retailer ranked the performance of each of its store managers.

But what Carter really loved was the joy he experienced in growing the business. Every time friends would ask why he had turned down opportunities for advancement from more important retail chains, he cited the thrill of being able to make his decisions in a growth business. For example, he was given the freedom and had substantial discretion to source merchandise that matched the needs of the unique demographics of his market, well-to-do Hispanics. This discretion drove his creative juices to ever-higher levels as he strove to grow revenues and be the largest and best retailer in the community. Not only were revenues increasing, but Carter was experiencing personal growth as well.

Carter couldn't see himself ever leaving Furniture Globe.

And then everything changed. Furniture Globe was acquired at an exorbitant price by a Fortune 100 conglomerate. For a few weeks, it seemed that nothing major was going to change--then the real overhaul began.

To help pay for the acquisition, the new parent company announced a mandatory, across-the-board, 8 percent head-count reduction. It meant that Carter had to reduce his staff by ten people. He knew this would not only affect his sales growth--there would be fewer employees to take care of customers--but that it was the first shot in destroying the "esprit de corps" of his store.

Then the other shoe dropped. Corporate announced that all decisions about buying merchandise, advertising, and the mix and quantity of stock units and when they would be delivered to individual stores would be centralized. Carter sensed that the company was now focused on cost reductions and cash generation instead of searching for profitable revenue growth. In his gut, he knew that his sales growth engine would start running out of gas.

He was right. Not too long thereafter, both sales growth and buzz about the store began to decline. More customers walked out without buying anything. The number of people coming in to the store also went downhill. Customers began to complain that the store's selection had been cut and skewed the wrong way, not meeting the tastes of the store's Hispanic customer base.

The problem really hit home when he saw the couple who were right out of central casting. They were in their early forties, and even though they were in casual clothes--she in designer jeans, he in a wrinkled nylon running suit--he could tell they were well-off.

The couple was looking seriously at the highest-end outdoor furniture the store sold. They were searching around for sales help, when Carter spotted them. They weren't having any luck, and Carter knew why.

The decision to cut staff was coming home to roost as he saw the couple walk out of the store.

Does this experience sound familiar even if you have never been through an acquisition or merger? Bill Carter's experience at Furniture Globe shows both the business and personal consequences of being part of a business that is growing or one that is not. It also shows that we need to think differently when it comes to finding ways to grow.

Profitable, sustained revenue growth results from a mind-set that differs significantly from one required for either cost-cutting or productivity improvement. The latter are deterministic and internally driven, while growth requires creativity and the ability to look at a business from the outside in.

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