Ram Charan
A former Harvard Business School professor and a consultant to major corporations, Ram Charan tackles an A-list topic in his new book, Profitable Growth Is Everyone's Business.
Q: Define "profitable growth."
A: Profitable revenue or profitable revenue growth that uses capital efficiently.
Q: You use baseball metaphors. How so?
A: Most people equate growth with "swinging for the fences," home runs that capture huge sales increases that will dramatically increase the size of their business. A single or a double just doesn't seem good enough. The idea here is that if you aim for the singles and doubles, you will get the home runs.
Q: This is preferable to buying quick growth through mergers and acquisitions, as happened last decade?
A: Many of the industries were consolidating, and this required scale. They created a larger top line but not top-line growth.
Q: Has the focus on cost-cutting short-changed growth initiatives?
A: Imagine what would happen if the same focus was given to sources of revenue growth as has been given to programs such as Six Sigma, centralized purchasing, and moving production facilities to low-cost countries.
Q: You cite Colgate. Why?
A: Colgate's gross margin has increased from 39 percent in 1984 to close to 60 percent in 2003. Colgate created a corporate "growth group" with two major responsibilities. The first is to be continually focused on developing new products, extending existing products, and improving packaging. The second, equally important job is to concentrate on logistics, production, delivery, and speed and responsiveness to retailers through the effective use of data warehousing, information technology, and cost productivity. Both processes resulted in Colgate's winning shelf space. -Tim Smart
This story appears in the January 26, 2004 print edition of U.S. News & World Report.
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