How businesses can unlock better growth

With the economy at a turning point, companies should be thinking more critically about growth—concentrating on growing better rather than simply getting bigger.

For most businesses the urge to grow is written in their DNA. Growth is a key measure of success. Financial markets demand it. However, finding opportunities to expand has been difficult lately. As inflation and costs have risen, it has become harder for most businesses to grow.

Yet that is exactly what makes this the right moment to think critically about growth. “The fact is you can’t cut your way to growth,” says Andreas von der Gathen, co-CEO of commercial growth specialists Simon-Kucher. “If you want to find growth in a world where costs are rising, the key is to understand what customers really value today and what they will value in the future.”

That chimes with the mood of financial markets. Investors will always want to see higher revenues and profits—but increasingly they are also looking for growth with purpose, growth that will foster the kind of creativity and innovation that translates into long-term sustainability. And they know that growth that leads to staff burnout and lasting corporate exhaustion is not real growth at all. Understanding how to identify and unlock better growth is the key to sustainable success in business.

The value of value

If value is key, we need to ask what value really means.

“It is a surprising fact that a lot of companies collect a lot of data, but they still don’t have an evidence base on value,” says Mark Billige, co-CEO of Simon-Kucher. “They have a lot of fine detail on sales processes, on market segments. They can tell you to the last decimal point how much something costs, but to determine how much something is actually valued is very hard. And you can’t even begin to form your growth strategy until you stand in the customer’s shoes and understand how people make trade-offs between price and something much more subtle which is perceived value.”

Some companies tend to confuse value with price, although they are very different concepts. The problem is that price is easy to state, but value is harder to calculate. For companies concerned with sustainable growth, this is best thought of as “customer lifetime value”—the long-term value the customer experiences through engaging with a seller or a brand. Price is a lever, but it is just one factor in the creation of this value.

“Firms need to understand that pricing should be a strategy, not a tactic,” says Shelle Santana, Assistant Professor of Marketing at Bentley University in Massachusetts and a Visiting Scholar at Harvard Business School, who has authored studies around how consumers respond to pricing, including The Impact of Numbers Throughout the Customer Journey. “You need to think about what information you are trying to convey with price, because price not only captures value for the consumer, it can also create value for the firm.”

Custom Content from WSJ is a unit of The Wall Street Journal Advertising Department. The Wall Street Journal news organization was not involved in the creation of this content.

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