In-Depth

You Can Grow Your Own Way

Companies have to find their own paths to expansion, but lots of flexibility and a few best practices can make the road a lot less rocky.

• By Lee Pender
• May 01, 2006

In fact, in managing the growth of his firm from a boot-strap startup with no venture capital funding in 1993 to an $8 million operation just over a decade later, Korstad didn't rely on a book at all.

"If you were to look at a book of how this should be done, there's probably some sort of formula to it," says the CEO and co-founder of Boulder, Colo.-based Unitime Systems Inc., a Microsoft Certified Partner and developer of enterprise time and attendance software. "The way we did it, there was no formula."

Korstad isn't alone. The truth is that, despite the wealth of how-to books available on the subject, if you ask 100 CEOs how they manage their companies' growth, you're likely to get 100 different answers.

There are, however, some best practices that almost every company can adopt to promote rapid expansion. The common thread that runs through all of them is dynamism. Fast-growing companies have to be ready to change --
according their own needs as well as those of their customers.

"It's a wild ride," warns Bart Hughes, managing partner for the communications and high-tech strategy practice at consulting firm Accenture. But it's a ride that could mean the difference between stagnation and expansion.

Make a Mark on Your Market
That wild ride begins with a company shaking up its market to jump-start growth. Any company serious about growing must, of course, start by finding a way to differentiate itself from potential competitors in order to attract customers. But that's not as simple as it sounds. Many companies settle for being bandwagon riders with little to separate them from their competitors. While those companies can survive, they reduce their chances for significant growth by not jolting their markets into spending money on their products and services.

The differentiation so critical to growth often comes in the form of innovative functional capabilities that no other company has yet developed. Companies, though, can have an impact on their markets in other ways, such as targeting an underserved industry or, as in the case of eEmpACT, a Bloomington, Minn.-based Microsoft Solution Partner and provider of software and services for the staffing industry, combining a revamped product with an aggressive pricing strategy.

eEmpACT, founded in 1990, took 10 years to reach the plateau of $1 million in revenue -- longer than leaders at most companies would like to take, says Tim Giehll, CEO of eEmpACT. Six years ago, looking to grow more, the company revamped its strategy.

"It was kind of a wake-up call that said that we just can't stay a million-dollar company forever," Giehll says. "We either have to grow or just get out of the business."

New product capabilities helped eEmpACT reach new customers, and the company turned to a pricing strategy that undercut competitors, but brought in enough volume to allow the company to stay profitable.

"Other companies were selling for $2,000 per seat," Giehll says. "We started charging $899 for licenses we used to charge $1,800 for. It really did disrupt the industry. Sales increased fivefold."

The once-stagnant company entered into a period of consistent growth; last year alone, it racked up $5 million in revenues.

Don't Get Lulled to Sleep
Shaking up a market can be a catalyst for growth, but it's no guarantee of prolonged success. Accenture's Hughes says that many companies fall into the trap of resting on their laurels and not re-thinking the strategies that let them crack their markets. Markets change; customers change -- and strategies must also change.

"This is where a lot of companies get tripped up," Hughes says. "They start off well, but they kind of lose touch with what the market wants. As the market matures and as customers mature, their definition of what a solution is changes."

Most importantly, product innovation must be a constant process. B. Chatterjee, president of Rockville, Md.-based CNSI, a Microsoft Solutions Provider and developer of applications primarily for public-sector organizations, says his company broke into the Medicaid market with a unique product but remains diligent about making sure that the revised solution continues to meet market needs. Chatterjee's company has consistently experienced year-over-year growth rates of greater than 30 percent since 2000.

"We entered the market providing a state-of-the-art technology solution," he says. "When you do that, your competition wakes up. The only way to survive going forward is to keep providing an innovative solution."

But it can't be just any innovative solution. Applications must first meet customers' needs, something many ambitious but misguided companies fail to realize when creating new products or services, Hughes says. As always, it's critical not only to listen to customers but also to help them understand what they need and then innovate to meet those needs.

"Companies get caught up over-innovating in a dimension that has worked in the past but won't work in the future," says Hughes, of Accenture. "It's a balance with understanding what the customer is asking for versus what problem the customer is trying to solve. Sometimes customers aren't very good at articulating that."

Sweat the Small Stuff
Product development deserves a lot of attention from growing companies, but the less-glorious aspects of running a business -- cost cutting and streamlining back-office operations -- also become more important as a company grows.

"[Newer companies] are less interested in back-office infrastructure, process and things like that," Hughes says. "As their markets mature, they have to be interested in that stuff because their profit margins aren't as large."

The most effective companies, he says, break down their operations into components -- human resources, payroll, customer support and so on -- and constantly evaluate the efficiency of those parts of the company, challenging executives to meet pre-determined metrics. The importance of cutting costs and maximizing back-office efficiency increases as competitors catch up with a company's market-shaking product or service innovation, Hughes says. But any company looking to grow needs to innovate and streamline at the same time.

Outsourcing is a viable option for streamlining costs and avoiding the cost of recruiting and retaining staff. Unitime outsources its payroll operations, Korstad says, and began outsourcing some development to Bulgaria last summer -- an effort that's met with success.

"The quality of the work they did was far superior to what we could produce here with our engineers," he says. "We could get things done much faster."
Outsourcing, however, is not always a viable cost-cutting option, especially if the service being outsourced is critical to customers and, ultimately, to the success of the company. eEmpACT reinforced its in-house help desk after a negative outsourcing experience.

"It was a disaster," Giehll says. "We found that nobody would take care of our customers as well as we did. When a customer would call in with a problem, if the support person didn't take care of it, the firm might lose us as a customer but the support person would never lose [his] job. In-house, they could lose their jobs. You'd be surprised how much of a difference that makes. It was a learning experience for us to try to grow fast, outsource [support], learn that that doesn't work very well and bring it back in house."

Keep Your Options Open
One of the toughest jobs for the leaders of any growing company is planning. In a rapidly changing market and within a rapidly developing company, making long-term business plans is difficult, if not virtually impossible.
"We didn't have a detailed business plan," Chatterjee recalls. "The detailed business plan was our gut instinct. We look at one year at a time."

Competitors' innovations, customers' changing needs, shifts in corporate spending or changes in direction from industry heavyweights can all affect a company's plans, both in the long and short terms. In fact, Korstad warns against putting too much effort into planning.

"It's so easy to lay out a business plan, but keeping to that business plan just doesn't happen," he says. "Don't get hung up on trying to be super-accurate because there are forces beyond your knowledge that are going to have an impact on what you see today."

Hughes says that companies can and should plan two to three years out, but recommends a form of planning that relies less on specific scenarios and more on potential responses to possible scenarios.

"More sophisticated companies think in terms of options," he says. "They can't control and predict everything, but [they can] look for the trigger points and define them." After defining those flash points -- or potential events that will require a change in strategy -- planners can come up with a strategic response for each point and prepare to use it if necessary.

Once again, flexibility is the key. Each company must find its own methods for managing growth, but adaptable, innovative and well-organized companies can help make that wild ride a little less wild and a lot more profitable.