Veracity (Oxford)

An effective growth plan needs to identify and manage its associated risks and ensure that plans are aligned across the whole business, in particular ensuring that Operations has the capability and capacity to support them effectively. Only in this way will you ensure that growth is appropriately profitable and sustainable (i.e. maintains or enhances margins).

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Some questions to ask about your growth plans

Whether you're aiming to grow business as usual activities or break into new markets, all growth plans are inherently risky.

These risks aren’t something to be avoided, but more an effective growth plan needs to identify and manage the risks and ensure that plans are aligned across the whole business, in particular ensuring that Operations has the capability and capacity to support them effectively. Only in this way will you ensure that growth is appropriately profitable and sustainable (i.e. maintains or enhances margins).

“Always experiment on a scale that is survivable”
Author unknown

The objective here is to see every growth action as an experiment where some level of ‘failure’ is inevitable, as no set of assumptions about growth will be perfect. Having the right ‘attitude to failure’ is an essential part of any effective growth plan. Not every one will work out, so there is a need to recognise this as normal and ensure that the level of risk is appropriate for the business.

The key is to:

Ensure that you identify as many of the risks as possible before embarking on your growth path and mitigate the risks where you can.
Prepare well to respond to those instances where risks cannot be effectively mitigated or assumptions made turn out to be invalid.
Here are some suggestions to get you thinking more deeply about those risks and how to address them.

Business risks

How well do these opportunities align with your business strategy?

A good business strategy will make clear what your business does or doesn’t do. It will recognise the organisation’s strengths and capabilities, either current or planned for the future, and ensure that either:

Growth opportunities selected are consistent with these
or
Strategy is adjusted to align with the direction that this new opportunity presents, and the business develops new capabilities accordingly

Is this opportunistic or part of a steady, long–term growth plan?

Recognising the difference between these is key as they require a different assessment of risk. For example, assuming it can be funded, a smaller but longer–term opportunity may justify greater capital expenditure than an apparently larger, but shorter–lived opportunity.

Are you spreading your resources too thin to deliver on this? Might existing products/services/customers suffer?

Adding new products or services, or adding more customers for existing ones, will place extra demands on the organisation. The demands of the new may even be in conflict with the existing business. For example, when some of the major airlines tried to compete with new budget entrants like easyjet and Ryanair, they found it hard to let go of many of their existing ways of doing things and so couldn’t offer lower prices in a way that was profitable.

Customer risks

How well do you understand your customers? What do they really need?

Adding more options or derivatives of existing products may appear to offer more choice to customers that will increase the attractiveness of your offer. However, there can be too much choice that will actually confuse the customer and make their buying decisions harder, resulting in them going elsewhere. Equally, additional variants and options will require more complex procedures in operations and higher inventory levels, which may affect profitability and operational effectiveness.

How sustainable is the demand for the product/service you are considering adding, or the additional sales of existing products or services?

Responding to what could be short–term trends may be the thing that your organisation is perfectly set up to do, with flexible facilities and the people with the ability to pivot quickly to adapt to the new opportunity.

For others, stability and slower, steady growth will be what they are set up for, and rapid swings will be highly disruptive and may jeopardise its long–term future.

Understanding the nature of the growth opportunity is key – how well does it fit what your organisation is trying to be?

Operational risks

How well do these opportunities match your operational capacity and capability? Can this opportunity be delivered with the facilities, people and processes you currently have?

Getting a realistic assessment of what is required operationally to deliver a growth opportunity can make a huge difference to its profitability. New products or services that do not require significant investment in facilities will be inherently less risky.

How early in the new product development process will you consult your Operations team?

By involving operations at the early stages, the product/service can often be adapted to make better use of existing capability, or a more robust assessment of the investment required can be generated to inform the business case rather than being an unwelcome surprise after a commitment is made. The best case is to have an Operations perspective when developing the growth strategy itself.

How adaptable are your operations should things not turn out as planned?

The ability to respond effectively should growth plans not turn out as planned is a critical element of preparation for growth. Whether you're dealing with more growth than expected or less, recognising the constraints and opportunities associated with a plan can be just as important as how to adapt when unexpected changes occur..

Growing problem solving and improvement skills in the business is a key foundation to this adaptability, giving people the skills needed to respond effectively to changing circumstances.

Financial risks

How much do you need to invest in capacity or capability – buildings, infrastructure, equipment, training etc – to deliver on your growth plans? Is this justified by the return on that investment?

See the first point under ‘Operational risks’ above.

How much additional cash will be tied up in the business due to the need for more inventory, whether raw materials, work–in–progress or finished goods?

Greater variety of product can often mean that disproportionately higher levels of inventory are required tp manage operations and maintain the desired service levels. A better solution can often be to segment offerings through, perhaps, selecting different fulfilment methods or accepting longer lead–times for less frequently required options.

It is important to add that there are no right or wrong answers here, more a series of things that need to be considered in making the right decisions about pursuing any growth opportunities. Any decisions involves a series of ‘trade–offs’ between those items to reach a decision that is right for your business. By taking the ‘whole system’ view that our ‘high performance with ease’ approach delivers, your chances of making a good decision are considerably improved.

Want to explore further?

If you’d like to learn more about how to align your growth plans and operational capability to deliver ‘good growth’ that benefits customers, shareholders, employees and your business, please book a free, no obligation call using the button below - no sales chat, just a conversation to understand your situation, answer your questions and explore if we can help. Alternatively, complete our contact form and we’ll get back to you.

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“Growth is never by mere chance; it is the result of forces working together.”

James Cash Penney, , Founder of JCPenney

Not all growth opportunities are good!

One of the companies I visited on my Japan trip in 2024, Ina Food, has a salutary tale about accepting an apparently attractive growth opportunity.

Having grown steadily, the company was performing well and very profitably. They were approached by a major supermarket chain who were seeking to distribute their product nationally, which would have dramatically increased Ina Foods’ sales. Ultimately, despite pressure from some executives, the CEO decided against because of the risks associated with such rapid expansion of facilities and workforce. He was aware that supermarket chains always put pressure on price and was sure it would erode the company’s market positioning.

However, on another occasion they went against their general principles. A TV programme had sparked interest in their product and demand soared. In this instance, they CEO decided to leave the decision to employees, and they really wanted to do it. They added extra shifts to meet the demand to avoid making capital investment or hiring workers quickly. Sadly, after three months the toll on workers’ health was apparent and the extra shifts were stopped. Interestingly, this coincided with a drop in demand. Even though they hadn’t made a capital investment, profits fell for the following three years. Had they made the major investments that the demand increase suggested, the impact on the company and employees would have been more severe.

Hiroshi Tsukakoshi, the founder of the company, concluded that this confirmed his view that a company should not expand to scale rapidly. He said, “I want Ina Food to improve little by little every year, and I want my employees to become a little happier every year. Because that is what I would like to achieve, I am committed to the gradual growth and solid management of the company.” For them, solid results and sustainability are what really counts.

I can think of a number of companies in the UK – including our local brewery (the originator of Hobgoblin) – whose businesses were hugely impacted by taking on similar opportunities. In our example, the local brewery is closed and Hobgoblin produced in a huge brewery many miles away along with many other similar brands. Gain or loss?

Source: Kaneko, H., Vlad, C., Gatan, L., Takahashi, T., Adachi, S., Ina Food Industry: A company that makes employees happy, Studia UBB Negotia, vol. 66, issue 1 (March) 2021, pp. 49-77, doi:

Companies that grow for the sake of growth or that expand into areas outside their core business strategy often stumble. On the other hand, companies that build scale for the benefit of their customers and shareholders more often succeed over time.
Jamie Dimon, President and CEO of JPMorgan Chase

Some questions to ask about your growth plans

Business risks

Customer risks

Operational risks

Financial risks

Want to explore further?

Not all growth opportunities are good!

Veracity (Oxford) Ltd

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