Expansion plans for strangers to growth

INSIDE BUSINESS

It is now widely accepted that downsizing is not producing the expected results. A survey by the American Management Association found that only 44 per cent of a sample of more than 300 companies had seen an increase in operating profit and few would doubt that the situation has been much the same this side of the Atlantic.

The question is: what to do in its place? With many companies feeling they lack the skills to cope with expansion, there is a risk of them missing out on opportunities and therefore making the most of the chance to escape from the cost-cutting environment.

Howard Davies, the deputy governor of the Bank of England, alluded to this last week at the Institute of Management when he spoke on the subject of "downsizing and after".

Companies needed to respond to the end of the job for life and other monumental changes in the world of work by recognising that loyal employees were more likely to be productive and that this loyalty would come from being trained and developed, he said.

But there is a more practical issue: how do you put a company on the road to growth when most of its managers have in recent years been locked into devising ways of reducing costs in the face of rising competition?

This is the problem that a recently published book, Customer-Centred Growth (Century Business, pounds 20), seeks to solve. Since it is subtitled "Five Proven Strategies for Building Competitive Advantage", its authors are clearly not lacking in confidence.

As the authors, Richard Whiteley and Diane Hessan, point out: "There is no secret formula to becoming customer centred." The strategies required are "observable and transferable". And with reference to many companies in many sectors they set about demonstrating the extent to which that is true.

Consequently, they illustrate the first strategy - "shifting from an identity crisis to a laser-beam focus" - with reference to a large US property-casualty insurance company. It "made a decision to target services only in the areas that its customers cared about, and sold off no less than 13 ancillary businesses to allow it to focus on its remaining core", they write.

They also describe how a South-east Asian retailer aiming at the upwardly- mobile youth market expanded into the enormous Chinese market and started to lose money.

The chairman decided to emulate the US group The Gap by creating a focus. And to do that he responded to the excessive inventories built up by buyers by closing all the company's warehouses except for one with the aim of forcing them to focus on the more profitable end because that was all there was storage space for.

The second strategy - "don't just listen to the voice of the customer, hardwire it" - illustrates how large companies can often learn from their smaller counterparts.

It points out how it is better to get precise information from customers and then act on it, rather than obtain via ever-more sophisticated techniques vast amounts of information that is rarely used.

The third strategy - "moving from excessive use of teams to collaboration" - also owes something to the experience of smaller companies.

Meanwhile, the fourth - "turning customer satisfaction into lasting customer enthusiasm" - requires "that companies create breakthroughs in how they interact with customers". In other words, their relationship with customers has to be so different that it becomes a brand in itself.

The fifth strategy is perhaps the most important and the toughest to achieve. It requires a move from facilitative leadership to contact leadership. This means abandoning the old idea of executives sitting back, giving directions and then "empowering" everyone else to do the work in favour of getting out on the shop floor, talking to employees, asking questions, helping out if needed and getting out among the customers.

A few executives, particularly in smaller organisations such as those featured in the annual Independent 100 listing of fast-growing private companies, have always done this. Others are starting to join them, and are amazed at what they discover. Those who elect to remain in their gilded boardrooms could soon find themselves out of a job.