3/13/2015

Why and how to grow in a stalled economy

We recently announced the hiring of our 1000th employee. This is a good time to look back on the past as well as to look into the future. Growth of the overall economy is stalled these days. Is aiming for growth of your own business still a good thing?

Why?

Already ten years ago, we thought about this apparent discrepancy. We concluded we needed to continue to grow and expand our services to stay relevant to our customers. After all, many of them were growing and consolidating themselves. We also understood growth was required to allow our people to realize their own professional ambitions.

Next to that, we needed to find ways to control our cost structure without applying an up-or-out policy. As people evolve in their career, evidently their salaries increase. Unfortunately the rates we can charge to our customers do not evolve at the same pace. So, we need our senior people and our younger colleagues to team up in order to protect our margins.

Where?

Having understood that we must grow if we didn’t want to drastically change our identity, the next question that came up was how to direct our growth. Growth drivers can be found in many dimensions: expand market segments, grow the service portfolio, expand the geographical focus or simply increase market share within the current scope.

That is why we conducted our first five-year plan in 2005. It was titled “Directing our Growth”. We consciously did not choose for the traditional “oil stain” approach, expanding from and around your base. We went for an “arrow” approach, aiming for less evident targets at long but still reachable range. With each five-year plan, we select the 5 to 6 arrows we want to shoot.

Our decision to reduce our service portfolio to only SAP and Microsoft allowed us to channel our energy (“less is more”). Starting offices in China and the USA immediately increased our geographical relevance to our customers. And addressing different market segments, such as the public, utilities and services sector, reduced our vulnerability to economic fluctuation.

This exercise of strategic redirection was very useful and even indispensable, given our Delaware Consulting culture. Entrepreneurship, one of our core values, clearly implies that we invite our people to take initiative wherever they think this can strengthen our company. Focusing them all in the same direction ensures that initiatives are taken in line with the strategy.

How?

Once you know what you want to realize, the next step is to define how. In the past twelve years, we have tested many different approaches.

We have always been careful with acquisitions. In our service industry, too many transactions resulted in “empty boxes”. In these cases, the only winners were the previous shareholders. As a consequence, acquisitions have contributed less than five per cent to our growth.

On the other hand, we had the opportunity to do some nice mergers. We were lucky to get to know the people of Alliance Consulting and B&M. While feeling an almost perfect cultural fit, in both cases we saw an excellent complement in offering and competences. Consequently their contribution to our growth has been a lot higher than the number of people they initially brought.

Joint ventures though have been a source of disappointment to our company. For different reasons, they did never lead to the successes we had in mind. This was mainly caused by an unbalanced contribution to the joint venture’s success, a cultural misfit between the shareholders and – partially as a consequence – a different kind of leadership.

Last but not least, organic growth has proven to be the best and most successful way. Combined with a low attrition rate, we continued to hire young as well as experienced people. New offices were opened in order to address new markets, on the client and the employee side. We identified leaders around new offerings and in other countries and started with them from scratch…

Limitations and drivers

During this fascinating journey, we gained a lot of insights. We learnt the hard way that the availability of leadership really is our major limitation. We experienced that we needed to limit the number of new initiatives in order to control the overall stress and risk in the company. And we got convinced of the importance of a strong cultural fit.

We also saw the power of having a clear understanding of our identity, combined with a challenging but realistic vision and strategy. While opportunism is dangerous in the long term – sometimes opportunities pop up that are worthwhile grasping. We experienced both the benefits and dangers of being persistent – some will definitely say stubborn – in our endeavors.

The strongest growth drivers consisted of strong leadership, as well in growing our home markets as in setting up new entities. The best results were realized when strong and different individuals teamed up with shared objectives. Allowing them to focus on their core mission, by giving them access to strong support of a shared service center clearly strengthened their results.

Luck, that is a cart you need to push!

The next five years

Last year, a motivated team of 50 local and international colleagues, assisted by specialists from AT Kearney, co-created DLW 4.0, our strategy towards 2020. While growth still is not our first objective, we believe that successfully executing this strategy can lead us to growing our family to more than 2500 people in 10 to 12 countries. Personally I am confident that with hard work and some luck we will realize this.

That is why I like to conclude with a nice quote of Willem Vermandere, a famous Flemish singer:

Luck, that is a cart you need to push!

 

Author: Jan Delaere. You can follow Jan on Twitter (@delaerej) or connect with him on LinkedIn