Pull the Right Growth Levers Using the Value Creation Quadrants

The window for fact-driven, thoughtful changes in your value creation strategy is closing remarkably quickly. Recent history is crystal clear on how the best growth companies separated themselves in periods of economic uncertainty: CEOs pre-emptively shifted their value creation strategy and drove absolute focus on a narrow set of growth imperatives. This isn’t news.

The challenge with articulating a focused value creation strategy is that growth levers are incredibly multi-faceted. Ask any executive team to articulate their value creation strategy and you’re likely to hear 10 different answers, each both incomplete and overstated at the same time. Regardless of where you are in your fiscal year, as a CEO, you are the difference maker in driving growth and creating value even during uncertain market conditions.

SBI has created our Value Creation Compass to help align leadership teams and determine growth imperatives through a simple yet comprehensive growth framework.  Through thousands of customer engagements, SBI has determined there are there are four definitive value creation approaches. 

These approaches are based on two factors: 

• The expected growth profile of the business
• Level of investment to achieve those growth outcomes.

Our 2022 CEO Growth Survey, fielded in mid-June 2022, shows that nearly 40% of surveyed CEOs classify their organization’s value creation strategy as quadrant #2 “Accelerating Growth with Increased Operating Expense.” Just weeks later, many of these firms are now decelerating spend or even reducing operating expense. In the coming weeks and months, we expect a dramatic decrease in businesses operating under this value creation mode. Most organizations in the tech, tech-enabled services, and other business services sectors will shift their value creation direction toward quadrant #1 “Accelerating Growth without Increased Operating Expense.” How these organizations navigate this expense drawback will determine their success levels in navigating FY2023 – for some, it may even determine their fate.

Navigating the SBI Value Creation Quadrants

1. Accelerating Growth without Increasing Operating Expense: Companies in this quadrant invest in growth at levels commensurate with peers, however, the business is not growing at the expected rate given those investments, requiring productivity gains.

2. Accelerating Growth with Increasing Operating Expense: This is an “art of the possible” thesis for high-growth companies focused on extracting breakout growth with increased investments.

3. Converting to a More Valuable Revenue Stream and Operating Model: Often a use case for shifting the revenue model dramatically (e.g., on-prem to SaaS revenue model conversions), these companies focus on making a step-change in their revenue model to drive future growth and enterprise value creation.

4. Maintaining Growth Rate Without Increasing Operating Expense: Often seen in public-take-private scenarios or large legacy businesses, this quadrant describes businesses that are overspending, yet failing to achieve commensurate growth.

For each value creation quadrant there are 2-3 Growth Imperatives that a CEO can drive execution against to that expected growth. A company can execute against multiple growth imperatives at the same time BUT they must all be within the same quadrant. Each of those growth imperatives then has a set of operational execution areas that are most critical to execute on. 

Many companies find themselves in high-gear for establishing their annual plan as we head into 2023.  To ensure your team is focused on the right growth imperatives for value creation, click here.