Tuesday, May 03, 2005

look at growth as a strategy rather than an outcome

Stalled by sluggish demand, companies have slashed spending.Investments in growth can produce disappointing results. Traditional sources of revenue growth have been tapped out. Where is the growth going to come from? Companies should create new growth and value by addressing issues that surround products. If a company can combine high growth and low risk by moving systematically into products, services, geographies, or cutomer segments that are highly related, or adjacent, to the company's core business, then expansion into new markets is almost certain.

One example is UPS. By the mid-1990's, UPS was failing to deliver on its growth goals. From 1994 to 1997, revenues grew at less than 5 percent annually. A new source of revenue was needed. A few big customers had asked UPS to warehouse goods near its main U.S. air hub in Louisville. Those customers wanted to take orders up to the last minute and still have those orders shipped overnight. In 1995 UPS Supply Chain Solutions was started. The business was built out of the existing shipping network. The company has 750 distribution centers in 120 countries. Inventory is managed, orders are prepared, and good are delivered.

The bottom line for customers includes better inventory management, accelerated cash flow, and lower working capital. In 2003, 2.9 billion dollars of revenue was added to UPS, which accounted for more than half of the company's new growth from 1998 to 2003.

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