SCALE YOUR BUSINESS – DON’T GROW IT
Everyone wants to achieve growth, and while growth is the default strategic starting position, it is the weakest and highest risk of the 4 Scaling Strategies. Integrative Trade data has clearly demonstrated that a few thousand exporting companies utilizing at least 3 scaling strategies are responsible for over 50% of Canada’s export sales, and enjoyed decadal growth over over 80%, whereas sales of over 40,000 exporters focused exclusively on growth, have declined by about 7% over the same period.
In order of effectiveness the Scaling Strategies are Smart Networks, New Standards, Replication and then Growth.
Smart Networks are Global Value Chains (GVC) whereby each business unit contributes significant value to the product, arbitrages low cost inputs, and manages Forex risk.
The most common New Standards methods focus on creating hybrid, high performance organizations that achieve strong increases in productivity, and sharply lowering costs.
Replication refers to establishing integrated supply chains, licensing, franchising etc that leverage others capacity to your advantage.
Growth, when used on its own is generally limited to single point of origin exporters, who (usually) sell through sales representatives, agents or distributors. However when used in conjunction with the other three methods, growth can make a strong contribution.
The necessary prerequisites to implementing all four scaling strategies are effective GVC, autonomous Foreign Affiliates, and Globally Competent management.
In particular, scaling via Smart Networks / GVC can provide immediate and sharply improved productivity, lower costs, and confer strong competitive advantage, as it is usually less expensive to create a brand new state-of-the-art facility offshore than upgrade an existing facility in Canada.
XPM has been successfully scaling firms, achieving significant productivity gains, and compelling competitive advantage since 1991.