Monday, May 16, 2011

Sustaining top-line growth: The real picture
A historical view shows that beating markets is tougher than most leaders believe.
MAY 2011 • Bing Cao, Bin Jiang, and Tim Koller

Organic top line growth is really tough. This is a sobering summary of how companies perform:

"Many leaders set unrealistic growth targets. Often, they don’t properly consider how fast their underlying markets are growing and thus how much market share must be grabbed to meet ambitious goals. Or they ignore the likelihood that their competitors are doing many of the same things to grow. They also underestimate the ongoing need to find new products to replace revenue declines from current offerings as they mature….
 …The median revenue growth rate was 5.9 percent (large, non-financial companies from 1997 to 2007). About one-third of these companies increased their revenues at rates faster than 10 percent. But that one-third figure probably overestimates organic growth, since it includes the effects of acquisitions….…Over a longer time horizon (1965 to 2008), other difficulties come into view…The median was 5.4 percent a year. Although the rate fluctuated from 1 percent to 9 percent according to the economy’s health, there was no upward or downward trend and thus no rising tide to lift growth over the longer haul."

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