how to manage the inflection points of growth

How to Manage the Inflection Points of Growth2 NO. 142013 SAP AG or an SAP affiliate company. All rights reserved.

Dont Be Distracted by Growth. Growth is good, but it can also be distracting. It keeps companies from focusing on the changes they need to make in order to adapt. Companies need to keep an eye on the future or risk seeing their dreams collapse.

There are four inflection points to watch for:


Small businesses cant grow without reevaluating management strategy. There are three management thresholds to plan for:

Inflection Point #1: Management Thresholds

Creating the dreaded org chart. At a certain point companies have to put a layered management structure in place without creating an overwhelming drag on profits.

Bringing in the suits. The founder must bring in a professional management team to add the strategic discipline thats required to drive sustainable growth.

Connecting all the moving pieces. Expansion, new geographies, acquisitions it all must be linked together with rational planning processes.

Source: Inflection Points: A Guide to Growth


Orabrush came through, but not before the order revealed gaps in its manufacturing processes, management processes, and supply chain that it had to address.

Orabrush, Inc., maker of an innovative tongue-cleaning device, was not prepared when Wal-Mart suddenly called in 2011 with an order for 735,000 Orabrushes to be distributed in 3,500 stores.

Inflection Point #2: The Big Order



Inflection Point #3: Global ExpansionIts the rare company that can do things the same way in every market. Management must understand the specific strengths and weaknesses it brings to each market beyond the core products or services, such as:

Industry expertise

Technical knowledge

Customer relationships



Inflection Point #4: Access to CapitalThere are three paths that small and midsize companies can take to get the capital they need to grow all of which revolve around a central question: when or whether to pursue external funding.

Hypergrowth. Companies that have a product or a business model that they believe is going to take off quickly are most open to external investment.

Growth from operations. Family-owned businesses tend to be risk-averse and prefer to fund growth from profits.

The capital well runs dry. At some point, receivables and the bank account wont be enough to fund that new warehouse. Its time for more sophisticated financial management and a plan for securing new levels of funding.



Four Steps for Proactively Managing the Inflection Points

Always Look Big Even If Youre Not

Keep Resources and Infrastructure Flexible

Be Ready to Change the Business Model

Plan for Disruptions; Dont Wait for Them

You dont have to be a 500-person firm to do business globally anymore. You can be a 10-person engineering design firm in Kankakee, Illinois, and you can reach people in Taiwan because you have a specific skill set. Were moving more and more into that type of micro-verticalization.Steve Niesman, CEO and President, itelligence North America

Identify areas where the business can support variable resources. Harmonize supply chain processes across the globe.

UsedCarboardBoxes.com began life as a retail business for buying and selling used cardboard boxes to consumers. But a big order from Wal-Mart convinced founder and CEO Marty Metro that a business-to-business model could be much more lucrative over the long term. We used to sell $100 moving kits, he says. Now our average order size is a $7,000 truckload.

Growing companies constantly need to prioritize the most urgent needs. A good rule of thumb for prioritizing: start with the customer and work backwards.


Source: Q&A: When Small Businesses Need to Grow Up


TO LEARN MORE ABOUT THE INFLECTION POINTS AND HOW TO MANAGE THEM, READ OUR IN-DEPTH REPORT INFLECTION POINTS: A GUIDE TO GROWTH.

The SAP Center for Business Insight discovers and develops new research- based thinking to address the challenges of business and technology executives.

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