Reconciling growth and profitability

When asked about their strategic priorities, most leaders cite either growing revenues or improving the bottom line. The choice between growth and profitability is thus often presented as a key strategic decision.

And indeed, these two objectives often appear to be contradictory. To boost sales, most companies try to attract more customers by reducing their margins to offer better value for money, but end up with a less profitable business. And when they want to improve profitability, they squeeze costs for a quick margin fix, but this often puts a drag on medium-term growth.

The publications that we have analyzed underline that the most successful companies are those that refuse to choose between these two objectives. Instead, they work to find ways to manage both challenges at once. Three approaches appear to be particularly effective in this regard:

– To foster growth without penalizing profits, work to develop an offering that is more highly valued by customers.

– Improve profitability without penalizing growth by cutting back on costs that customers do not perceive to add value.

– Enter new markets judiciously: Be careful not to jeopardize profitability by overburdening your infrastructure.