Going for Growth

Finding new sources of revenue is harder than ever. Here's how to grow without damaging your roots.

Other books published in the last year, also by well-known consultants, offer more or less similar answers to the growth conundrum”—books like The Innovator’s Solution: Creating and Sustaining Successful Growth, Profitable Growth Is Everyone’s Business, and Stretch!: How Great Companies Grow in Good Times and Bad.

Believing that experience is the best teacher, we decided not to review books but rather find out whether what the consultants preach actually works in the real world. Accordingly, we examined four companies that have adopted variants of the strategies promoted by Slywotzky and Wise, Zook, et al. They are United Parcel Service (UPS), which wants to embrace the whole spectrum of logistics services; Cardinal Health Inc., which went from $2 billion to $50 billion in 10 years; Reynolds & Reynolds Co., which was incorporated in the era of buggy whips and now offers Internet tools for its auto-dealership customers; and General Motors Co., which has leveraged intangible assets to create a brand-new technology.

Seeing the Big Picture

A key principle of successful growth is that it should add to, not detract from, a company’s core business, says Wise. “The idea is not to abandon the pillars of growth, but to add to the playbook.” For Zook, UPS is a stellar example of a company that has strengthened its core by exploiting adjacencies—here, new, high-growth business opportunities that also create greater demand for shipping.

Not that UPS was a slouch to begin with. From 1981 to 1991, the Atlanta-based company tripled revenues, from $4.9 billion to $15 billion. That was achieved by building on a solid brand, expanding overseas, and acquiring competitors. Along the way, the company built a network that serves more than 200 countries and millions of customers. By the mid-1990s, however, UPS was failing to deliver on its growth goals. From 1994 to 1997, revenues grew at less than 5 percent annually, as growth in the U.S. package-delivery business slowed to the single digits. Clearly, UPS needed a new source of revenue.

The source was sitting right under its nose. A few big customers had already asked UPS to warehouse goods near its main U.S. air hub in Louisville. Those customers wanted to be able to take orders up until the last minute and still have the goods shipped overnight. At the same time, other companies were asking UPS to keep equipment parts on hand, which they could then ship to facilities in a matter of hours if repairs were needed. UPS realized that it could provide these services—and more—to other companies around the world.

In 1995, the company started UPS Supply Chain Solutions. Through a series of acquisitions and organic growth, it built out the business along its existing shipping network, leveraging existing capabilities and making acquisitions to plug holes. “At the time, other companies were doing small parts of the supply-chain logistics puzzle,” says David Mounts, CFO of UPS Supply Chain Solutions. “But no one had put the whole picture together globally.” Today, UPS Supply Chain Solutions can do just about anything under the logistics umbrella. The company has 750 distribution centers in 120 countries, where they manage inventory, prepare orders, and deliver goods via truck, ship, rail, or air. It will handle returns and even repair and ship some products back to customers on behalf of the vendor.

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