• Strategy
  • CFO Europe Magazine

Growth Mode

Finding new ways to grow a company in today's tough climate isn't easy. These CFOs show how it can be done.

“We’ve become obsessed with the notion of double-digit growth,” says CFO Kristen Onken. That’s an understatement. Since Logitech brought her on board as finance chief in 1999, the Swiss computer-accessory company has been in pure growth mode. Through some of the worst market conditions that technology companies have ever faced, revenue at the Zurich and Nasdaq-listed firm has grown an average of 23 percent annually in the past five years, to $1.3 billion in fiscal 2004. “What this has done is make me a great believer in growth drivers,” notes Onken, having just returned from an annual gathering of Logitech’s 60 top finance managers at the company’s U.S. base near San Francisco. The theme of the jamboree? “Getting to $3 billion.”

That’s right — Logitech wants to more than double its size “in the next several years,” its executives say. Wishful thinking? Reminiscent of the booming 1990s? Not according to Onken. She says her company can do this through the prudent expansion of distribution centers, customer base and product lines. At a time when much of Europe is still focused on post-bubble restructuring and belt tightening — think ABB, KarstadtQuelle, or Unilever — Logitech’s growth vision might strike some companies as audacious. But within the pockets of recovery, not just in Europe but worldwide, there are plenty of other companies that are feeling pressure to dip into the big piles of cash they’ve been hoarding and ramp up growth.

The challenge for all companies: finding the next new source of growth will be more difficult than ever before. Traditional sources of revenue growth — such as product enhancements, grabbing market share, or acquiring competitors — have been largely tapped out, says Adrian Slywotzky, a managing director at Mercer Management Consulting in the U.S. Slywotzky echoes other management gurus in calling this “a growth crisis.”

In the hunt for growth opportunities, failure is rife. (See “Operation Backfire,” at the end of this article.) According to research overseen by Chris Zook, head of the global strategy practice at U.S.-based consultancy Bain, only 13 percent of companies worldwide during the 1990s achieved “even a modest level of sustained and profitable growth.” In today’s hypercompetitive environment, he says he’d be surprised if that figure can reach 10 percent.

Yet that hasn’t stopped companies from whipping up investor enthusiasm with magnificently ambitious growth plans. Zook notes that the average company sets a public target of revenue growth at twice its industry’s rate, and earnings four times higher. Where will all that growth come from?

In many cases, finance might have the answer. That’s why we caught up with the CFOs of three very different companies, all renowned for their ability to tap into new avenues of growth: Logitech, a small start-up founded in 1981, made a name for itself as a maker of computer mice for PC manufacturers before expanding into the retail market to sell a vast range of accessories for computers, gaming consoles and entertainment systems; Giorgio Armani, the Italian fashion house which since its founding in 1975 has grown revenue organically to €1.3 billion ($1.7 billion) through shrewd customer segmentation and brand control; and French hotel group Accor, which revolutionized its industry in the 1980s with a smart investment aimed at budget travelers and today is seeking to rekindle that innovative spirit.

Discuss

Your email address will not be published. Required fields are marked *