Podcast #44:
Profitable Growth Podcast
Part 1 of 9

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Transcript: 

By Jim Tompkins, CEO, Tompkins Associates

Hello, this is Jim Tompkins, the CEO of Tompkins Associates and Tompkins International back with you again to begin a whole new series on our Global Supply Chain Podcast. I'm so glad to have you join us today on the 1st segment of what will be a 10 part series on Profitable Growth.

This podcast series is meant to draw a line in the sand after the last two years of the Great Recession. This series is the beginning of the return to profitable growth. This is the change of seasons from a two-year long winter into the new growth of spring. This is the end of hunkering down and the end of the fruitless challenge of trying to meet quarterly forecasts and shift to sustainable, long-term profitable growth.

In the first podcast of this series I will provide you with an overview of the topic of Profitable Growth. Then for the next nine podcasts I will return to my normal routine of inviting a subject matter expert to join me in a question and answer format to provide you with the latest and most current information on how to provide profitable growth leadership for your organization.

I know we are all very pleased to have the Great Recession behind us, but at the same time we should consider how we move forward with profitable growth is dependent on what we did during the Great Recession. My advice that I preached on every occasion over the last two years is that we need to this:

• Maintain Talent
• Maintain Strategy
• Cut all other costs

Now whether you did this or something else over last the two years is not the topic of this podcast. For better or worse you are where you are. What we must do is begin where you are now and move forward. To assure you do not miss this golden opportunity to leave the Great Recession behind you and move onto profitable growth, let me share with you the three fatal mistakes that some companies will pursue and totally miss this golden opportunity:

1. The first fatal mistake some companies pursue as a result of being hurried and not taking the time needed at this critical time is to return to a previously developed growth plan. We need to realize that our marketplace, our customers, and our competition has all gone through major changes over the last two years. Only after we have a clear understanding of our position and our customers’ desires can we develop a relevant profitable growth plan going forward.
2. The second fatal mistake that some companies will pursue is to get so focused on profitable growth that they fail to focus on the profitable present. Organizations must not go from the dead of winter to the middle of spring too quickly. Stakeholders desire and expect your organization to crawl, walk, jog, run. So returning to profitability and to achieving expectations is very important and if not achieved may very well undercut your pursuit of profitable growth.
3. The third fatal mistake that some companies will encounter is not properly planning the proper balance between Operations Excellence and the pursuit of Process Improvement with the capital needs to fund profitable growth. As you will see in this profitable growth podcast series some of the profitable growth initiatives will increase revenue and some will reduce costs. Some of the initiatives will require capital and so an important part of your overall plan for profitable growth is to assure the timing of the need for capital to fund the initiatives to the results to flow from initiatives.

Let me begin the discussion on profitable growth by defining what we mean by profitable growth. First, as a rather basic observation, in that the phrase profitable growth contains two words. Now maybe this observation is not a breakthrough to you, but based on what I see occurring with many companies this observation needs to be made. The word Growth is most often tied to the top line, as increased revenue. The word Profitable is most often tied to the bottom line as increased profits.

So yes, what we're talking about with Profitable Growth is increasing both the top-line and the bottom-line of your company. Increasing the top line by having higher increases in cost is not profitable and thus, not profitable growth. A key to most companies achieving profitable growth is the increase in operating margins. Profit is actually the end result after the non-operating expenses, like taxes and depreciation, are subtracted from the operating margin. So the questions we want to pursue in this podcast series are:

1. What can we do to grow revenue?
2. What can we do through organizational excellence to reduce costs and increase operating margins?
3. And lastly, how can we assure that the revenue growth and the process improvements we pursue can result in long term, sustainable profitable growth?

Something I find very interesting is which companies are most interested in profitable growth, and which companies are most successful in achieving profitable growth? As I review, with these topics I tend to end up with one answer to both questions. Now, as far as being interested in profitable growth:

1. Small firms want to lose the small firm and be able to handle and become medium sized
2. Medium sized firms want to become big
3. Big firms want to become bigger

In a similar way, a review of the top 50 fastest growing companies in the Fortune 500 demonstrated that:

• 22% are in the top Fortune 100
• 18% are in the top 101-200
• 14% are in the top 201-300
• 26% are in the top 301-400
• 20% are in the top 401-500

So, which companies are the most interested in and successful in achieving profitable growth?

All companies.

So no matter how small, medium, or large your company is, it's going to be interested in achieving profitable growth. The best part is that the companies can easily be successful if they properly focus their attention on the topics I am about to cver in this podcast.

Let me tell you about this 10-part podcast. Part two of this podcast will address profitable growth by enhancing your organization focus and being sure your organization is ready to support profitable growth. Then, I will work with our subject matter experts to step our way through seven of the top eight approaches to achieving profitable growth.

The one approach that we will not cover is Mergers and Acquisitions, as we just completed a seven-part podcast series on M&A. Please look into this series to fully grasp the Mergers and Acquisitions route to profitable growth. The other top 7 profitable growth topics are:

• Solution Selling
• Technology
• The Supply Chain
• The Service Supply Chain
• Inventory Management
• China
• Emerging Markets

Finally, the last installment in this series will be an overall profitable growth clean-up topic on lessons learned with our own profitable growth expert, Gene Tyndall.

So, I am really excited about this series. Hope you are as well. As the weather outside turns to hot I hope your focus on profitable growth heats up as well. Thanks for joining us; I look forward to speaking to you all real soon.

Additional podcasts are available - see the list here.