India’s Ambitious Goals for Sustainable and Inclusive Growth
India’s plan for achieving extraordinary growth is based on an analysis of 837 publicly traded Indian companies between 2012 and 2022. The results showed that while most companies performed in line with national economic growth, one in every five companies were able to double their revenue every five years and quadruple it in ten years. This level of growth, which equated to a 15 percent annual compound growth rate, had the potential to act as a GDP growth catalyst.
Debunking Myths About Growth
Myth 1: Size matters. Many business leaders believe that only large companies can outperform in uncertain times. However, research indicates that 36 percent of smaller companies achieved growth champion status, compared to only 10 percent of mid-sized firms and 11 percent of large firms. This disproves the notion that success is limited to established companies.
Myth 2: Companies must choose between growth and profits. Many firms believe that pursuing growth comes at the expense of profit. However, the research shows a strong correlation between revenue growth and profit growth. Growth champions achieved an average of 20 percent annual profit growth, compared to less than 9 percent for their peers.
Myth 3: Extraordinary growth is limited to high-growth industries. While it is true that growth is easier to achieve in high-growth sectors, the research found that extraordinary growth is possible in almost every industry. The top quintile of companies across all sectors grew their revenue by more than 15 percent over the past decade, with the exception of the energy sector.
Myth 4: Low-growth companies cannot turn around performance. The analysis revealed that companies that lagged behind their peers were able to stage significant recoveries within a ten-year timeframe. In high-growth sectors, almost 50 percent of companies in the top quintile were not in that position in the first half of the previous decade.
The Pathway to Extraordinary Growth
This section outlines seven levers for high growth that companies can employ to achieve extraordinary growth. These levers are based on a consistent growth framework identified in previous McKinsey research.
Accelerating the core: Companies can enhance their core operations by adopting digital technologies and data, reallocating resources for the highest returns, and investing in leadership development. These actions can improve operational efficiency and drive revenue growth.
Unleashing the full potential of digital and data: Digital transformation can streamline processes, enhance capabilities, and lead to triple-digit growth in certain sectors. Using data and advanced analytics can optimize pricing, marketing, and decision-making processes.
Reallocating resources with agility: Companies that reallocate their resources to focus on fast-growing, profitable segments can outperform their peers. This may involve targeting specific geographies, channels, or timing.
Investing in the next line of leaders: Empowering leadership throughout the organization can enhance operational efficiency and drive innovation and growth. Investing in leadership development programs can contribute to overall organizational health and performance.
Looking beyond core business: Diversifying beyond the core can be a valuable growth strategy. Companies can pursue adjacent opportunities, create new breakout businesses, pursue global expansion, and strategically approach mergers and acquisitions.
Strategic mergers and acquisitions: M&A can be a powerful tool for growth, allowing companies to build organizational capabilities and best practices. Strategic acquirers often outperform their peers and deliver higher total shareholder returns.
By employing these levers, companies across all sectors in India can create their own recipe for growth outperformance. These actions have the potential to generate superior value for shareholders and contribute to the overall economic prosperity of the nation. It is up to company leaders to decide whether they wish to pursue extraordinary growth, but these levers can provide the guidance they need to succeed.
Analyst comment
Positive news.
As an analyst, the market can expect to see increased investment and focus on sustainable and inclusive growth in India. This could lead to job creation, higher income per capita, and overall economic growth, especially for companies that adopt the outlined strategies for achieving extraordinary growth.
