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Benchmarking Growth

Amazon is an ‘excellent case of a company that has an economically fine-tuned engine which effectively serves their goal in a really interesting and thoughtful way’… as long as their future investments pay-off. The excessive free cash flow at Amazon makes it possible to experiment, learn from mistakes, and keep moving ahead… regardless of what shareholders think. However, the business model at Amazon is dependent upon continuous growth. Therefore, a critical question for Amazon is; what is the future growth potential?

Jeff’s Vision

  1. Continue to identify new growth opportunities.
  2. Continue to re-invest profits into the business.
  3. Continue to use ‘every single last penny’… to do just that.

Growth vs. Profit (2:30)

Matt Blumberg

The crucial transitions that turns a startup into a sustainable business.

NOTE: video starts & stops at pre-assigned times

Growth Addiction

Companies in all industries eventually see their revenue growth slow, and Amazon will be no exception to the rule (eventually). Therefore, what should a company do when growth no longer materializes? For some, the answer to that question is; continue to chase growth. However, for others the wise choice might be to concentrate on operational improvements (maturity strategy).

Top-line Growth

From 2001 to 2006 Home Depot was a store-opening machine, and quickly grew to be the second-largest retailer in the United States (doubled store count in that period). In 2007 the Board of Directors realized that growth was occurring at the expense of productivity. In comparison to Lowe’s (their nearest comparable retailer), in-store sales at Home Depot were increasing by +1.4% a year. Lowe’s on the other hand had a in-store sales growth rate of +4.6%.

Growth Formula

Foot Locker has been tempted to grow retail outlets however, they recognized that productivity per store is equally important. Unlike their close competitor Finish Line, Foot Locker focused on increasing sales as a percentage of expenses (+1.8% vs. +1.3% for Finish Line), and controlling inventory (1/2 as fast as sales). That small differential in fact had a significant impact on operating profit (+23.6% for Foot Locker and +4.6% for Finish Line).

Key Performance Indicators (KPI’s)

The measures selected (monitored) on business performance, must be ones that are most relevant for a specific startups individual business conditions. However, the challenge is; how to decide on the most relevant metrics? 

What are the critical KPI’s your startup needs to monitor regularly?

If you’re in a e-commerce business, the most critical KPI’s might be conversion rate (how many visitors are converted into customers), or retention (how many people converted actually remain active customers for a defined period of time). For a food retail company, a critical KPI might be; sales-per-square-foot (square meter) of shop space.

It is essential that the KPI’s selected (and monitored), must be ones that are most relevant for a specific startups individual business conditions.

KPI’s (5:00)

Erica Olsen

The vehicle to tell the story of your organization’s strategic performance.

NOTE: video starts & stops at pre-assigned times

ACTIVITY

KPI’s Again?

Yes… it’s time to refine your initial KPI’s, which you formulated earlier in the course.

Remember, the KPI’s selected to monitor business performance, must be ones that are ‘most relevant’ (personalized), for your startups business conditions.

Revise KPI’s Now!

Course Curator: Dr. Gerard L. Danford

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