Business x design: Understanding business growth

What do you do as a designer when a senior business executive discusses 'growth'?

1. Pay no attention: "Here we go again, business jargon."
2. Pay some attention: "They want more of something."
3. Frame the question: "How can design help drive our growth strategy?"

We react with #1 and #2. However, this lack of focus on #3 has led to a growing distrust between business and design where business leaders think that design does not contribute to profitable growth. Yet, design's potential to shape and drive business growth is immense, and it's time we recognise and harness it. In this article, let's unpack business growth so we can have more meaningful design conversations with business leaders.

Defining business growth

Growth in a business context often refers to expansion, especially revenue expansion. All other expansion types, such as market share growth, product offerings, or geographical reach, report to one master—revenue.

Some definitions may come in handy here:

• Sales: Money made from selling products or services. It doesn’t factor in expenses.
• Revenue: Sales plus other income, such as investments and royalties.
• Expenses: Costs incurred in delivering the products or services.
• Profits: Sales minus expenses.
• Earnings: Profits minus all expenses, including interest and taxes.

Top-line growth refers to growing sales—getting new customers to pay for your products or getting existing customers to buy more.

Bottom-line growth refers to growing profits or earnings. This means the company is selling more to more people and managing its expenses well, ultimately having more money in the bank.

If sales are rising less than the company wishes, it can achieve bottom-line growth by reducing expenses. It can do this sustainably by eliminating waste and improving productivity. It could also do it through cost-cutting and downsizing, which is sometimes justified but, other times, just a short-term fix.

A healthy company must grow its top and bottom lines. However, this depends on the company's stage in its lifecycle. For a startup, revenue growth may not be a critical issue but becomes crucial once the company gets traction. Consider Amazon.

In its early years, Amazon focused intensely on increasing its sales and market share, often at the expense of profits. This top-line growth strategy involved reinvesting revenues into the business, expanding into new markets, building infrastructure, and acquiring other companies. The goal was to grow Amazon's customer base, increase its product range, and enhance its distribution and delivery systems. This approach meant that, for a long time, Amazon reported slim profits or even losses despite rapidly increasing sales. But the strategy paid off. The long-term vision of embedding Amazon into the global e-commerce and cloud computing fabric made it indispensable to both sectors, eventually leading to enormous profits.

Amazon had a long-term vision to achieve profits, which they could explain by their flywheel. However, many companies grow their top line without knowing how to increase their bottom line. Kunal Shah, commenting on the Indian startup scene in an excellent podcast interview with Lenny Rachitsky, said that in India, it is easy to get DAUs (Daily Active Users) but not ARPUs (Average Revenue Per User). It does not matter if the company has millions of DAUs, but if they don't help generate a profit, the company will eventually sink!

Clayton Christensen echoes the same sentiment in Chapter 2 of his brilliant book The Innovator's Solution: “There is good money, and there is bad money.” Christensen argues that it is better for companies chasing new growth opportunities to be impatient for profit but patient for growth. In other words, aim for profitable growth.

A company's growth is a tangible sign of success and progress. This progress is not just a number on a balance sheet; it's a source of pride and motivation for those working there. When a company grows significantly, it is easily observable and can energise staff as they see the direct results of their efforts contributing to something bigger.

Identifying growth opportunities

There are many theories and books on business growth. Still, I have found Tiffani Bova’s Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business to be a simple guide to understanding growth opportunities.

Tiffani identified ten paths to growth, as shown in the diagram below. These are organic growth paths, not inorganic ones like mergers and acquisitions.

Customer experience is a core or foundational path. The other nine build on customer experience in the following way:

Context + Combination + Sequence

• Context: The stage of the company in its lifecycle, current social and economic conditions, etc.
• Combination: The combination of growth paths that work in concert to drive multiplier growth.
• Sequence: The priorities and timing of actions to drive growth.

Let’s unpack one of her case studies to understand these concepts. Consider Sephora.

Sephora revolutionised the beauty retail industry by embracing technology, personalisation, and an omnichannel approach to create an immersive, customised journey tailored to each customer. They aced customer experience and then used other growth paths:

This strategy was not formed all at once. It was shaped by the context of the different periods.

• They were early adopters of the e-commerce boom, launching their first online store in 1999, targeting the U.S. market.
• They embraced data and personalisation when it became available to fuel their obsession with customer experience.
• In the early 2000s, they embraced partnerships with JCPenney and Amazon, rapidly growing platforms then, to expand their physical and online presence.

Business x design conversations

As designers, how might we have growth conversations with business leaders? I have found that doing the following helps:

• Do the research: Understanding the business context and growth strategy is essential. If the company is listed, go through the quarterly call transcripts. If the company publishes annual reports, find out where they will allocate capital in the next few years. We've previously used a research company to gather all the intel about the company, the category, and the competitors. Yes, we paid for research before meeting with the senior leaders.
• Explore revenue productivity: Ram Charan uses the term ‘revenue productivity’ in his book Profitable Growth is Everyone’s Business. He compares it with cost productivity, where you try to increase profits by reducing costs. On the other hand, revenue productivity is about increasing revenue without increasing costs. One example is when a call centre team analyses customer gaps and informs the product teams, subsequently improving customer experience and referrals. Here, the cost structure remains the same, but revenue increases. I have found that asking, “What are we learning from X that can drive growth?” is a useful conversation starter around revenue productivity. For example, asking, “What are we learning from field sales around rejected and lost accounts that can help us drive growth?” can reveal positioning problems that, if solved, can increase growth.
• Be proactive: As designers, we are optimists. We excel at coming up with ideas, even in dire situations. What better way to get leaders' attention than by offering ideas focusing on growth? We have depth in areas that the leaders, marketing, sales and product teams lack. We see things holistically; we see systems where others see point solutions. In one client engagement, the conversation veered towards getting a CRM.  By drawing attention to field sales, data analytics, customer journeys, and market positioning, we helped the leaders better appreciate CRM in a growth context.
• Embrace humanity-centered design: We designers are uniquely qualified to create a positive impact by expanding our view to include social and ecological factors. A good case study is Juul, the American e-cigarette company that popularised vaping. Their mission to "eliminate combustible cigarettes” was first seen as a noble cause, but then they targeted teens. Juul did grow rapidly, but it was bad growth. America was subsequently confronted with teen nicotine addiction, and there was a backlash and a Netflix documentary about their rise and fall. Juul was conceived in Stanford’s d.school, where user-centred design is celebrated. It did not take long for Don Norman, widely considered the father of user-centered design, to recognise the problem and expand his call to action to embrace humanity-centered design to address the issue. His new book, Design for a Better World, is a good start for those who want to champion the cause.