Magazine article Management Review

Measuring Company-Growth MOMENTUM

Magazine article Management Review

Measuring Company-Growth MOMENTUM

Article excerpt

Virtually everything done by every company involves a time dimen-sion.

Finding ways to get the most done in the least time is always im-portant.

But making time-savings a top priority is usually counterproductive. Get-ting things right, not just done, is what counts. In an era where fast-changing technologies, markets and customer needs are facts of life, it is of vital impor-tance to find better ways to understand and guide company performance.

Measuring company-growth mo-mentum- the rate at which company-wide innovation takes place-is one di-rect way of understanding the force that drives growth. I have used this tool for many years to identify actions that will produce higher levels of innovation and thereby more consistent growth.

To build a company's growth mo-mentum, managers must stimulate inno-vation in the core strategy, business model, processes, policies and productiv-ity.

Achieving this goal requires much more than defining and acting on pro-jects and schedules. Nurturing organiza-tional vitality-the competencies, ideas, actions and energies of the company's people-is what sets the foundation for exceptional accomplishments.

Innovation must be focused on retain-ing the company's key people, sustaining customer loyalty, redefining markets, devel-oping products and services, and creating better business processes. When that focus is achieved, company-growth momentum emerges as the seminal force that drives long-term growth in financial performance.

A company can objectively measure its growth-momentum with a set of new metrics called "momentum indicators," which I developed while running my business. These metrics primarily exam-ine a company's operational dynamics, providing the critical information needed to guide internal decision-making toward important innovation.

The most important momentum indi-cator is revenue margin (REM), which is determined by deducting from gross margin all selling, marketing and distribu-tion costs included in the SG&A line item of an income statement. REM is the profit from revenue, and is the only source of operating profit. Unsatisfactory trends in REM indicate that the company's market-position strength is inadequate relative to competitor actions or customer needs, or from weaknesses in operations.

Along with REM, other specific mo-mentum indicators-both quantitative and qualitative-are necessary to create a picture of what's working and what's not. …

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