On Growth

Building a 'Portfolio of Initiatives' Is Key to Partner Growth

Forget planning for just the foreseeable future; a partner's plan for adapting to the rapidly changing IT landscape should span years.

• By Mike Harvath
• September 24, 2014

Global management consulting firm McKinsey & Co. published an article a number of years ago titled, "Just-in-Time Strategy for a Turbulent World," which always intrigued me.

The article defines a classic approach to corporate strategy as "with sufficient analytical rigor and an adequate assessment of the probabilities, strategists can pave a predictable path to the future from the matter of the past." The premise of the article is that for industries buffeted by rapid change, as in IT, the classic approach may no longer be adequate.

The author, Lowell L. Bryan, goes on to posit, "Suppose we no longer believe that the future is foreseeable...Most companies put too little energy into adapting core businesses to changing markets. Indeed, they often unintentionally harvest their core businesses by pushing for short-term performance while neglecting the investments needed to stay ahead of the game."

To remedy this shortsightedness he suggests CEOs "think about corporate strategy not as a portfolio-of-businesses, but as a portfolio-of-initiatives aimed at achieving favorable outcomes for the enterprise."

We isolated the key principles as they might apply to the universe in which we work -- small to midsize IT services firms. Key among them is creating a portfolio of initiatives that comes to fruition over a period of time, such as initiatives that contribute to current earnings, initiatives that mature in two to three years and initiatives that mature in three-plus years.

We see this portfolio approach playing out with three basic growth strategies:

1. Current earnings growth strategy: This is organic growth, building upon your current source of revenue, your current core competency. The key to keeping your organic growth engine on fire is to specialize, to own a segment of the market positioned at the intersection of a technical and vertical market and drive your company to be the No. 1 or No. 2 player in this market. Then sell into this market with a full set of services offerings that includes advisory services, technology services, and maintenance and support.
   
   
2. Initiatives that mature in two to three years: Only when you have a solid base of organic growth contributing to current earnings should you begin to think about an acquisitive growth strategy. Our most successful clients will tell you that without an ongoing M&A initiative, you're forfeiting more than 50 percent of your growth potential. Thinking two to three years out is an appropriate time frame to consider M&A initiatives that will help you enter new geographies, new verticals, complementary service lines and so on.
   
   
3. Initiatives that mature in three-plus years: In a previous article about intellectual property (IP) development, I wrote about how my company is beginning to work with a number of IT services firms that have set their sights on creating and selling IP as a way to grow and differentiate their businesses. Having seen the partner community evolve from hardware and software implementers to services providers, we foresee the next platform for growth in IP development. The key to making this work is having both internal and external critical mass.
   
   Internal critical mass is having an experience base of successful implementations, which we define as having half your current customers buying into your IP. Externally, it's leveraging this experience base to attract and recruit new sales channels. This growth strategy requires a great deal of forethought, planning and groundwork.

What's intriguing about this approach is its building-block logic. From a base of hardware and software implementation, on top of which comes managed services and support, now comes the third leg of a growth stool, new IP. Companies can project a portflio-of-initiatives strategy three to five years out that provides clear direction, allocates appropriate resources to the task and gives ample opportunity for analysis, risk/benefit assessment and rigorous monitoring, all without straining the capabilities of the team.

More Analysis by Mike Harvath:

• IP Development: Beware of These Potential Pitfalls
• CEOs: Have a Succession Plan Ready
• Column Archive