India is committing to sustainable and inclusive growth in its goal of becoming a developed economy. This ambition is likely to see 600 million jobs created, income rising sixfold to over $12,000 per capita and GDP growing to $19 trillion.1 In realizing this goal, the private sector is an indispensable partner.
While, most companies performed in line with national economic growth, over the period, what’s impressive is that one in every five companies (top quintile) were able to double their revenue every five years and quadruple it in ten, achieving revenue growth of 15 percent or more, compounded annually. This extraordinary growth rate is more than two and a half times4 the GDP growth rate during the same period, and it has the potential to act as a GDP growth catalyst.
The top quintile companies also delivered nearly double the total shareholder returns (30 percent) over five years compared to the Nifty 50 benchmark index of 14 percent total shareholder returns. We deem this as extraordinary growth, and companies achieving this as “growth champions.”
Myths about growth can prevent companies from aiming high
Size matters. Only large companies can outperform in uncertain times. However, our study revealed that 36 percent of smaller companies, with revenue less than INR 1,500 crore (approximately $180 million) in 2022, were classed as growth champions.6 Only 10 percent of mid-sized firms (revenue between INR 1,500—4,000 crore) and 11 percent of large firms (revenue greater than INR 4,000 crore) showed similar growth. While it is true that some of this high growth can be attributed to the low base effect, the difference in average growth rate between these categories is too significant to overlook.
Companies must either choose growth or profits, not both. Many firms may consider growth and profitability as trade-offs. After all, growth plans frequently incur sizeable costs as companies expand capacities, enter new markets, introduce new product lines, or invest in brands. But our research confirms that revenue growth and profit growth have a high correlation coefficient of 0.95, which shows a strong relationship between the two variables.
Growth champions reduce costs and pursue value engineering to open new markets and create surplus profits for investing in future growth. This may include investing in distribution networks that increase their access to customers, investing in their brand and marketing, or tightly managing their pricing strategy.
Extraordinary growth is only possible in high-growth industries with tailwinds. Higher revenue is easier to unlock when companies are fortunate enough to be in high-growth industries. But it’s also true that while tailwinds matter, extraordinary growth is possible in almost every industry. Hence, a company in an industry facing headwinds should not be limited by the belief that growth is beyond reach.
Once a low-growth company, always a low-growth company. Companies that trail their peers can turn around performance. In fact, companies can stage a significant recovery within a ten-year horizon. Performance turnaround is much more prevalent in high-growth sectors. Almost 50 percent of companies who ended the decade in the top quintile for the financial and real estate industries were not in this position in the first half of the past decade. This figure was much lower in slow-growing industries, where less than half of the companies had overturned performance to gain a top-quintile position.
Fast-growing companies typically make the explicit choice to grow, and follow that up with bold, deliberate actions. The core elements are an ambitious mindset, the right internal enablers, and clear pathways for action founded on growing revenue.
Accelerating the core
While pursuing sustained growth, outperforming companies also recognize the need to fortify their core operations. Here, companies have three paths for higher growth, including the adoption of digital technologies and data, agile resource allocation for the highest returns, and investing in leadership development. By investing in both systems and people, companies can enhance their overall potential.
Looking beyond core business
Growth champions frequently choose to grow competencies beyond their core business, transferring the skills, expertise, and market knowledge acquired in one sphere to new markets and geographies. There are four key growth drivers that high-growth companies typically pursue as they look beyond their core businesses, including the pursuit of adjacent opportunities, creating new breakout businesses, pursuing global expansion, and mergers and acquisitions. Diversifying beyond the core can be a valuable growth strategy for any company, regardless of industry. Fast-growing businesses can consolidate their position, with opportunities for slow cultivators too.
As India aspires towards its centennial ambition of becoming a $19 trillion economy by 2047, companies across all sectors can build their own recipe for growth outperformance. Ultimately, it is up to company leaders to decide whether they wish to pursue extraordinary growth. If they do, these levers may provide the direction they seek.
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