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2015-05-05 05:59:14
Gretchen Gavett
How many software companies really make it big, at least in terms of revenue? McKinsey analyzed more than 3,000 software and online-services firms from a 22-year period, finding that fewer than a third reached $100 million in revenue growth. Only a handful of companies reached the elusive $4 billion mark.
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This data, combined with interviews with executives at 70 companies, led researchers to three main findings: Growth trumps all, including margin and cost structure; sustaining growth is really hard, even among companies with early momentum; and that (don t fret!) there is a recipe for growth that involves four key principles. They are:
Growth happens in three acts.
The first must contain five steps: Picking the right market; defining a monitization model that makes room for scaling; focusing on rapid innovation; being stealthy and maintaining a low profile while developing new products; and creating the right incentives for senior leadership.
Succeeding in the second act requires a strategy that falls into one of three buckets: having a robust model you can expand upon easily as is (this is a rarity); expanding successfully into an adjacency; or transforming your product into a platform.
Companies that have figured out how to master the transition from one act to the next are the most successful.
Source: Grow Fast or Die Slow
Gretchen Gavett is an associate editor at the Harvard Business Review. Follow her on Twitter @gretchenmarg.