Achieving extraordinary growth: Myths and realities

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Achieving extraordinary growth: Myths and realities

By Jaidit Brar | McKinsey & Compnay | February 19, 2024

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As India anticipates a century of independence in 2047, it 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.  In realizing this goal, the private sector is an indispensable partner.

The authors set out to understand how Indian enterprises can achieve the extraordinary growth necessary for them to propel India towards its centennial aspirations. We analyzed the performance of 837 Indian publicly traded companies between 2012 and 2022.2 The results of the research were clear. Most companies performed in line with national economic growth, over the period.3 However, 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 research clearly indicated that extraordinary growth rates such as these are achievable for Indian enterprises, but persistent myths abound that deter companies from pursuing such growth. This article debunks those myths and proposes enablers for companies aspiring to such growth.  

The four myths are: 

• Myth 1: 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.
• Myth 2: Companies must either choose growth or profits, not both.  But the research confirms that companies with extraordinary growth in revenue also saw gross profit increasing in parallel.
• Myth 3: Extraordinary growth is only possible in high-growth industries with tailwinds.  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.
• Myth 4: Once a low-growth company, always a low-growth company.  Companies can stage a significant recovery within a ten-year horizon.

Analyzing the growth patterns within the sample allowed the authors to recognize seven levers for high growth that may apply to Indian companies. Organizations can pull these levers to accelerate their core, through digital technology and data, agile resource reallocation, and investing in leadership capabilities. Additionally, four more levers encourage companies to diversify beyond core business, including the pursuit of adjacent opportunities, the creation of new breakout businesses, global ambitions, and a strategic approach to acquisitions. Research has found that high-growth companies execute along not just one, but several, distinct growth levers

3 key takeaways from the article

1. As India anticipates a century of independence in 2047, it 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.  In realizing this goal, the private sector is an indispensable partner.
2. While most companies aspire to growth, misperceptions of leaders can keep them from setting high growth targets. Leaders may believe four common myths around growth performance.  These are: growth depends on size, on being in the right industry, that growth comes at the expense of profit, or that a low-growth company cannot dramatically turn around performance. 
3. Organizations can pull seven levers to accelerate their core, through digital technology and data, agile resource reallocation, and investing in leadership capabilities. Additionally, companies can diversify beyond core business, including the pursuit of adjacent opportunities, the creation of new breakout businesses, global ambitions, and a strategic approach to acquisitions.

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Topics:  India, Economy, GDP, Firms, Strategy