The Grass Isn’t Greener

The Grass Isn’t Greener

Growth is harder to find in an environment without macroeconomic tailwinds. It’s amazing how often executives rush to the conclusion that their problems are simply a function of a decline in their core markets. There’s bound to be greener grass somewhere, isn’t there? Actually, no. The idea that some industries are superior is illusory. The data does not support it. Sure, some industries outperform others for a time, but the differences across industries are far smaller than most people think. By contrast, the variation in returns among companies within the same industry is huge.

The message for corporate leaders is clear: Shifting into a hot, new industry probably won’t revive growth. Given a choice — and they have a choice — they should focus instead on building the capabilities to win in their home industry.

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It’s amazing how often executives who are looking for growth opportunities for their companies conclude that they simply need to find a “better” industry to compete in. Our analysis of shareholder returns of more than 6,000 companies in 65 industries globally and over a 10-year period, however, shows that the idea that some industries are superior does not hold true.

Additional resources

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Sustainable, superior returns accrue to companies that focus on what they do best. The truth is that simple, and yet it’s incredibly hard to internalize.
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The power of coherence: A company's right to win in any market depends not just on external market positioning, and not just on internal capabilities — but on a coherent strategy that aligns them at every level.
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This article of the Harvard Business Review explains why they are making a big mistake and, more important, how even the most mature companies can kick-start their organic growth engine by following four straightforward rules.