Using Monopoly to Understand Business Growth Strategy

What is business growth?

Growth is good and required for business survival. An expanding company will usually increase sales and strengthen its market position. However, growth isn't a strictly defined concept. In this article, I will explore business growth on a purely market and revenue basis and why creating a consensus for growth seems so hard. ?

A growing business is expanding in one or more ways. There is no single metric used to?measure growth. Instead, several data points can be highlighted to show a company is growing. These include:

• Revenue
• Sales
• Company value
• Profits

Think about a time you wanted to make a change. Something simple like weight loss. First, you come up with a strategy to meet the outcome. That's the easy part; you want to weigh 20 pounds less. Second, you must determine how to?implement?the strategy, be it diet, exercise, food types, and nutrient levels.?Third, apply?focus, engagement, and accountability?to execute your plan. The results will be to create permanent behavioral changes toward your personal goals.

The weight scale usually tells you the whole story during the journey to a new you. But that is not what is happening now; the strategy is weight loss and a future goal. We can continuously look at our current weight on the scale or focus on what contributes to the weight and consistently evaluate how changes to diet, calories, nutrients, and exercise affect weight. The question is, which can we influence? But, the current weight is OUT OF MY CONTROL, but how much we eat, or the caloric contact in our food, the nutritional content, etc., is in my control.

Therefore, we can control only a few activities or inputs to facilitate our strategy. That is the same for a company. In other words, if we can discover what we can manage and the ONE or TWO things that "tip the scale" (because we can't control the future result), we can find and master the POWER to address and consistently practice what will change the outcome strategy.

The more activities we employ while looking at our weight on the scale, the less we know about how to control the outcome. We are spread too thin and unable to determine where and what we should focus on that is within our control. The principle that focusing on less can bring more is around us.

How Less Produces More ?

Nearly everyone has played Monopoly. Eventually, each play starts precisely the same. Ultimately, each player's wealth ends up in one person's hand, who is declared the winner. This game imitates circumstances many have experienced in real life. Focus on the right moves, and winning can be attained. Monopoly is based on several observable laws of buying and selling, commerce, accumulation, probability, and luck. Or so it would seem. The game imitates real life in a free economy where people can make choices and acquire assets like homes and commercial real estate, invest in those assets, and charge other players for their usage, just like in real life. ?

The game employs complex system sources with predictable affect outcomes, including?economies of scale, locational advantages, operating investment costs penalty when detained in jail, restricted ownership of critical inputs, government restrictions, exclusive franchises, licensing, taxation, and fixed revenue requirements. I know it is somewhat technical, but it imitates observations in mature economies like the United States and business. It's also why all attempts to control people in socialistic and communistic regimes fail. People don't want to lose or be poor! But Monopoly illustrates a few results we observe:

• Why is 1% of the total population controlling 98% of the domestic wealth?
• Why do only a few people make a difference in a successful company growth strategy?
• How can a growth strategy accurately reflect this Law for a maximum probability of success?
• Is there a tipping point where one individual will grow in power and control until they own nearly everything?
• Is there a principle in business economics governing business success and revenue growth?

Economic Principles

The Pareto Principle, also known as the 80/20 rule, is an observation that suggests that roughly 80% of the effects come from 20% of the causes. The principle was named after Italian economist Vilfredo Pareto, who observed that 80% of the land in Italy was owned by 20% of the population.

The Pareto Principle is often applied in various fields, including business, economics, and social sciences. For example, the principle can be used in industry to identify the most profitable customers, products, or services. In project management, the principle can be used to determine the critical tasks that will significantly impact the project's success.

Although the numbers 80 and 20 are not always exact, the Pareto Principle is still useful for prioritizing and focusing efforts on the most critical areas for maximum impact. This proportion shows up everywhere. For example, 80% of people live in cities that occupy less than 20% of land mass, and so on.

Price's Law is another principle closely related to the Pareto Principle. Price's Law states that the square root of the total number of people participating does 50% of the work in a given domain. In other words, if there are 100 people in a field, then approximately 10 of them will do 50% of the work. Similarly, if there are 1,000 people at a company, then about 32 of them will do 50% of the work.

Price's Law and the Pareto Principle are similar in that they both suggest that a small proportion of the individuals in a group are responsible for a significant proportion of the outcomes. However, Price's Law focuses on productivity distribution in a given field. In contrast, the Pareto Principle broadly applies to any situation with a disproportionate relationship between causes and effects.

This is why in the game Monopoly, eventually, all the wealth is in the hands of one group, and why does 1% of the total population control 98% of the U.S. wealth? Because the same principles in life and capitalism apply.

Communism and socialism have attempted to circumvent this phenomenon to no avail. You still have the 1% dictating what is far and just to the masses. Deceters are dealt with harshly, and people don't like that. Oppression always results in revolt.

Applying Price and Pareto to Business Forecast and Growth

Remember, 80% of our effort and strategy needs to be applied to 20% of what we do best, where we make 80% of the revenue annually.

For a specific industry, this has significant implications. First, it implies that a small proportion of the individuals in that industry will generate a substantial proportion of the revenue. For example, if we assume that 10% of the individuals in the industry generate 50% of the revenue, then increasing the base revenue by 15% per year would require a focus on growing the productivity of this top-performing 10% of individuals.

This helps explain how the American standard of living has been elevated so much in 150 years. We are doing more with less effort. Just going to the grocery store is an example: we travel to a place and come home with food that would take two-day round-trip travel and an entire growing season to be available 150 years ago.

Case Example for XYZ Company

In the case of XYZ company, with 530 employees, a maximum of 106 employees (80/20) are primarily doing the work. Around 23 employees somehow account for 50% of the work or revenue. Although initially shocking, this helps us understand what needs attention to grow and innovate. This doesn't discount sales, marketing, administration, proposal writers, or other essentials to bid and win work. Don't misconstrue that I'm asserting it only takes 23 employees. I am looking for a money-maker at XYZ Company.

With some thought and a good dashboard on a CRM like Salesforce, we can quickly determine the essential services and best margins. Then we ask and answer a few questions.

Questions to answer:

1.???What are the core services represented by the 80/20 principle?

2.???How do we attract market share through innovation and brand awareness?

3.???What is the 50% of projects that 23 employees are producing and managing?

4.???What is the tipping point for exponential (doubling over a set period) growth by focusing on these financial winners? In other words, how many additional projects do we need to add each year to double, then double that, and so on?

5.???What are the key personnel that needs duplication to have exponential growth?

6.???Is there a tipping point for growth requiring long-term vision?

The tipping point theory of growth is a concept that suggests that growth in a system or society can be driven by small changes that eventually lead to a significant shift or "tipping point" in behavior or outcomes. Author Malcolm Gladwell popularized the theory in his book "The Tipping Point: How Little Things Can Make a Big Difference."

According to the theory, the tipping point is reached when a critical mass of individuals or organizations adopt a particular behavior or idea, which spreads rapidly and becomes the norm. Various factors, including social, technological, or environmental influences, can trigger this shift.

For example, adopting social media platforms like Facebook and Twitter started with a few early adopters. Eventually, it reached a tipping point where their usage became widespread and mainstream. Similarly, introducing electric cars and renewable energy sources may lead to a tipping point where they become the dominant transportation and energy production forms.

The tipping point theory of growth suggests that small changes can have significant and far-reaching effects and that understanding the factors contributing to the tipping point can help drive positive change and societal development.

To achieve this, the industry may need to identify the key factors contributing to these top-performing individuals' success, such as their skills, knowledge, and behaviors. Then, the industry could develop strategies to replicate and scale these factors across a broader base of individuals.

To grow a business in an industry focused on remediation, sustainability, IT security, and professional services for environmental engineering, some practical activities and strategies to consider could include:

1. Expanding service offerings where the projects are different, but the work is similar: The business could consider expanding its service offerings to include new areas related to its core competencies, such as renewable energy or waste management. This would allow the company to capture additional market share and revenue streams.
2. Targeting old markets with a new spin: The business could target markets with high service demand. Target industries with high environmental impact, such as coal power generation, manufacturing, or mining.
3. Building strategic partnerships that have relationships but lack something: Form partnerships with other companies in related industries to expand its reach and leverage expertise—for example, the partner with a construction company to provide remediation services.
4. Investing in technology: The business could invest in technology to improve its operations and service delivery. This could include GIS for site updates and real-time digital twins before and during construction. Using drones to conduct site inspections or investing in new equipment to enhance remediation and sustainability services.
5. Building brand awareness around in-demand messages: The business could invest in marketing and branding to build awareness and credibility in its target markets. This could include creating content to educate potential customers about the importance of environmental engineering and sustainability, participating in industry events and conferences, or engaging with customers on social media—additional visibility by presenting at conferences.

Regarding market share, it would not be easy to provide a specific target without more information about the size and competitiveness of the industry. However, the business could conduct a market analysis to identify its current market share and potential areas for growth. The company could then set specific goals for increasing its market share over time based on its growth projections, competitive landscape, and target markets.

Conclusion

Less, not more leading indicators provide feedback to support goals in a given strategy. Only 20% of our activities will change 80% of our outcome. The 50% of our best services and producers can be traced back to the square root of the total number of people engaged in a specific objective.

We focus on that and measure weekly or monthly to move a business from where we are to where we want to be at the end of the year. That is strategy.

The three aspects of successful growth are:

1.???Mindset or determination and discipline.

2.???SkillSet or what we do internally.

3.???Actions or are what we can pursue today to reach a long-term business growth strategy.

Mind + Skill + Action = Growth. We must have our minds right before we start. It is easy to abandon strategy and go back to old habits. Next, we must have the right skills on the right team to execute projects. Finally, only a few actions determine the message to separate our company from everyone else.

Like Monopoly, there is always one move within our game that can make a difference in your company goals. Focus on less to get more!