(FORTUNE Magazine) – NOW WHAT? Nothing lasts forever, not even the wave of restructuring and reengineering that has engulfed American business for the past decade. Sure, the daily paper still brings news of companies firing hapless managers by the thousands, and consulting firms are flush with reengineering work. But what was revolutionary in all this is now routine. And it's increasingly clear that restructuring and reengineering work their wonders only up to a point. Yes, they've pepped up profitability and toughened corporate America for global competition. But more and more executives see that you can get only so far by cutting down and tightening up. As PepsiCo CEO Wayne Calloway puts it, ''You can't save your way to prosperity. That alone won't get you there.'' There comes a point when only growth is growth. Yet achieving profitable growth is harder than cutting costs. Unlike raising profits by shrinking the denominator of expenses, enlarging the numerator of revenue through product innovation or geographical expansion requires managers ''to have a point of view about the future,'' in the words of Gary Hamel, a professor at the London Business School. It takes vision about where technology is going, how markets can be developed, what consumers will want, where your industry is moving, and how you can move with it -- or ahead of it. The restructuring era hasn't been a breeding ground for such executive skills. Says Hamel: ''Over the last decade or so, we've produced a generation of denominator managers in the U.S.'' When cost cutting and reengineering reach the point of diminishing returns -- as they assuredly will -- will these neutron executives have the know-how and self-confidence needed to go for growth? It's not too soon to start thinking about the expansion that your company will need, especially since winning strategies for growth in the Nineties and beyond will be different from the expansion-by-acqui sition of the past. As with any other battle, the best way to get ready for the coming high-stakes competition is to ponder the strategies that today's successful campaigners for growth have already proved under fire. They mobilize a wide array of weapons, from technology, investment, joint ventures, marketing, and product enhancement, all the way to creating a culture of growth.

The Leverage of Lower Cost Union Carbide had a technological edge but little money to expand. Solution? Joint ventures to gain market share.

THE COMMODITY chemical business suffers from two chronic ailments: overcapacity and persistent pressure on prices. In search of a cure, Union Carbide is betting hundreds of millions on a strategy that's easy to state but trickier to execute: Be the low-cost producer. The company's aim is to double or even triple the tonnage of petrochemicals coming out of its plants within a decade -- and earn, over the course of each economic cycle, an average 15% a year on a larger capital base, up from around 8% now. For Carbide, the growth magic starts with a competitive advantage in technology. Twenty years ago the company concocted a low-cost process for making polyethylene, the most widely used basic plastic, and has regularly updated it ever since. Though Carbide licenses the recipe to other producers, the company maintains an economic edge because competitors pay out licensing fees and Carbide rakes them in. What's more, Carbide keeps some enhancements all to itself -- a still cheaper way of making polyethylene, for instance, or low-cost extensions of the technology to make plastic for TV and phone casings. Most important for growth right now, 18 months ago Carbide engineers came up with a breakthrough way of making ethylene glycol, the essential raw material of polyester fiber. The process saves 30% in operating cost over the conventional method. That technology, too, has not been licensed. Expanding capacity in a hugely capital-intensive industry like chemicals is a gargantuan undertaking. With its new glycol technology, Union Carbide is relying on two joint ventures to get the maximum bang out of its investment buck. The first, with textile producers in Japan and Taiwan, will install the new process in Carbide's plant in Alberta, doubling its size. Located near supplies of cheap Canadian petroleum feedstock, the plant currently makes ethylene glycol the old-fashioned way. The Asian partners will buy half the increased production to make into textiles for the Japanese, Taiwanese, and Chinese markets, which they know well; Carbide, in turn, will sell its share to other producers in the same fast-growing territory. In addition, this venture allows Carbide to use its technology as a kind of currency: Though it will own 50% of the $300 million facility, to be finished late this year, it will put up much less than 50% of the investment. Weighing in at $2 billion, Carbide's second new joint venture, to build a glycol and polyethylene plant in Kuwait with a subsidiary of Kuwait Petroleum Corp., is the world's biggest current petrochemical project. Partnership with the Kuwaitis will ensure a stable supply of cheap raw materials and energy. Onstream in early 1997, this plant will also produce mainly for customers in Southeast Asian markets, completing Carbide's Pacific Rim coverage. Being the low-cost producer means squeezing costs out of all parts of the business, from maintenance to corporate communications. Carbide, which had spent years in the Eighties cutting out whole divisions to pay down the vast debt incurred from fighting off a takeover bid in the wake of the Bhopal & tragedy, decided in 1990 to try to shave costs by $400 million. To do that, management devised an exercise it called work process improvement, which it discovered only later -- like Moliere's character who was thrilled to learn he'd been speaking prose all his life -- was what other companies called reengineering. So close was the target when the reengineering was only partly done that management saw no sweat in raising the hurdle to $575 million. But cutting and reengineering were always only part of the plan. Says CEO Robert Kennedy: ''The senior management knew from the beginning of our restructuring that we had to have a commitment to growth, because ultimately you had to say, what kind of a company is this going to be?'' By century's end, if all goes as planned, a much bigger one.

Find and Extend Your Core Bausch & Lomb grew sevenfold by lopping itself in half and then investing in new businesses at home and abroad.

IF YOU HAVE TO ASK why Bausch & Lomb is a winner worth scrutinizing, you haven't been paying attention. In the past decade, its sales have jumped from around $400 million a year to nearly $2 billion, while the market value of its shares has grown even more impressively -- from under $400 million to nearly $3 billion. But in 1981, when pudgy and avuncular Daniel Gill, 57, became CEO, the company was adrift. Half its sales came from products with market shares of 5% or less. Its technology was sliding into history's dustbin: glass-lens factories in an era of plastic, and a line of scientific instruments whose key was no longer the Bausch & Lomb optics at the front but someone else's computer at the back. Such operations earned little, while the contact lens business that produced almost all the profits was coming under hot competitive fire. Beneath all this was a risk-averse, centralized culture whose business philosophy seemed limited to ''a penny saved is a penny earned.'' ''Some skeptics,'' Gill recalls, ''thought Bausch & Lomb would not be a survivor.'' Gill immediately began dumping the losers, and over the next five years shed operations that generated half the company's sales, along with most of top management. But, thanks to his prior job, at Abbott Laboratories, he knew when he started that downsizing wouldn't be enough. Says he: ''I had been raised in a culture that said you make money by making wise investments.'' As Step 1 of his growth formula, he recast Bausch & Lomb in Abbott's growth- oriented image. A powerful symbol set the tone: Early on, Gill gutted his grungy Rochester, New York, headquarters, rebuilding it in traditional, prosperous corporate style -- to the wide-eyed astonishment of his penny- pinching employees. The message: Things are going to be completely different, and we have cash to pour into the business. To be sure, today's managers are more used to the opposite -- the new CEO changing things by flying coach and selling the imperial headquarters -- but unusual problems require remedies to match. Explains Gill: ''To be classy, you've got to feel classy.'' Gill knew that the core businesses that were left -- contact lenses, lens- care products, and Ray Ban sunglasses -- were parched for investment. Their high market shares rested on extremely wobbly technological underpinnings, from outdated factories to archaic computer systems. So as Step 2, he used the proceeds from divestitures to triple capital spending and pump it into modernization. Step 3 was to find new strengths that the company could build onto its remaining base. Gill sent market researchers to ask consumers and health care professionals what kinds of products would seem more desirable to them with Bausch & Lomb's name attached. Out of that ''global what-can-we-be search,'' as Gill calls it, came four expansions of the company's health care core. Contact lenses and solutions grew into a general eye-care business, with over-the-counter preparations developed internally and prescription eye drugs added through acquisition. Because most people surveyed thought Bausch & Lomb was a German company with precision German engineering, they told market researchers that they'd eagerly buy hearing aids with the Bausch & Lomb label. Cashing in on that misapprehension, Gill bought Miracle Ear, a manufacturer with a thousand franchise outlets. When the marketers discovered that many buyers of the company's chief eye- care product, Sensitive Eyes drops, had sensitive skin that they would willingly entrust to the brand they put in their eyes, Gill started a lotion and cream business. And since consumer confidence in the company seemed to radiate to every organ above the neck, Gill planted his standard in the mouth, too, buying the maker of the Interplak electric toothbrush and an array of companies that made implants for dentists. When the acquired companies in all these fields came under Bausch & Lomb's marketing and sales umbrella, sales typically soared 15% a year, sometimes even 30%. As Step 4, Gill strengthened and expanded his global market presence. He consolidated the minor-league companies Bausch & Lomb already owned abroad -- hitherto as separate, obscure, and uncoordinated as the wriggling worms in a spadeful of loam -- into a handful of regional operations. To the higher- quality bosses he could now afford to put over them, he gave real profit- and-loss responsibility. He then infused the marketing support and research these companies had never had, and upgraded their manufacturing technology. ''When we began to run them like businesses,'' he says, ''wonderful things happened. International sales just exploded.'' So Gill pushed for more growth by attacking emerging markets. In a joint venture with Beijing Optical, he built factories in China in 1987, and Bausch & Lomb taught thousands of local opticians how to fit contact lenses. To sell them, the company set up China's first contact lens shops in major department stores, converting drab corners into oases of optical glitz. In an economy with relatively little to buy as yet, the appearance-conscious Chinese made Bausch & Lomb's subsidiary there profitable within two years. On a total investment of under $20 million in this non-capital-intensive industry, Bausch & Lomb created and now utterly dominates the Chinese contact lens market. And the global phase of Gill's growth strategy, which included expansion into other underdeveloped markets, such as India and Poland, has raised overseas sales from under 25% of Bausch & Lomb's revenues when he started to 50%, while boosting operating profit margins from 8% to around 20%.

If You Can't Invent, Copy But do so creatively. That's how Louisiana-Pacific learned to make a timber substitute and satisfy new customers.

THIS FOREST PRODUCTS company's growth story began with CEO Harry Merlo's no- bull assessment of his industry's future. Once the government expanded the Redwood National Forest in 1978, putting all Louisiana-Pacific's old-growth timber off limits to logging, Merlo foresaw that the big trees that had been his raw material would soon become taboo to lumbermen nationwide. ''I'm not sure it's right or wrong that the natural forest is being reserved for owls and fish,'' he says, ''but I'm not going to argue with it. We've got to move the company ahead with the resource that's available.'' The task was to figure out some other way to make the building materials his company sold. Experience had taught Merlo that you can make silk purses out of sow's ears. As a 12-year-old working in the grocery store of a northern California sawmill camp, he used to take home the brains and hearts and tripe that the butcher threw out, and his Italian-immigrant mother would transform them into savory stews for the lodgers of the boarding house she ran. ''To the butcher, this stuff had no value,'' he recalls, ''but to me it had a lot of value, because I knew what Mom could do with it.'' So in pondering Louisiana- Pacific's future, Merlo thought, why not figure out how to use small trees of waste species no one cared about? The likely candidate was fast-growing aspen, which stretched in a broad band from Maine to British Columbia. Unlike the hapless bosses of big U.S. steel companies, who long scoffed at foreign-made continuous casters before installing them decades late, Merlo was a techie, enthusiastically up-to-date with every new wrinkle in his industry. He knew that in Canada a few lumber manufacturers were already shaving small trees into wafers, which they glued and pressed together to make something like plywood. After visiting every plant that made the product, he figured he could make it better. Instead of arranging the wafers randomly, he lined them up to make a three- layer board, with the middle layer's grain running roughly perpendicular to the outer two for strength and stability. His product, introduced at the end of the Seventies, turned out to be cheaper and stronger than plywood. Merlo later found he could cover the waferwood with heavy paper, embossed with wood grain and sealed with resin, and use it as siding. He learned to combine waferwood with another kind of engineered lumber his mills produced to make I- beams to replace the increasingly scarce lumber needed for floor joists and roof trusses. Now the company has started improving on sheetrock by mixing shredded newspapers with the gypsum. The resulting board, introduced in 1990, is more soundproof than sheetrock, holds nails better, breaks less easily, can be tiled more securely, and is produced more efficiently. Says Merlo: ''It wasn't any problem for us to take the business away from plywood with waferwood; it won't be any problem to take the business away from wallboard with this product.'' He expects to sell billions of feet of it a year within the next decade. That doesn't sound unreasonable, considering that his annual waferwood output went from nothing to nearly four billion square feet in 13 years. You'd think Louisiana-Pacific had a lab full of engineers to dream up these products. But no, they materialized without a nickel's worth of R&D. ''We just copied,'' says Merlo. But this was inspired copying: He knew everything that was out there to be imitated, and he copied creatively, boosting the efficiency of the technology he'd seen or adding desirable features to the products he produced. His first presses were eight feet wide, twice the width of the Canadian presses he'd seen, producing the big sheets that customers wanted. He built other presses that more efficiently rolled out continuous ribbons of manufactured wood, which could be cut to any length desired. Instead of having to cut trees into 33-inch logs to fit the machine that shaved them into wafers, Merlo developed a mechanism that allows Louisiana-Pacific to dump whole trees onto a movable bed to be continuously fed to the waferizing blade. He could thus use every part of the tree but its shadow, as he likes to say, even burning the bark to heat the oil that fuels his presses. The company can so successfully improve processes and devise products builders want because it is an operating culture to the core, with a bare- bones headquarters staff and an aversion to meetings. ''All of our people are in the plant all the time,'' says Merlo. ''I know every cost; I know everything we make; I love the mills, and I love to be in them. All of our people are that way.'' Well, sure, since he hires in his own hands-on, down- to-earth image. As he says, ''I'd never hire a guy I wouldn't work for.''

Look Into Customer's Souls When Barnes & Noble figured out that buyers of books also want entertainment (and coffee), sales exploded.

WHAT IS NOW the nation's No. 1 bookseller was born in 1971, when Barnes & Noble founder and CEO Leonard Riggio bought a single stagnant Manhattan store. Today it's a 937-store chain. Why? Credit two profound insights into what consumers really want and a readiness to make big bets on that understanding. Insight 1: ''Shopping is a form of entertainment,'' as Riggio phrases it. Consumers aren't corporate purchasing managers, singlemindedly seeking specific commodities at the best possible price. To consumers, shopping is a social activity. They do it to mingle with others in a prosperous-feeling crowd, to see what's new, to enjoy the theatrical dazzle of the display, to ! treat themselves to something interesting or unexpected. So Riggio learned to craft stores that decoct the pure elixir of the shopping experience. In 1989, he began to perfect the formula: a high- visibility, upscale, usually suburban location to draw the crowds where they live; enough woody, traditional, soft-colored library atmosphere to please the book lovers; enough sophisticated modern architecture and graphics, sweeping vistas, and stylish displays to satisfy fans of the theater of consumption. And for everyone, plenty of welcoming public space, where they can meet other people and feel at home in an urbane throng. Approachable employees complete the welcoming scene; they're intentionally nothing like the snooty booksellers that boss Riggio -- short, sad-faced, and unassuming -- found intimidating when he was young. People at Riggio's superstores settle in at his many heavy chairs and tables to browse through piles of books; they fill the cafes he's put into the superstores to increase the festivity; they hang out in their chosen sections to pick up like-minded lovers of sports and fitness, high-toned fiction, New Age emoting, or gay and lesbian studies. Consumers attend the readings and signings he puts on; they bring their kids to his puppet shows and story hours; they read the accolades to his stores in newspapers and lifestyle magazines, captivated by something new and hot. Riggio makes sure they always have clean bathrooms, too, so they don't have to leave in a hurry. ''If I get you for two hours, I've got you,'' he says. ''I don't need more books; I need more people.'' As CFO Irene Miller sums up: ''The feel-good part of the store, the quality-of-life contribution, is a big part of the success.'' Insight 2: Books are consumer products. Says Riggio: ''People have the mistaken notion that the thing you do with books is read them. They think all a book is about is information.'' Wrong. Maybe 5% of what gets printed gets read, and those who read most are also the biggest accumulators of unread volumes. People buy books for what the purchase says about them -- their taste, their cultivation, their trendiness. Their aim, says Riggio, is to connect themselves, or those to whom they give books as gifts, with all the other refined owners of Edgar Allan Poe collections or sensitive owners of Virginia Woolf collections. The consequence is that, if you try, you can sell books as consumer products, with seductive displays, flashy posters, an emphasis on the glamour of the book as an object and the fashionableness of the bestseller and the trendy author. Riggio has found he can even wrap his customer in the glamour, by sending him or her out with shopping bags sporting his trademark high-style sketches of famous authors. ''It's amazing,'' says Riggio, ''how people almost wear the bag that they take from the store.'' Before developing the superstore formula, Barnes & Noble grew by spurts of innovative retailing -- it was the first bookseller to discount and to stay open on Sundays, for example. And it grew in spurts of opportunistic acquisition, buying the 754-store B. Dalton chain, a big presence in shopping malls, in 1986, and later acquiring the Bookstop and Doubleday chains. But with the superstore formula, the company has hit on a model for future internal growth, with economics as investor-friendly as the stores are consumer-friendly. Security analysts think that the stores, when mature, will return a plump 28% on investment, with stable operating profit margins of a comfortable 7% to 8%. No wonder Barnes & Noble is rushing to open 75 this year, bringing the superstore total to 280, up from a mere 23 five years ago.

One-Foot Growth Path Rather than add capacity, Ford stretched what it had. Result: As demand surged, the company was ready to ride.

TO REVERSE the old saying, Ford Motor shows how sometimes the best offense is a good defense. A decade ago, as Ford was losing share under the Japanese onslaught, growth was far from management's mind. ''In all honesty,'' says CEO Alex Trotman in his mellifluous British accent, ''our objective back then was to regain competitiveness and not lose.'' Ford focused anxiously on the basics of the business, boosting quality and productivity and making products more customer-pleasing. Customers responded. Says Trotman: ''We were so successful that we have been growing for about a decade.'' Usually, you plan for growth and build up capacity in advance of getting it, as Union Carbide is doing. Had Ford's bosses foreseen in 1980 the five points of market share growth that ultimately materialized, they might well have built new plants, especially for the popular Explorer. Instead, they stretched capacity inch by inch, adding extensions on existing factories, untangling bottlenecks, changing shift patterns, moving walls in the engine lines, and, of course, upping productivity. The result: However imperceptibly, Ford's U.S. ( capacity grew a weighty 20% over the last decade -- with the plants running at 100% to 114% of their rated capability. Today, now that Ford's managers explicitly want to grow, they've become attached to this strategy of first working on the fundamentals of quality and customer satisfaction and then stretching capacity to meet demand. That's their growth strategy for Europe. Says Trotman: ''As the share comes to us, we will ratchet up capacity in a cautious way.'' In Japan, where Ford aims to double its still small export sales (5,400 in 1993) annually for the next few years, the emphasis is on support systems -- parts distribution centers, training and technical centers, and the opening a few weeks ago of a Ford Credit office. Trotman calls all this the ''one-foot approach'' -- better, he believes, than jumping in with both feet. To build capacity in anticipation of demand is dangerous, he says: ''You may be trapped into the situation some companies are in today, of having huge excess capacity and a work force that is very hard to reduce.'' Current conditions only make him more relieved that his managers rejected going with both feet into Eastern Europe after the Wall came down, or into Russia after the fall of communism. Like Bausch & Lomb's Gill and Carbide's Kennedy, Trotman believes that Asia will become the great arena of his industry's growth before long. Even so, he is going into China with only one toe for now, feeling his way gingerly. A dozen dealers now sell the few Ford cars allowed in from the U.S., and Ford is working on establishing several joint ventures to build component plants to supply domestic Chinese manufacturers -- and to get a sense of the market. It will get, in addition, a sense of possible partners with whom it might build a car plant, perhaps beginning in two years. At present, says Trotman, ''I feel the need for close attention and an urgent feeling, but I don't feel the need for urgent action.''

Building a Culture of Growth At PepsiCo, managers ''have growth stamped on our foreheads,'' they say. That mindset moves mountains.

PEPSICO, a whole university of growth, teaches lessons in the why as well as the how of it, with CEO Wayne Calloway a principal professor of why. He's worth listening to, since he can do as well as teach: For the past decade PepsiCo's sales have grown at an annual compound rate of 17%. You need growth, he says, not just for its immediate financial reward but also to keep your management team energized and renewed with fresh talent, so you can stay vibrant for the future. A static company has no opportunity for gifted managers to build anything; they either leave or end up focused inward, struggling among themselves for a bigger piece of the same-size pie, instead of looking out toward the competitive horizon. Or, just as destructive, they focus on the trivial and bureaucratic, turning an organization into an impotent mandarin court, where no promising young person would want to work, and the future is lost. That's why Calloway thinks his key role is to create a culture of growth -- one that stimulates risk taking and molds young managers with the self- confidence and know-how to build new businesses. It's a subtle process. Says Calloway: ''You can't just get a memo from the CEO that says, 'Stop being so risk-averse, dammit, or I'll have your head.' '' The culture starts with the kind of people you hire and promote, and Calloway keeps close tabs on them. Says he: ''I spend over half my time knowing those folks. Of the top 500 or 600 employees, I know them all.'' That includes the 26-year-old up-and-comers, too, whom Calloway likes to identify early and send to posts around the world for an education in self-reliance in the school of hard knocks. ''Then you've got a 32-year-old instead of a 52- year-old that you can promote,'' he says. At the core of the growth culture is one key value. Explains Calloway: ''It's that whole mindset that says, 'I don't have to keep on with what I'm doing. I can change the game.' To play the game the way it's being played now, obviously there's a limit.'' Growth managers need to reconceive their business entirely, not just improve it incrementally at the edges. They need, says vice chairman Roger Enrico, the ability to break the rules, ''to be able to think outside the box, not to be mesmerized by the limitations of the way things are done.'' And how do you get growth? Says Enrico: ''It's all in the mind; it's a mind-set.'' PepsiCo's Pizza Hut division is a perfect example of what Calloway and Enrico mean by radically redefining your business. Watching Domino's swallow 90% of the growth in the chain pizza business when it began delivering in 1985, Pizza Hut's management decided to see Domino's bet and raise it. Till then, Pizza Hut had thought of itself as a restaurant chain. No more. Henceforward, recalls Pizza Hut boss Allan Huston, the strategy would be ''to go from being a pizza restaurant company to being a pizza distribution company.'' So delivery, of course, but that was only a first step. The company soon began to make deals with ''contract feeders'' like Host Marriott to provide the materials for pizza served in airports, hospitals, colleges, schools, even corporate cafeterias. Pizza Hut's revenues more than doubled. Moving even further, a trial Pizza Hut concession in several Wal-Marts is now serving up slices. For the further future, it's on beyond pizza. As part of another of those changes in mindset that build businesses, the company is experimenting with dinners like chicken or pasta that could be sent through its delivery operation. Explains Huston: ''The product in delivery is actually the service. Once you realize that, then it's just a question of what you want to deliver.'' PepsiCo's growth culture even turns cutting back into fuel for expansion. Says vice chairman Enrico: ''The people who go through restructuring and downsizing without a plan of growth are like the people who consume assets rather than invest in them.'' When he himself ran Pepsi's Frito-Lay division, he worried that his 12% growth rate was not only droopy by PepsiCo's stellar standards but also wasn't sustainable because of increased competition. So in 1991 he decided to trim $100 million out of what he was spending to administer the business by dumping 1,800 middle managers, and to use the $100 million that he saved to make the business grow. Accordingly, he cut prices and poured investment dollars into new products and improved quality. The result: In three years, Frito-Lay increased its market share in its mature business by five percentage points, and it is still growing. Competitors are disheartened: Borden, for one, has its big snack-food business up for sale.

Without doubt, it's easier to get a dollar of profit growth by cutting costs than by raising revenues. But investors, the final arbiters of value, well know that those two dollars are very unlike in terms of the futures they presage for the companies in question. A new study of 847 big public corporations by Mercer Management Consulting in Boston neatly quantifies this difference. It found that the compound annual growth rate in the market value of the companies that achieved higher-than-average profit growth but lower revenue growth than their industry's average -- the cost cutters, in other words -- was 11.6 from 1989 to 1992. By contrast, the companies that achieved their higher-than-average profits as a result of higher-than-average revenue growth saw their market value jump at an annual rate double that -- 23.5%. As usual, the market looks forward with wise eyes.