October 27, 2019
Four Simple Options for Hacking Your Company’s Growth
Growing your business can come through many forms. Some companies require individuals to secure leads, close deals and generate revenue for the firm. The number of people generating that revenue could be a benchmark that a company uses to identify growth. Other companies might measure number of clients. Some firms focus on market share, particularly in FMCG and other consumer-based industries. But most companies focus on top line revenue. Top line revenue is your gross profit before subtracting your overhead and expenses. Net profit (after subtracting your costs) can be manipulated in several ways, especially by cutting costs and streamlining processes to move more product within a specified timeframe, thereby improving efficiency.
If your organization has stalled or revenues are falling, you have a number of choices in how to face the future. You can simply not deal with it and either retire or find another job and let somebody else deal with it. But the best method is to get all of your A players into a room and start dealing with the issue. One methodology that allows companies to create potential growth strategies is the Product/Market Expansion Grid.
This matrix clearly identifies the options available for growing your organization. NOTE: Clean your house first. This does not address any internal issues that may be causing your growth challenges such as out-of-date equipment, poor execution or quality, poor employee management or morale, etc. Those issues should be clearly identified and addressed prior to moving towards this process.
To get back to the Matrix, it will help your leaders create growth strategies and compare them to the risk involved. As you move from “Existing” quadrants to “New” quadrants your risk will be higher. The four strategies are:
This quadrant focuses on selling more of your existing products or services to existing markets. To increase market share, you may have to cut pricing or add more features, improve distribution or customer service, or rejuvenate your brand and messaging to attract new clients or develop new sales channels. You may have to streamline your production process to build more products at a time at a lower cost. Upselling to existing customers other products you already produce/other services you offer can be an ideal way to minimize risk while increasing growth. This may require additional training for your sales team or creating new sales collateral that encompasses all of your offerings.
This quadrant focuses on selling more of your existing products to new markets. This can be as simple as looking at who else you can sell to. For example, you may be a shoelace manufacturer and you typically sell to large retail companies and department stores. Diversify your market to include shoe manufacturers and standalone shoe retail outlets, thereby adding a more diverse revenue stream. Leaders should use their creativity to brainstorm where other markets may be.
Adding new sales channels requires new messaging, value propositions and collateral. For example, if a telecom company has been traditionally selling to companies that sell phone systems, they may want to create new collateral to attract network systems integrators that show how easily that potential customer base can integrate the telecom company’s products into their suite of services.
Market Development may also mean expansion into other locations, either going national or global. This has higher risk, but it can be minimized by acquiring companies already established in those areas or partnering with established companies that offer symbiotic products or services that could also sell your products and services to their existing customers. It’s a total win-win when negotiated and managed effectively.
This quadrant focuses on identifying a new problem your existing clients have that you may be able to solve for them. This may require focus groups or surveys to have conversations with your customers about your current offerings and what they also need. One process that I found extremely powerful was having a feedback loop between sales, marketing and R&D so that whenever clients complained about an issue or wanted features we did not have, those calls were logged and every quarter we revisited all the feature requests and complaints as a team, prioritized them and selected the most critical issues to be worked on in the coming months. With a built-in feedback loop between marketing, sales and R&D, we were able to more quickly respond to our customers and offer new solutions more quickly than our competitors.
This quadrant focuses on understanding your market, your company’s core competencies, and brainstorming new products and/or services that are related or completely unrelated to your current offering. There are many options when looking at diversification:
- Related Diversification is entering a new market with a new product that is related to your current offering. For example, a milk producer may decide to produce flavored milk, like chocolate, banana, and strawberry to their product offering. The change is simple but expands their market by simply adding flavorings. Not much new equipment is required, a few labeling design changes, but same form factors, so the risk is fairly minimal. Consumers who trust your regular milk would be more willing to try your new flavored milks because there is not much of a change for the consumer.
- Unrelated Diversification is entering a new market with a new product that is completely unrelated to your current offering. If the same milk producer decided to make yogurt or cheese, the risk would be higher. New machinery would be required. New staff would have to be trained to operate the new machinery. New packaging would have to be developed. Logistics may require different strategies to getting these new products on the shelves. Consumers used to your milk may not see the equity in the brand the same way you do and may be less willing to try your new products when they already trust another brand’s cheese or yogurt.
- Vertical Diversification is swallowing up part of your supply chain and eliminating outside vendors. For this milk producer, they may look at the feed supply or perhaps the delivery process. They could start growing their own feed and selling it to new customers. They could decide to invest in drone or home delivery and e-commerce to bring milk to your door instead of relying on shelf space in retail stores.
I said earlier that you should get all of your A players in a room to discuss the situation. These employees should come from all levels and departments within your firm. Develop a formal process to quickly brainstorm a number of ideas in each of these quadrants and then prioritize them for further evaluation. Set up small teams to present on each idea and their recommendation on whether to move forward with it, scrap it, or reserve it for a later date. Select the best of the ideas and move forward by investing in a small prototype or Minimally Viable Product (MVP) to test with your customer base.
Generally speaking, all companies should do this on a regular basis and most don’t. They are typically surprised when they suddenly find themselves irrelevant. There’s a saying by Harry Emerson Fosdick who said,
“The world is moving so fast these days that the man who says it can’t be done is generally interrupted by someone doing it.”