“In a Bain & Company study, 85 percent of the executives surveyed, and a full 94 percent of those running companies with more than $5 billion in revenue, said that internal, not external, obstacles keep their companies from growing profitably.” – Tiffani Bova, Growth IQ
According to Michael Treacy, business researcher, and author, there are 5 areas of your business to look for growth in his HBR article. They are:
- Retain Your Customer Base – Consistently delight your customers so they do not leave
- Gain Market Share – Steal share from competitors
- Exploit Market Shifts – As markets change, being the first with a viable solution wins
- Penetrate Adjacent Markets – Identify markets where your core competencies and/or solutions can be leveraged
- Develop New Lines of Business – Acquire reasonably priced market leaders
I recommend that you ask your Operations team to break down your revenue by these five areas going back 2-3 years. Then craft a strategic plan to optimally grow revenue.
According to Tiffany Bova’s book, Growth IQ, there are 10 different ways that companies can grow their business. Many of the companies in her research employ multiple items from the list below.
THE TEN GROWTH PATHS
- CUSTOMER EXPERIENCE: Inspire additional purchases and advocacy
- CUSTOMER BASE PENETRATION: Sell more existing products to existing customers
- MARKET ACCELERATION: Expand into new markets with existing products
- PRODUCT EXPANSION: Sell new products to existing markets
- CUSTOMER AND PRODUCT DIVERSIFICATION: Sell new products to new customers
- OPTIMIZE SALES: Streamline sales efforts to increase productivity
- CHURN (MINIMIZE DEFECTION): Retain more customers
- PARTNERSHIPS: Leverage third-party alliances, channels, and ecosystems (Sales, Go-to-Market)
- CO-OPETITION: Cooperate with market or industry competitor (Product Development, IP Sharing)
- UNCONVENTIONAL STRATEGIES: Disrupt current thinking
Here is an example from the book:The Honest Company has used a number of growth paths in combination to achieve its $1 billion valuation. With its initial focus on diapers, infant formulas, and household cleaning products, The Honest Company was quick to maximize sales by offering more of its existing products to its existing customers via a subscription service (Customer Base Penetration). The company launched (Product Expansion) the recurring $79.99-per-month subscription model for its diapers and wipes to improve both the customer experience and revenue predictability, based on its keen understanding of its customer base and what would appeal to them—it didn’t want new parents to run out of diapers and need to make a midnight run to the store any longer. The Honest Company also broke with industry tradition by eschewing traditional marketing such as advertising and brick-and-mortar retail. Instead, it focused upon direct-to-consumer (D2C) online sales and an image of purity and goodwill, not least in making major donations to charities right from the start (Unconventional Strategies). Hence why its e-commerce roots continue to run so deep even today.
Bill’s Key Takeaway
Treacy’s and Bova’s research support that you should be clear on where your existing and past growth/decline is coming from (Treacy) and then choose the appropriate combination of growth paths based upon market and customer context to move forward (Bova). This must be done at least once/year consistently and fit into your overall company strategy. (Flynn).
Which combination of the aforementioned growth strategies will separate you from viable alternatives for your best customers? To paraphrase Michael Porter, the purported father of modern business strategy, A winning strategy is about choosing a unique and valuable position rooted in systems of activities delivering what your core customer most wants and values.
Please see a previous post with a straightforward exercise to get you started. Please set up a 15-minute conversation with me if you are interested in learning how you can do this for yourself or with a coach.
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