THREE PLATFORMS FOR ACCELERATING PROFITABLE, SUSTAINABLE GROWTH. Incremental and Innovative Ways to Grow Your Business

April 29, 2011 by · 1 Comment
Filed under: Business Strategy 

Whilst the options for growth are commonly grouped into organic and inorganic – internally and externally sourced growth – this distinction is much more blurred today.

Organic growth in the sense of ‘building on what you’ve got’ is usually the easiest and quickest, but it also delivers small increments of improvement. Of course this does not have to be the case – moving from a product-pushing to solution-selling model can quickly establish superior revenue, significantly greater profits, add differentiation to your offer and engage customers more deeply too. Boeing has found this, for example, when it started offering aircraft leasing and service-based contracts, as did IBM when it started offering business consulting solutions rather than just the technology.

Inorganic growth in the sense of ‘acquiring something different’ is most often seen in the form of business acquisitions, although they are often presented as friendlier mergers (accounting regulations dictate that one company should be the acquirer). Such transactions are fraught with dangers: whether or not they will work together and whether or not the organizations can extract the ‘synergies’, not just in terms of cost savings, but in terms of fusing capabilities and portfolios to do something more together than they could apart. The M&A troubles of the likes of Daimler and Chrysler, AOL and Time Warner, or HP and Compaq are well documented. Enormous sums of money and reputations are at risk.

There are three broad platforms for growth. These should not be viewed as alternatives but as a range of opportunities from which the organization should select a number at each level. The platforms are distinguished by the time and effort required to deliver growth, and the risk and reward involved.

The three ‘growth platforms’ are:
1.    Operational growth. Doing more of what you do.
?    Adding. Getting customers to buy more – Starbucks’ broader range of food and accessories encourages larger and more regular purchases.
?    Retaining. Retaining your best customers – Lexus focuses on personal service to retain customers for servicing and future renewals.
?    Broadening. Engaging new customer segments – Coca-Cola reaches out to new customer segments with new reasons to drink and things to drink.
?    Extending. Reaching further with new channels – Top Shop extends its reach to young people around the world through franchising and in-store partners.
?    Globalizing. Entering new geographic markets – Zara is rapidly extending its store portfolio to every corner of the earth.
?    Differentiating. Communicating a new proposition – Skoda revitalized its brand from ‘old Communist rust-bucket’ to ‘solid cars with attitude’.
?    Streamlining. Improving business efficiency – Delta fundamentally restructured its airline to reduce costs and improve efficiencies.

2.    Innovative growth. Do what you do differently.
?    Inventing. Developing new products and services – HSBC constantly seeks to develop new financial services for its many audiences.
?    Reapplying. Creating new applications for products – Philips explores how its existing products and technologies can be used in new ways.
?    Collaborating. Developing solutions with new partners – Disney constantly works with licensees to take its properties into new markets.
?    Diversifying. Launching additional diffusion brands – Versace recognized that it needed secondary brands to reach different audiences.
?    Concepting. Designing a new business model – Boeing redesigned its business model to focus on collaborative services.
?    Sharing. Forming alliances to share resources – Cisco formed alliances with communication partners around the world.
?    Partnering. Riding on an affinity partner’s back – Samsung reaches out to new markets using partners with strong customer bases.

3.    Strategic growth. Doing different things.
?    Shaping. Shaping new markets in your vision – Apple fundamentally rethinks markets and how to shape them in its own vision.
?    Focusing. Becoming a specialist in one area – ICI stripped down their business to focus on a core area.
?    Extending. Diversifying into adjacent categories – Nike takes its brand to more and more different sports.
?    Acquiring. Buying up your direct competitors – HP acquired Compaq in the hope that they could dominate PCs and printers.
?    Connecting. Finding a complementary business – P&G tied up with Gillette to offer men and women the best they can get.
?    Venturing. Creating new venture businesses – Google constantly experiments with new businesses by setting up ring-fenced teams.
?    Moving. Shifting the business to new markets – IBM recognised that its heritage was not its future, and got out of the PC business.

Collectively these initiatives deliver a ‘growth portfolio’ – a collection of different initiatives that will deliver growth short- and long-term, with varying levels of effort and risk. How they are achieved depends on the organization, but most can turn to internal and external means, depending on what is right for the market and organization.

Ultimately, growth is very simple – how can you use the assets you have, including brands and relationships, and match them with the best market opportunities for profitable growth?
Matching assets and opportunities is a creative process, most simply about matching the strongest assets with the best opportunities, and then innovatively exploring how the different combinations might deliver growth.

The best initiatives, shaped and evaluated together, form a portfolio of initiatives: ‘Operational’ growth will typically deliver results fastest but with least impact. You want some of this to show you are delivering. ‘Innovative’ growth will take a little longer, but has the potential to make more difference. You want some of that too. ‘Strategic’ growth will be an even slower process, but the results will make people stand up and say ‘Wow!’ You definitely want some of that too.

Like any managed portfolio, the challenge is to create a balance between fairly simple ‘no brainers’ and more strategic ‘big bets’. Growth is required to become a dedicated part of strategic planning, putting all the initiatives on the table, and evaluating their relative strengths and weakness.

Who should manage growth in the business?
Because growth is so often seen only as an output, a measure, rather than a process and manageable activity, it is usually left unmanaged, or comes under the responsibility of the CEO or finance director.
Growth needs dedicated management by people with the best growth mindset are those closest to the market opportunities, to the ability to drive innovation and sales. The most sensible ‘chief growth officer’ is often the ‘commercial director’. Whilst this is still an emerging role in organisations, it is a role that can combine a focus on sales and marketing, pricing and profitability, today and tomorrow – and to champion growth across the whole business.

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