Why is Growth So Important?
Growth is a critical aspect for nearly all companies, especially larger ones. While some businesses may prefer to remain small and independent, in this blog we're focusing on the significance of growth for corporates and fairly large companies.
Growth is essential because it brings in additional sales, potentially increases profits, and generates good salaries. It also attracts new talent, creating more opportunities within the company. Stagnation and decline are not acceptable to most companies. Therefore, growth is vital for sustaining and enhancing a company's success.
Achieving Growth
While the importance of growth is widely acknowledged, achieving it isn't straightforward unless you're fortunate to be in a booming economy. For most businesses, engineering growth requires effort and strategy. Various frameworks can help companies grow. Here's where one should start when aiming for growth:
Start with Research: Understanding your customers is crucial. Know who they are, where they're located, and what their preferences are. Classify your customers to identify your strengths and weaknesses. Determine the market size and your current market share versus the potential market. Research is the foundation for any growth strategy, helping you understand your current position.
Target Selectively: Resources are limited, so you can't target everyone. Knowing who not to target is just as important as knowing your target audience. Once you have detailed market and segment information, you can move to the next step.
Frameworks for Growth
Several frameworks can guide companies in their growth journey:
Ansoff Matrix
The Ansoff Matrix identifies growth opportunities based on two axes: existing or new products and existing or new markets, creating four quadrants:
Existing customers buying existing products: This is the starting point for growth. These customers already know and trust you, and research can help you understand how much more business you can do with them.
Selling existing products to new markets: This could involve expanding into new geographies or targeting new segments.
Selling new products to existing customers: These customers already trust you, making it easier to introduce new products.
Selling new products to new markets: This comes with higher risks but can be considered once other opportunities are explored.
Boston Consulting Group (BCG) Matrix
The BCG Matrix looks at growth through two axes: market growth and market share. It categorises business units or products into four quadrants:
Cash Cows: Generate significant profits in a stagnant market, funding growth in other areas.
Stars: High market share products in growing markets.
Question Marks: In fast-growing markets but with low market share, having the potential to become Stars.
Dogs: Low market share in low-growth markets, often considered for divestiture.
Both the Ansoff and BCG Matrices simplify complex situations into manageable frameworks, guiding companies on the best actions to take. Understanding your market, leveraging your strengths, and strategically planning your next steps are key to successful growth. When used correctly, these frameworks can provide valuable insights and direction for businesses looking to grow.
New Product Development and Launch Strategy
A common argument in product strategy is that a third of your product portfolio should be composed of new offerings. Constant renewal is vital because "new" is one of the most compelling words in marketing. Launching new products effectively requires understanding Everett Rogers' Diffusion of Innovations theory. Rogers observed that only 2.5% of people (the innovators) would initially buy a new product. This small proportion can be discouraging, but it’s a natural part of the adoption curve.
Following the innovators are the early adopters (13.5%), then the early majority, and finally, the late majority and laggards. Each group adopts new products at different rates, and recognising this pattern can help manage expectations and strategies for new product launches.
The Blue Ocean Strategy
Innovation is crucial for growth, and the Blue Ocean Strategy is a valuable framework for finding uncontested market space. Traditional markets, or "Red Oceans," are highly competitive. Blue Ocean Strategy suggests looking for "blue waters"—markets without current competition.
A classic example is Cirque du Soleil, which reinvented the circus by focusing on performance art without animals, targeting a different audience.
Similarly, Yellow Tail wines identified a market segment looking for simple, easy-to-drink wines that didn’t fit into the existing cheap or premium categories. By targeting this unserved segment, Yellow Tail successfully applied the Blue Ocean Strategy.
The Importance of Disruptive Innovation
Disruptive innovation, introduced by Clayton Christensen, involves attacking a large, established market with a novel approach. Companies like Uber, Airbnb, and Amazon started by appealing to a small customer base before expanding. Disruptive innovations often begin at the market fringes, gradually building momentum and market share. However, attempting disruption can be costly and challenging, so it's essential to approach it cautiously.
Creating a Strategy with VMOST
Turning growth opportunities into actionable strategies requires a structured approach. The VMOST framework (Vision, Mission, Objectives, Strategy, Tactics) is useful here. It helps you articulate a clear vision and mission, set achievable objectives, devise strategies to meet those objectives, and outline the necessary tactics. This structured sequence ensures a comprehensive growth plan.
Summarising Key Points
In summary, achieving business growth requires a strategic and structured approach:
Start with Research: Understand your market size, potential segments, and customer needs.
Explore Basic Frameworks: Utilise tools like the four P's (Product, Price, Place, Promotion) and SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to identify opportunities.
Leverage Ansoff's Matrix: Focus on existing customers for growth but also explore new products and markets.
Consider New Product Launches: Understand the adoption curve and be prepared for gradual uptake.
Apply Blue Ocean Strategy: Look for uncontested market spaces where you can innovate.
Embrace Disruptive Innovation: Approach market disruption cautiously and be aware of the challenges.
Use VMOST for Strategy: Develop a comprehensive business plan from vision to tactics.
Additional Resources
For those interested in learning more about these frameworks, visit B2B Frameworks. The website offers a wealth of tools to help businesses grow. If you have questions or need guidance, don't hesitate to reach out at info@b2bframeworks.com. Good luck in your growth journey!
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