Is our business on the right track to achieve expansion? What can we do to speed up company growth? This explainer is designed to help you answer these questions.
From the outset however, it’s worth dispelling a couple of misassumptions surrounding business growth.
The first is that past performance is necessarily a reliable indicator of your future growth trajectory. As an illustration, let’s say that to date, profits and customer numbers are both strong, and are heading upwards. The assumption may be that so long as you carry on with what you are doing, further growth will follow naturally.
The problem is that even with the strongest product range and value proposition, very rarely does growth ‘just happen’. It has to come from somewhere. Sooner or later, your existing sources of customers and revenue will run dry. It takes concrete and deliberate action on your part to expand them. Helpfully, the same also applies where sales are flattening: faced with a stagnant market, you can still create growth opportunities.
The second mistake concerns your practical approach to growth. It can be tempting to ramp up activities in all areas (e.g. roll out new products, boost advertising and dabble in some new markets) with the expectation that your investment will pay dividends. The danger, however, is that without focusing on clear sources of growth, efforts across the board are diluted, and resources wasted.
In short, accelerated growth demands both intentionality (a positive decision to focus on expansion) as well as planning – i.e. clarity on how you are going to achieve it. To help you, here are the specific areas to focus on.
Growth has to derive from somewhere specific. At its most basic, in order to grow, you will need to either find new customers or markets, or else extract greater revenue from existing ones.
Regardless of industry, there are just a handful of growth sources or ‘levers’. To accelerate growth, you could try pulling all levers at once. However, best results usually occur when you focus on just one or two areas, allowing you to focus your resources more effectively.
Here’s a closer look at various growth levers, to help you identify a best fit for your business.
This lever is focused squarely on increasing growth within an existing, pre-developed market with your existing products or services. In other words, your aim is to increase market share.
Market penetration may involve the following:
Increased marketing and advertising: to strengthen your positioning statement as against the competition.
Pricing structure review: If your aim is to grow through increasing customer numbers, this may involve a price reduction strategy. To focus on growing revenues (and margin), you might choose to increase prices.
Scaling your resources: e.g. growing your sales and customer services teams in pre-developed markets.
But by far the most effective way of penetrating a market is finding unique sources of difference and benefit between your product, service or way you do business, and the competition.
Because you are not having to start from scratch with a new product or market, a penetration strategy can be an effective way of achieving rapid growth. But this can be harder if there is nothing different about your product to others.
This is appropriate where you have a medium to low share in your existing market, where that market is not already saturated, and where competitors do not enjoy in-built advantages that would prevent you from making inroads.
With this strategy, you sell existing products or services to new markets. This could be anything from a new geography, customer segment to a new industry vertical.
This is about building on your existing track record and repeating it elsewhere. But just be aware of the often dangerous assumption that ‘what works here is bound to work anywhere’. Before making your move, you need thorough research on the size and growth prospects of your potential new market, including recognition that your new customer audience may have different needs and expectations. How you best access that customer base may not be the same as in other markets either.
This is where you develop, create and sell a new product or service to existing customers.
Let’s say you have a talented R&D department. You also happen to have a strong existing customer base. With this combination, product expansion can be a highly effective way to accelerate growth.
To keep risk to a minimum, conduct thorough research involving your existing customers to build on what you know about them already. What problems do they face and how might you be able to offer a solution? If you focus on new products that closely relate to existing offerings, it can help to maximise cross sales, and also reduces the likelihood of diluting your brand perception.
With this strategy, you are creating a brand new product or service for a brand new market. This could be a substitute product for an existing solution which solves customer pain points better or cheaper, or an entirely new concept.
More than any other strategy, market creation involves starting from scratch, rather than expanding naturally on what you have built already. It is often used where the company involved has a unique vision, access to unique customer insight or sees the market in a different way.
It requires the most resources in terms of R&D, marketing and generally educating the market about your company and what you offer. It carries a lot of risk. The flipside, of course, is that so long as you have a strong product, proposition and plan, it can also carry a lot of potential for growth.
Where you acquire another business that already has access to whichever market, customer base or capability set you are targeting.
Acquisition is sometimes seen as an automatic fast-track to growth. But in fact, it is not a standalone growth acceleration strategy. Rather, the rationale behind the decision to acquire another company should always be guided by one of the other strategies.
For instance, if you acquire a competitor in your existing market, the rationale is usually to increase your market share (penetration). You might make a purchase to gain a foothold in a foreign region (market development). Or you may decide to purchase a particular business along with its R&D department and IP rights to develop a brand new offering (diversification).
How do successful companies ramp up their growth efforts? For inspiration, take a look at some of the work White Space Strategy has been involved in:
Is there realistic scope for market penetration, or should we be looking at entirely new markets? This was the question facing Northgate Vehicle Hire.
To answer it, we carried out detailed analysis of the company’s current market share and growth potential within the light commercial vehicle rental market. Market analysis revealed a definite route to successful penetration, specifically by taking market share from contract hire and HP markets. By focusing on a penetration strategy, Northgate’s customer base grew by 29% in 2 years following the project.
Centrica’s core home services market was flat, and so White Space Strategy helped Centrica develop their service expansion strategy.
Taking into account the growing demand for electric vehicles, Centrica expanded its Local Heroes service to offer homeowners EV charging installations. Alongside this, Centrica Business Solutions launched a package of solutions for large businesses, including new solar and battery storage facilities to help meet increased onsite power demand.
Our work with sustainable packaging specialists, DS Smith demonstrates the value of thorough investigation before making significant growth investment decisions, and taking a step back where necessary.
In this instance, the company was considering an acquisition in order to facilitate new market entry. We carried out full analysis both of the new market and the target acquisition. And while it seemed clear that the acquisition was the most attractive available in that particular market, it was also found that this was a space in which, on balance, the company shouldn’t be stepping into.
As a consequence, capital was retained for more viable acquisitions, better aligned with the company’s objectives.
Here are some of the actions that White Space Strategy considers vital when outlining a plan to deliver accelerated growth:
Look carefully at each of the growth levers. Which of them might offer the best fit for your business? For instance, does your research indicate stagnation within existing markets? This is a strong indicator that market development is preferable to penetration. Does market research point to changing need states among existing customers? There may be a strong case for product expansion.
Develop an inventory of what you need to succeed in terms of human resources, infrastructure and marketing resources.
A new growth planning stress test tool from White Space Strategy is designed to help you think through your growth plan and decide on the best course of action.
Advance planning is obviously crucial for any growth strategy. But especially in the current volatile market conditions, even the best laid plans can be blown off course. What if a new competitor were to suddenly appear on the scene? What if the exchange rate was to shift dramatically? Stress testing your plan allows you to reappraise its viability in light of changing drivers and variables.
Capable of being put to work instantly, our free resource enables you to identify blindspots, factor in new information, ask ‘what if?’ and get answers you can put to work.
Here are some actionable steps you can take to enhance your growth plan…
A strategy workshop focused on growth acceleration can be a productive way of generating topline ideas and for weighing up your options. For best results, consider inviting participants from sales, marketing, product development, customer success and operations.
This is essential both for assessing the viability of new markets, as well as for exploring ways to grow existing markets. It also helps to avoid drifting into confirmation bias and false assumptions. Key questions to answer via research include the following:
What are the key trends impacting buyer behaviour?
Who are the key players? What are their strengths and weaknesses?
What unmet needs do customers currently have?
What are the barriers to new market entry?
What is a realistic market share? What are the entry options?
Once you are clear on the different options and their relative strengths and weaknesses, its helpful to compare the options in a structured way. Our typical model for this is to compare by ease vs commercial attractiveness. So on one hand, you will assess how a particular market fits with your existing capabilities, the scope for differentiation against competitors and the existence of any barriers to entry. On the other hand, you would look at factors such as market size and growth indications.
To carry out this analysis, you can use our ready-made framework.
It rarely pays to take a scattergun approach to growth. That said, it is certainly possible to focus your efforts on more than one area at once (for instance, by going for a combination of quick wins, along with an additional longer-term strategy). As an example, you might identify a previously overlooked market niche to target within your existing market. Simultaneously, R&D could be focusing on a new offering, with an eye on product expansion.
Gap analysis is useful here. What level of additional skills and resources will be required to make headway in your new market? How might these gaps be bridged? It may be a case of bringing new expertise into the organisation, either through hiring or via the consultancy route. If you are entering a new market, a partnership arrangement with another organisation could be a viable way forward.
As a first step, growth acceleration requires you to reach a decision on which specific ‘growth levers’ you are going to pull. Next, it’s a case of creating a realistic plan for execution. For both of these elements, external input can be invaluable; not just for plugging the gaps in your existing capabilities, but also for helping you uncover hidden opportunities.
Want to get your growth strategy off to the right start, or back on track? Speak to White Space Strategy today.