In our experience, no company is short of growth ideas and initiatives.
Every organization we have worked with have run successful brainstorming sessions that have produced a laundry-list of growth initiatives, new market segments to attack, new pricing strategies, new markets for existing products, and transformational concepts to bring totally new products and services to market.
Most of these organizations actually have too many initiatives, which in some ways is a great problem to have, professionally speaking.
Where they struggle lies is how to efficiently assess and prioritize all these opportunities.
It is not easy to do and we empathize with you in the struggles you encounter on your growth journey. Deciding on which growth strategies to prioritize and execute is difficult for any organization, regardless of the industry. The key to success in executing a growth strategy is choosing the few ideas that are actually worthy of investment versus creating lots of new ideas. Often, organizations fail by perpetually creating new stuff and not really understanding how to kill or commit to things they’ve already identified.
To help you solve this, we’re going to give you some thoughts and insights around the 3 types of growth strategies, to help you focus on those that will most likely grow your organization.
3 types of growth strategies
The question for every organization is what’s the right mix of growth strategies?
It’s not just the number of them, but it’s the type. And there are really three different types of growth strategies. Each organization has to decide for itself what’s the right balance of investment among the three.
The three types are:
- Core growth.
- Adjacent growth.
- Transformational growth.
With core growth, as a business leader, you are looking for ways to grow the market share of your existing products and services. This is where most efforts to grow are focused, and in some ways it is the simplest to describe: you want to grow your existing business by taking more market share. To do so, you need to figure out why new customers would decide to buy your product and why potential customers buy your competitor’s product. As part of your core growth, you’ll want to understand the position of your product in the market, the different customer segments and their buying behavior, in order to take market share away from your competition. That’s a core growth strategy.
The second kind of growth strategy is what is call adjacent growth, which is where you either say, “I’m already offering a product, a service to this market and know this market very well, but I want to start to add additional offerings or services to that market”, or “I already have a product, a service that is successful in one market and I want to start to move into other markets with this same offering.” A good example is an auto parts manufacturer who manufacturers parts for transmissions. Let’s say they want to get into manufacturing parts or engines, or something similar. They already have a customer base who purchases their transmission parts and with whom they have built trust with their brand over time, and they know there’s possible demand for the creation of a new line of engine parts. They know their ideal buyer and vertical and simply want to create a new product for their customers who are already familiar with them. That’s what we call adjacent growth.
The third type is a transformational growth strategy, which is, “I’m going to go build a totally new product or offering and take it into a market I’m not in right now.” That’s what startups do, as an example — in fact, a startup is, in many ways, the idealized transformational growth initiative.
Why these growth strategies are important
All overall growth strategies need to have some combination of these three kinds of growth — and managing growth is about managing a portfolio of these different kinds of initiatives.
You’re going to grow your core business, look for opportunities in adjacencies, and then have some investment in transformational growth. But the mix is what’s key and it’s different for every organization. For example, if you’re invested only in core growth, you’re bound by your existing market. It can be very difficult to grow your core because your competitors are going see you doing something different and typically they’re going to attempt to replicate or combat that.
Taking market share is a very common growth strategy but it’s limited in what you can do. Not to mention it takes a lot of work to get incremental results. But, this is where most companies invest the majority of their resources for growth. It’s where a business leader most often puts a stake in the ground by saying “I’m growing my business.” Mostly what they’re trying to do is sell more of what they already sell to the existing market that they’re already in. They’re simply trying to figure out how to market it better, price it more effectively, and offer incentives to take market from their competition.
Adjacent growth strategies are important because behind them is the realization that you’re removing a large part of the overall risk that would come from transformation growth — either you are reducing market risk or product development risk. Being in this position is a really great spot because either you already know the market, or already know your product, so you are limiting one of those risks in your new offering. At this stage, you’re just trying to understand where are the other markets your existing product or service could go, or what are the gaps in the existing market you serve where you could develop a new product or service.
Trends in growth strategies
One of the big trends we’re seeing right now is companies that have traditionally been entrenched in a commodity trying to move down the value chain.
These commoditized industries include things such as chemicals and materials, metals and mining, oil and gas, paper and packaging, and building and construction. These are production-based industries that are trying to push further into the value chain by capturing more value by creating finished products, services and solutions, and not just making raw materials or components. Instead, they’re trying to do what their customers are doing right now by further formulating and refining materials, making parts or manufacturing components, and providing services in addition to existing products. It’s almost like an adjacent growth strategy but one that puts them in direct competition with their existing customers.
It’s a very tricky thing to do for many organizations and often they’re fearful of upsetting their best customers.
Most organizations have internal resources that are tasked with developing and executing their growth initiatives. Because of the diverse nature of skills and insights required, and the demands of increasing speed to market, to do so successfully, many choose to partner with companies like 10EQS, where the result is a more flexible and dynamic assessment capabilities. These capabilities provide you with unique insights into different opportunities on-demand, and thereby allow you to make the critical decisions about your growth initiatives more quickly, efficiently and effectively.
To learn more about how your team can strategically craft growth strategies to catapult your business, click here to get in contact with us.