It seems rather obvious that most companies want to grow, in one way or another, and grow profitably at that. Whether it is to increase revenue, profits, or market share or physically expand with new facilities and more employees, striving for growth is a critical part of nearly every business strategy.
However, what that growth goal really looks like—and how to get there—are often not quite as obvious. For many companies, growth is an abstract goal. They have no clear and compelling agenda for exactly what they want or need to achieve. Articulating this vision is absolutely crucial, as this forms the solid foundation upon which any successful growth strategy must be firmly based. In order to get there, you have to first establish where “there” is. Otherwise, how will you know if/when you’ve arrived? Or if you’ve veered off course?
A Firm Foundation
Beyond just establishing goals, they must also be measurable and finite in timing. It is not enough to want to grow revenue; the goal should be to grow revenue by a targeted percentage over a specific period of time—5% in five years, for example. Some businesses may be afraid or find it difficult to attach hard numbers to their goals (what if you don’t make it?), but without measurability, it is impossible to know if progress is being made. Without measuring progress, there’s no way to make mid-stream adjustments in your strategy to achieve the goal. Instead, you’ll spend that time spinning your wheels, only to realize you’ve gone nowhere in the end.
Once you’ve established the vision, it is time to devise a plan of attack. Growing a business is like climbing a ladder: if you want to reach the top, you have to take it one step at a time. You certainly cannot count on being able to somehow leapfrog all the way to the top—it takes steady, incremental progress. As with any opportunity, there are risks and rewards, and the higher up the ladder you climb, the greater the risk and potential reward. This is why establishing that strong foundational vision is so important—no matter how high you go on the growth ladder, you’ll be much safer if it is planted firmly on rock instead of in sand.
Now, let’s begin our ascent:
Rung 1: Increase market penetration
The easiest and safest goal, increasing market penetration, means selling your product or service into the exact same or similar customer base, but selling more of it. Perhaps it could mean selling in higher volumes—like selling bulk packs of toilet tissue at Costco, rather than individual packs at Target. Market penetration can also grow vertically—selling the same product, but for a different application. For example, baking soda has always been a pantry staple, a critical baking ingredient found in the cabinet of almost every kitchen, used especially this time of year for holiday cookies and other goodies. It is also now commonly found in the refrigerator and laundry room, for its deodorizing ability. Arm & Hammer even sells a special “fridge pack” that’s nothing more than the exact same baking formula in a slightly different package.
Rung 2: Market development
The next step involves discovering or even creating new markets for current products. Often, the easiest route here is to expand geographically—adding Mexico or Canada to your North American distribution, for example. However, it can also mean introducing your product to a new consumer segment. For example, skin care products like anti-wrinkle formulae have traditionally been aimed at women, but many product marketers have created a new market for their products with men, offering virtually the same products with slightly different packaging for an entirely new audience.
Rung 3: Product development
This step can get a bit risky, as it involves slightly more investment. Creating a new product to offer current customers—or an entirely new customer base—provides an opportunity to leverage your existing brand to reach new markets with complementary products. Extending your product portfolio through your existing channels can speed up time to market and reduce friction. For example, a lubricant manufacturer’s customers also have a need for coolants, windshield washer solution, and other automotive fluids. Adding these products through existing distribution channels builds on the established brand and reduces distribution hurdles.
Rung 4: Alternative sales channels
Expanding sales and/or distribution channels makes your product more accessible to a larger market, which can significantly drive sales growth. Although this strategy takes some internal retooling and rethinking, as well as a smart strategy to work with existing channel partners so as not to undercut their sales, it can be a lucrative opportunity. For example, shifting from a strictly bricks-and-mortar operation to online sales can help you overcome geographic boundaries and the overhead of setting up new retail accounts or establishing storefronts. The Internet is overflowing with successful examples of the move to e-commerce for traditionally bricks-and-mortar shops. However, the opposite path is also quite smart. For example, while Apple’s strategy to open retail stores across the country required significant investment, it also yielded a strong return, reinforcing the brand and enabling the company to sell more primary and adjacent products and accessories.
Rung 5: New products for new customers
The pinnacle of risk and reward, this approach can deliver a major win, but it requires a carefully calculated risk and expansion strategy that typically only some of the world’s largest companies can bear. For example, GE is one of the broadest businesses in the world with products ranging from transformers to turbines, household appliances to medical equipment and locomotives to light bulbs, not to mention its GE Capital Finance division and one-time ownership of NBC. South Korea’s LG is another example, with products that include telecommunications, chemicals, IT, power generation, and consumer electronics—even farm tractors at one time.
The Summit: How to Get There?
Climbing to the top takes strong leadership, creative thinking and, quite frankly, some guts. Certainly, the DIY approach of climbing each rung on your own seems like the simplest and most rewarding, but it may also be the riskiest to the organization itself. It requires a solid, yet flexible organizational structure, strong processes, visionary leadership, and skilled implementers who know how to drive organizational change without upheaval.
On the other hand, acquisition can be one of the fastest ways to climb the ladder. While perhaps more financially risky, acquisition can be less risky to the business and brand. By maintaining autonomy within the added business units, it may be easier to divest if things go wrong. Acquisition typically takes one of three forms:
- Backward integration, in which the company essentially buys up the supply chain, locking down raw material supplies to normalize and internalize this cost of doing business, and cut out the competition when it comes to getting the best quality and best price.
- Forward integration, which involves buying up distributors or customers to ensure a more stable supply chain for your finished goods. The gasoline business is perhaps the most notable example, with major refinery operators like BP, ExxonMobil, and more owning the consumer-facing fueling stations.
- Horizontal integration that involves buying up competitors or complementary products in the same space, merging the brands and going to market with the best of both worlds. Google’s acquisition of Motorola is an interesting example of this kind of lateral move—in order to establish a stronger presence in the mobile space, Google added the device manufacturer to distribute its Android OS and other products natively on the Motorola hardware.
Whichever path you choose, having vital market and competitive intelligence data at your disposal is critical to making the best decision for your company to meet its goals. It is also crucial to genuinely assess your risk tolerance. Just as you would before making a stock market investment, determining just how much risk you’re willing to take is like thoroughly stretching your legs before beginning the steep ascent—a step easily overlooked in the rush to start climbing, but if you don’t, you’ll pay for it later with exhaustion and discomfort.
After setting a course and establishing a timeline, it’s time for everyone—from the C-suite to the production floor—to get on board. Without complete buy-in and understanding of the strategy, success metrics, and ultimate goal, any individual can be the weak link.
Now that you’ve solidified the foundation, positioned the ladder, and readied the team, it’s time to start climbing.
*Influenced by Keith McFarland, The Breakthrough Company