Growth is one of the fundamental objectives for any business. Driving growth and making strategic choices to secure growth are crucial business skills you need to build as a leader. This post outline three different ways to grow a business
Growth is often discussed without looking into the execution details. If you run an existing business, there are three main ways to drive growth:
- eXplore new opportunities. The first time you close a deal in a new area and/or a new market segment.
- eXpand successful pilot deals to new customers. Emphasis on expanding as fast as possible to a broader customer base.
- eXploit existing markets and solutions for higher market shares. Mature markets and executed from a leader or challenger position in the market.
Xplore opportunities have a high degree of initial uncertainties on many fronts. The co-operation with a lead customer is vital for success. Together you define a pilot project as the vehicle for realizing your growth ambitions. Without a successful pilot project your odds for succeeding in the market are small. Staffing of the key positions in the project with great people is perhaps the single most important success factor. Most initiatives starts with a lean start-up approach until you have proven the opportunity to have legs. You aim to replicate success with other customers, besides securing the lead customer outcome. Great opportunities and great lead customers is the aim for every new Xplore opportunity. Not all opportunities come through Xplore phase as a success.
Xpand opportunities follow after successful pilots. The challenge for these types of growth initiatives is to scale the business in sales and operations as fast as you can. By leveraging successful pilots to build strong market share positions. Aggressive growth targets can be set based on the metrics derived from the pilot project. Your accuracy in forecasting resource needs increases. Resource needs can with greater accuracy. Successful pilots reduces risks associated with with needs, solutions, business models and value propositions. Your strategic aim is to leverage the pilot to build a strong market position while you have an edge in the market. This scenario applies to high growth market entering the tornado phase. Overlaps between Xpand and Xplore are common as you try to maximize the pay-off from your initial win.
Xploit opportunities is about growing in your existing core business areas. Markets with moderate to flat growth favor the large established players. Market footprint is grown from an Incumbency positions, at the expense of smaller players. Scale, time-to-market and commercial requirements is common in value propositions. Most businesses have a latent potential if given the right focus. This might not be the sexiest part of your business, but volumes and margins have potential to be good.
When looking at your portfolio it is worthwhile to map them onto the three scenarios described above. All opportunities start in Xplore, move to Xpand over time to finish in the Xploit category.
To sharpen up your growth agenda you might want to consider working through the following questions with your team:
- Which of the 3 buckets do our current growth opportunities fall into? – Clarity on this is vital for selecting the best execution paths.
- Do we have a clear execution model in place for each of the 3 types or do we need to restrict our strategy to 1 or 2 of them? – Strategy execution for growth is the limiting factor for most growth initiatives.
- What are the things we need to focus on in the Xplore phase to secure we maximize the Xpand potential? – Your approach and investments in the Xplore phase set the frame for the Xpand phase.
- How far away from our current core business can we grow with a manageable business risks? – The further away from your core skills the harder the Xplore projects tend to be.
For deeper insights on how to drive this in a large organization I suggest the following reading
- Profit from the Core and Beyond the Core [BOOK] – by Chris Zook
- Emerging business opportunities at IBM [CASE STUDY] – by Harvard Business School
- GE’s Imagination Breakthroughs [CASE STUDY] – by Harvard Business School
With your new insights on the three execution centric ways of looking at growth, your have a better chance to succeed.