Want to Set Your Business up for Long-term Success? You Need a Corporate Growth Strategy
There is a consistent drive towards entrepreneurship everywhere. While most people are drawn solely because of the need to make money; others are compelled because it’s a way to gain attention; some are compelled because all their friends have businesses; and there are people who have an innate drive to make a difference or build a brand that stands the test of time.
Whatever the reason for wanting to start a business? Here’s the sad truth. 70% of startups fail. And let’s not ignore the fact that your idea might just be wack. But even wacky ideas will sell once marketed to the right people consistently over a period of time. I hope this post doesn’t discourage anyone from being an entrepreneur. Yet most startups would fail because they are too focused on short term metrics.
Successful startup owners recognize that growing a viable business requires a long term growth strategy. This simple realization may be the defining point for the success of your business.
According to Paul Graham,
“Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.”
According to Graham, for a company to grow really big, it must,
(a.) make something lots of people want and (b.) reach and serve all those people.
If you make something lots of people want and probably reach and serve all these people, then you must expect stiff, sometimes ferocious competition. With this comes the risks and constant pitfalls. Without a solid corporate growth strategy to keep you focused and guide your actions, it would be difficult to maintain sanity literally. This is where many startup owners lose their drive and cave in to the competitive stress.If you make something lots of people want and probably reach and serve all these people, then you must expect stiff, sometimes ferocious competition Click To Tweet
Corporate growth strategy?
It means asking the question, “how do we scale from here?”. It’s great to define a business plan. Yet, the most crucial question is: “How do we grow?”. There are many ways to go. But here are six that have been used successfully by companies like Facebook and Uber. This simple infographic from Business Strategy Hub describes the Ansoff Matrix, which focuses on the four basic business growth strategies.
1. Market Penetration.
As a small brand, market penetration is your long term plan to effectively beat the competition and keep a large share of the market. Some ways to achieve this might be through a focus on improved customer experience, topline customer retention rates, lowering prices or improving the product’s features to attract more of your competitors’ customers.
With Market penetration, you target the same market segment of buyers but substantially increase your market share. This allows you to gain more penetration in the market. It is typically the most common corporate growth strategy as it has lower risk compared to other strategies.
If your businesses is in an over saturated market, this strategy would be difficult to implement as gaining new market share would be tough.
2. Market Expansion.
With this strategy, you target an increased market segment of buyers i.e you expand your target market. This involves optimizing your existing product(s) to fit into new markets. However, note that before you enter a new market, you should assess the competition. Can your company compete successfully in a new market?Can your company compete successfully in a new market? Click To Tweet
Market expansion comes with its own risks. Without doing sufficient analysis, market expansion can be a wrong move. You should ask these questions:
- How receptive would our new audience be to the product?
- Who is our competition and how successfully can we compete in this new market?
- How can we make more profit in this new market?
3. Product Expansion.
Although this sounds the same as market expansion, it isn’t. This growth strategy relies mainly on your offerings rather than the market. You want to introduce new product lines to your existing market on a periodic basis. This will increase profit, consequently helping you scale more. This strategy is more common with fashion and digital marketing brands, which rely heavily on the product.
However, it should be noted that if your business relies on the quality of your products, then you want to maintain this quality with your new offerings. Else you risk losing market share to competitors.
Diversification is a bold approach to scaling. It involves diving into a totally new market with a totally new product. It’s almost like creating a business over again. But this time, it could be easier since you might already possess a measure of reputation.
However, unlike market expansion, you’re not using insights from your existing markets. You’re not selling any of your existing product. But entering into a new market or industry with a new product entirely. It’s very risky. As such, businesses that would like to grow using this approach need to consider the product’s reception and the competitive nature of the new market.
“Practiced by successful companies at all levels, growth through acquisition helps in securing more market share, man force and revenue. A tool of market consolidation, it offers the acquiring company a chance to consolidate its hold and keep market dominance.” – Angelinvestorreport
This is very common with big tech brands. If a company has grown sufficiently large enough in profit, it could offer to buy up the competition at a fair price to increase its market share of customers. Although this is a costly way to go, it’s the most profitable. It can lead to rapid growth. But of course, it has its risks. You have to do considerable research and analysis before taking the plunge.
With the growth of the freelance economy, outsourcing has become a great way to conserve running costs, labour fees, while improving customer satisfaction. All these leads to more profit and consequently growth. A freelancer is a standalone agency or individual that takes on specializied tasks and gets this done within a shorter time frame than you would normally. This can be considered a growth strategy because it creates efficiency as your employees focus their efforts on other tasks while you outsource boring tasks. This leads to more production and increased market share. Yet, outsourcing presents its own risks as you need to hire the right people.
On a large scale, a strategy that works for an automotive industry might not work for a tech industry and conversely. More subtly, B2B and B2C brands that offer the same product might have to consider different growth strategies. Now, let’s apply this knowledge.
A sustainable growth strategy will usually include pointers and KPIs that make it effectively able to track the growth of your business and set new milestones.
Pointers to your growth strategy
1. Your USP. What do you do better than others in your niche? While two restaurants could offer the same assortments of food and wine, one may have better customer service than the other. This slight advantage gives it an edge. Your USP is your edge. It would be more beneficial for your business that customers experience your USP first hand rather than you talking about it everytime.
For example, say a wine brand. What’s your USP? What sets you apart from the competition. If your product can’t be succinctly distinguished, then a growth strategy such as market penetration might not work.
2. Your customer base. Your business doesn’t appeal to everyone. There is a particular audience that your idea appeals to the most. This particular audience will form the majority of your buyers. So, take a look at your customer base and you’ll get some pointers.
The reason why you need to define your customer is for the efficient use of marketing dollars. When you hone in on your target customer, your adverts generate better, quality leads and consequently more conversions.
Who are your customers and what do they like most about your product? This means businesses that are focused on growth need to put out periodic surveys to assess how highly or low customers think about them. Without your customer base, your growth strategy is useless.
3. Your KPIs. It’s important to know your key performance indicators. Or else? How would you know if what you’re doing is working and the company is actually growing. Having a firm grasp on what you consider a win will keep you focused and directed. Hence, many growth-oriented businesses don’t fiddle with A/B testing and analytics.
For most businesses the best source of insight is profit. If you’ve undertaken market expansion, then you want to measure your ROI. Have you created a new product? Ensure to define the KPIs to track. Then start tracking them.
4. Your competition. While you want to be unique, you also need to know your competition. Your competition is directly any company whose services cause buyers not to need your service.
If a movie establishment stopped people from visiting your restaurant, then that’s a competitor there. In most cases, your competitor is also looking to grow their audience, hence trying to reinvent the wheel isn’t worth it most times. You have to consistently find out what your competitors are doing to grow. This will give you a raw idea to work with.
Say a tech startup. If our competitor was proactively creating new products for their customers. Then it means we should follow suit. If we were trying to reach an entirely new market while the competition is developing new helpful products for existing customers, we’d lose market share. Without a keen understanding of what competitors are up to, your growth strategy would be myopic.
5. Your ideal employee. When choosing people to work with, quality is always better than quantity. Growth-oriented businesses do not just hire employees out of the blue. They have things they want to see in their employees. Chief among what you should seek for is character (honesty).
Employees are the drivers of your growth strategy. They are the ones moving the pieces. Hence it’s essential for small businesses to define a growth strategy early on. Map this out as a trajectory and ensure the company as a whole is moving towards it. Passionate employees can be great sources of valuable ideas to help your brand gain more market share.
A Growth Strategy Template
Your company’s growth strategy influences everything from PR to HR. Hence if you’re a business that wants to thrive in a competitive landscape, you can’t afford to be vague.Define your business growth strategy. Download the free template #business #goals #startuplife Click To Tweet
Unfortunately, vagueness is common. A half glass full approach is good but without a concrete growth strategy, it might be illusive. Analyze your business, your employees, your competition and define a viable corporate growth strategy.
Understand that this would only be needed if you set your sights high – you want to grow your small business into a big brand. If you’re good with the smallness, you might be okay with a business plan.
Either way, starting any business comes with pitfalls. Your determination and foresight as an entrepreneur will help you trudge on when it gets tough.