Seven Innovative Growth Strategies for Small Companies
Most public companies engage in a strategic planning exercise at least every three years. Private companies often skip strategy development, considering it to be theoretical, even bureaucratic. Private companies tend to move quickly to Goals, Objectives and Tactics and skip Strategy due to time constraints and the fact that in most companies, the CEO serves in effect as the part-time chief strategy officer. A typical Goal might be to be the leading producer in the industry. An Objective might be to grow 10% in 2013 while a Tactic might be an action to achieve the Objective such as increasing the number of sales professionals.
While these are all important, Strategy should be on the agenda first. It is the indispensable first step where a company identifies potential growth markets and opportunities for the organization’s limited resources while aligning working capital investments to support the execution of that strategy. In essence, Strategy is the journey towards the Goals, Objectives and Tactics destination.
Companies without an effective strategy often end up in a sort of “No Man’s Land,” the place where growth has slowed. The statistics show that 7 out of 10 companies that enter this “No Man’s Land” go out of business before reaching 100 employees; 2 stay in the 10 to 100-employee level and 1 achieves growth beyond 100 employees. So as a company, your odds of moving into the middle market are 1 in 10. But adopting a clear and precise effective growth strategy can significantly increase your odds.
Seven Growth Strategies
- Core Strategy – a basic strategy could be an expansion of your core product offering--geographically or to new customers and markets. Many companies achieve growth by sustaining leadership in their own product line. They often fail when they try to expand into new products or services. According to a study by Bain, 78% of successful companies have only one core business.
- Adjacency Strategy – are there “adjacent” areas around the company’s core products or services that are natural extensions of the core? Examples might include a daily car rental company adding an hourly “Zip Car” offering to its product line.
- Extension Strategy – extensions involve the concept of the “extended enterprise.” Consider reaching beyond natural adjacencies to product or service extensions that might position the company for growth beyond the core business. A classic example would be American Airlines’ creation of the SABRE reservation system.
- New Channel Strategy – consider entering new markets through alliances, partnerships, mergers or acquisitions or even franchising your product. Alliances and partnerships might be a less capital-intensive way of growing the company without having to make an investment in new production facilities or inventory.
- Reinvention Strategy – products go through a natural life cycle, but often come back in vogue due to innovation or consumer tastes. Consider the auto industry and its reintroduction of the “muscle” car. Private companies may need to reposition or innovate to rejuvenate their products or services to begin a new life cycle.
- Recovery Strategy – A “reset” strategy may be called for when a product or market decision did not work as expected. Reflection is needed to understand what went wrong and how to correct it. Consider the example of how RIM (Blackberry) has recently reset to reposition itself in the PDA market.
- Redefinition Strategy – consider redefining the core of your business. The classic example is a printer manufacturer who virtually gives the printer away for the future revenue stream of ink cartridge sales. What are the sources of recurring profitable income and how can the company redefine its product or services to capture growth? Is your company’s position in alignment with customers’ needs and customers’ perceptions of your business?
By taking a close look at the company’s products and strategic alignment, companies can take the first step in moving positioning for exponential growth.
