How to Grow When Markets Don’t – More Relevant than Ever!

Published in late 2004, How to Grow When Markets Don’t by Adrian Slywotzky and Richard Wise (with Karl Weber) is more relevant than ever in today’s slow-growth business climate.

The Growth Crisis

  • The economy is maturing and population growth is flattening out. Combine this with excess capacity and global competitors; growth is slowing especially with traditional product – centric strategies.
  • With low growth comes a human cost
    • Running to stay in the same place
    • Fewer individual development opportunities
  • Combat low growth with demand innovation
    • Focus on creating new growth and new value by addressing the hassles and issues that surround the product rather than by improving the product itself.
    • Create new growth by expanding the market’s boundaries.
    • As an example, Cardinal Health moves into a hospital to take over the entire medication dispensing and management process rather than just being a pharmaceutical distributor

Next Generation Demand

  • While the product sale may be the culmination of the manufacturer’s efforts, it usually just marks the beginning of the customer’s efforts.
    • The customer’s internal value chain includes how to use your product, maintain it, finance it, store it and eventually dispose of it.
  • Recognize Next Generation Demand
    • Help your customer improve their cost structure (reduce waste, excess operating and capital costs, and process inefficiencies).
    • Help your customer reduce complexity, make better decisions, and speed their own offering to market.
    • Reduce the risk and volatility inherent in your customer’s business
    • Most valuable of all: help your customer to grow their top-line revenues.
  • Power of Next Generation Demand
    • Create new, more powerful opportunities to grow core product sales by deepening customer relationships
    • Combine multiple products and services into more valuable integrated offers
      • But, need to go beyond and offer significantly more value than the proverbial “one-stop shopping.”
    • Turn improvements in the customer’s value chain into new revenue streams (outsourcing fees, tolling charges, maintenance agreements)
  • View your customer through an economic lens
    • What issues do they struggle with every day? What headaches do they have?
    • Your goal is to then shift from responding to customer needs to anticipating them
  • But, beware of the danger of selling solutions
    • Code for a consultative selling process or attempt to pitch service agreements
    • Cost of capital play (out-sourcing)
    • Often complex, especially depending upon the supplier’s organization (can they really coordinate it all?)
  • Caveat: Not every business in every industry is in a position to identify and serve next-generation demand. Some may occupy market niches so narrowly defined and so hemmed in by competition that they have no choice but to accept a low growth or no growth future. They should then focus on being cash cows.

Hidden Assets that Every Company Needs to Take Advantage Of

  • Brand
  • Unique customer access
  • Technical know-how
  • Installed base
  • Window on the market
  • Network of relationships
  • Loyal user community

Examples of Demand Innovation

  • Clarke American
    • If you are not talking to your customers, who is?
    • Focus on strategic customers first
    • Keep your customers happy and keep your customer’s customers happy
    • Have a systematic approach to planning, deploying and reviewing innovations
  • John Deere Landscapes
    • Do you have authority with your customers that is going unused?
    • Grow your customer’s own revenues with unique financing, brokering or other skills
  • Johnson Controls
    • Responded to June 3, 1992 gauntlet from GM’s Ignacio Lopez to slash prices
    • When customer readiness threatens to block a new growth initiative, find and nurture a single customer with special reasons to expand the business relationship (e.g. the weakest car company – Chrysler)
    • Address flaws in your customer’s business- inefficiencies, redundancies, and excessive costs
    • Develop asset base on which growth is to be based by acquisition, internal growth or alliances.
  • Air Liquide
    • Exploited their technical know-how that was valuable to their customers.
    • Got beyond commodity supplier relationship by getting closer to the customer and understanding their real headaches
    • Built off of a relationship with one special customer

Hidden Liabilities That Can Trip Up Many Companies

  • Cultural liabilities
    • Corporate mind set
    • Culture and history
    • Leadership and commitment
  • Structural liabilities
    • Organizational structure
    • Skills and capabilities
    • Measurements and incentive systems (including prestige)
    • Budgeting and resource allocation process
    • Information systems
  • External liabilities
    • Brand / authority
    • Customer readiness
    • Investor resistance
    • Distribution channels / alliances

Making Growth Happen

  • The middle manager makes the difference
    • Expand your zone of control
    • Operate below the corporate radar
    • How can my best customer – focused idea be turned into a profit center and expanded?
  • The senior manager needs to create an operating system for growth
    • Harry Truman told Dwight Eisenhower that he was in for a bit of a shock:
      • “He’ll sit at his desk and give orders, and then discover that nothing happens.”
    • The foundation – operational excellence
    • The Grass Roots – mandating new growth at the operating level
    • A Thousand Flowers – Supporting then winnowing maverick ideas
    • Running Interference – High level support for growth initiatives
      • Typical approaches to building a new business
        • New product R&D – Good chance of success
        • Entrepreneurial start-up – Fair chance of success
        • New-Growth Initiative – Close to zero success
    • Form and Function – Structuring the New-Growth Business
      • John Deere – “one way window” with the new growth team able to look into Deere and borrow ideas and resources, but the reverse is discouraged
    • Missing Pieces: Building the Asset Base Through Acquisitions and Alliances
      • Capabilities acquisitions v. revenue acquisitions
        • Speed development
        • Bring in required skills
        • Open doors to strategic markets

Opportunities on the Growth Frontier

  • Consumer companies face even bleaker growth prospects than their business to business counterparts
  • GE has been a pioneer of demand growth by pursuing finance and service opportunities that grew from its core product sales
  • What can we do today to position ourselves for growth?
    • Transitional tactics that can be used include:
      • De-averaging and re-segmenting the customer base – finding niches within your current customer base
      • Building a strategic customer relationship program
      • Replicating the best customer relationships
      • Value pricing – to capture a greater share of the customer benefits delivered; break an all-inclusive price into its component parts and charge for valuable but formerly “free” add-on services
        • “Tell me three things that you do that the customer’s people value”
        • How closely does your pricing match the value that you deliver to the customer?
      • Evolving the product offer into a system offer
      • Putting a value added wrapper around the product offering
      • Shifting the brand equity investments to emphasize the emotional and affinity elements of brand
    • These transitional tactics give the opportunity for learning about the customer and developing new capabilities

Creating Your Growth Action Plan

  • Be most aggressive about creating new growth when the business model is at the peak of its performance.
  • Determine your growth gap
  • The Growth Spectrum
    • Traditional
      • International
      • Acquisitions
      • Price
      • Cost Cutting
    • Enhanced Product Position
      • New products
      • Extensions
      • Differentiation
    • Transitional
      • Re-segmentation
      • Replicate the best customer
      • Value-based pricing
      • Strategic customer program
      • Turning products offers into system offers
    • New Growth
      • Product / service integration
      • Bundled solutions
      • Value added outsourcing
      • Downstream offers
    • Information – Based
      • Integrated information offering
      • Performance guarantees
      • Selling information
      • Externalizing IT investments
  • Put together a Growth Action Plan
    • Have it be aggressive enough
    • Have it be practical and realistic
    • As Dwight D. Eisenhower remarked about preparing for battle:
      • “Plans are useless, but planning is indispensable.”

      Contact David Shedd

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About David Shedd

David has been a President - CEO - COO of an up to $350M group of manufacturing, distribution, specialty retail and services companies, having led 22 different businesses from turnarounds to start-ups to fast growth companies.
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