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.
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With low growth comes a human cost
- Running to stay in the same place
- Fewer individual development opportunities
- Running to stay in the same place
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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
- 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.
Next Generation Demand
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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.
- The customer’s internal value chain includes how to use your product, maintain it, finance it, store it and eventually dispose of it.
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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.
- Help your customer improve their cost structure (reduce waste, excess operating and capital costs, and process inefficiencies).
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Power of Next Generation Demand
- Create new, more powerful opportunities to grow core product sales by deepening customer relationships
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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.”
- 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)
- Create new, more powerful opportunities to grow core product sales by deepening customer relationships
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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
- What issues do they struggle with every day? What headaches do they have?
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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?)
- Code for a consultative selling process or attempt to pitch service agreements
- 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
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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
- If you are not talking to your customers, who is?
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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
- Do you have authority with your customers that is going unused?
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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.
- Responded to June 3, 1992 gauntlet from GM’s Ignacio Lopez to slash prices
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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
- Exploited their technical know-how that was valuable to their customers.
Hidden Liabilities That Can Trip Up Many Companies
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Cultural liabilities
- Corporate mind set
- Culture and history
- Leadership and commitment
- Corporate mind set
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Structural liabilities
- Organizational structure
- Skills and capabilities
- Measurements and incentive systems (including prestige)
- Budgeting and resource allocation process
- Information systems
- Organizational structure
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External liabilities
- Brand / authority
- Customer readiness
- Investor resistance
- Distribution channels / alliances
- Brand / authority
Making Growth Happen
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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?
- Expand your zone of control
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The senior manager needs to create an operating system for growth
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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.”
- “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
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Running Interference – High level support for growth initiatives
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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
- New product R&D – Good chance of success
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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
- 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
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Missing Pieces: Building the Asset Base Through Acquisitions and Alliances
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Capabilities acquisitions v. revenue acquisitions
- Speed development
- Bring in required skills
- Open doors to strategic markets
- Speed development
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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
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What can we do today to position ourselves for growth?
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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
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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?
- “Tell me three things that you do that the customer’s people value”
- 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
- De-averaging and re-segmenting the customer base – finding niches within your current customer base
- These transitional tactics give the opportunity for learning about the customer and developing new capabilities
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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
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The Growth Spectrum
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Traditional
- International
- Acquisitions
- Price
- Cost Cutting
- International
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Enhanced Product Position
- New products
- Extensions
- Differentiation
- New products
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Transitional
- Re-segmentation
- Replicate the best customer
- Value-based pricing
- Strategic customer program
- Turning products offers into system offers
- Re-segmentation
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New Growth
- Product / service integration
- Bundled solutions
- Value added outsourcing
- Downstream offers
- Product / service integration
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Information – Based
- Integrated information offering
- Performance guarantees
- Selling information
- Externalizing IT investments
- Integrated information offering
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Put together a Growth Action Plan
- Have it be aggressive enough
- Have it be practical and realistic
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As Dwight D. Eisenhower remarked about preparing for battle:
- “Plans are useless, but planning is indispensable.”
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Contact David Shedd
- Have it be aggressive enough
David M. Shedd - Move Your Company Forward 