10 Paths to Growth
purchases 1. Customer and Experience: advocacy Inspire Sell additional more 2. existing Customer products Base Penetration: to existing customers
markets 3. Market with Accelleration: existing products Expand into new to 4. Product existing customers Expansion: Sell new products 5. Customer and Product Diversification: Sell new products to new customers
6. Optimize Sales: Streamline sales efforts to increase productivity
7. Churn (Minimize Defection): Retain more customers
8. Partnerships: Leverage third-party alliances, channels and ecosystems (sales, go-to-market)
9. Co-opetition: Cooperate with a market or industry competitor (product development, IP sharing)
10. Unconventional Strategies: Disrupt current thinking about how to grow
Tell us a bit about the two paths that involve joining forces with other companies: Partnership and Coopetition.
Cisco would be an example of a pure Partnership strategy. You can’t go to Cisco.com and buy Cisco products; the company only sells to its customers via its vast partner ecosystem. They rely on 90 per cent of their overall revenue from various kinds of partnerships. Co-opetition is a newer kind of partnership. Across industries, we are seeing companies joining forces with partners they would have viewed as competitors in the past, in order to serve common customers in a better way. Coopetition is about finding ways to work with competitors to accomplish things that neither of you could achieve alone. Recent examples of unlikely bedfellows include Best Buy and Amazon getting together to sell Fire TV; Nike selling its apparel on Amazon — which it swore would never happen; and Sears selling its home appliances on Amazon.
What does an Unconventional Strategy look like?
When I started working on my book [ Growth IQ], I had originally intended for this path to be about how companies stimulate growth in unorthodox ways; but the past two years have exposed me to a different interpretation of what ‘unorthodox’ really means. ‘Doing well by doing good’ has become more important than ever, and in today’s environment, it is enabling growth. That’s because 79 per cent of consumers now prefer to purchase products from a company that operates with a social purpose.
When Mark Benioff started Salesforce 18 years ago, the model he came up with was very disruptive at the time: One per cent of the company’s time, revenue and software would be donated to not-for-profit organizations to make the world a better place. In recent years, influential companies like Unilever and Blackrock have started to contribute to society through their business models. In fact, early in 2018, Blackrock leader Laurence D. Fink said that his firm will no longer invest in companies that ignore this imperative. The New York Times called this a ‘watershed moment’, and in my mind, it’s still very much an unconventional stance.
Tell us about the fine line between Product Expansion and Market Acceleration?
Market Acceleration means putting your foot on the gas of what you’re already doing, but in new markets. Let’s use Starbucks as an example, taking its model to London but using the same layout, concept and products. That’s classic Market Acceleration. Product Expansion means selling different types of products within your current environment. For example, Starbucks recently launched a new lineup of salads and sandwiches.
Tell us a bit about the cautionary tale of Starbucks.
Between 1987 and 2007, Starbucks opened an average of two locations every single day — which is the very definition of Market Acceleration. Starbucks also pursued Product Expansion and Customer and Product Diversification by selling snacks, CDS, gifts and other retail items, stretching them beyond just coffee over the years.
But not all growth is good growth: By 2007, it had roughly 13,000 stores, but unfortunately, it had alienated many loyal customers with its product diversification choices. For example, in many stores, the smell of its breakfast sandwiches completely overtook the aroma of freshly-brewed coffee. Starbucks had lost its focus on customer experience — and some might say, its soul. When Howard Schultz was brought back as CEO in 2008, he admitted: “The most serious challenge we face is of our own doing. We became less passionate about customer relationships and the coffee experience.”
The best time to create the next big opportunity is when things are going well— not when you are struggling.
The good news is that Starbucks was able to coursecorrect by returning to its roots, which had always been about delivering a memorable and value driven Customer Experience; and along the way, it has figured out how to do Product Expansion right, through Partnerships with a wide variety of packaged-food providers that work seamlessly with its operational model.
Should companies always use a combination of paths?
In most cases, a combination of paths will make each individual path more likely to succeed. For example, Customer Diversification, Product Expansion and Customer Experience often go hand in hand; and as I indicated earlier, Customer Experience must be the foundation for all 10 paths. The question is, which combination of paths will work best for you?
Are any of the 10 paths being underutilized?
As indicated earlier, companies are spending a lot of time trying to get new customers in the door, and not nearly enough time focusing on the ones they’ve already acquired. This ties in with the Churn path, which basically means, growing by minimizing customer defections. The fact is, every business is going to lose a certain number of customers over time, and ‘the bucket is leaking out of the bottom’: For every customer you lose, you basically have to add two to cover the one you lost, plus one to grow. The best way to beat the reality of Churn is to think more about the long-term value of each acquired customer — not just one-time sales.
Creating a sense of being in an ‘exclusive club’ is one way to minimize churn. As big brands such as Adidas (with its Avenue A subscription program) and Starbucks (with its Reserve Roastery) continue to expand the ‘membership economy’, there will be more focus on this particular path as a way to improve growth. Hopefully, one day soon, the rigor that goes into acquiring new customers will be equal to the rigor of managing your existing base.
The best leaders know that growth needs to be counter-cyclical. That is, the best time to create the next big opportunity is when things are going well — not when you are struggling. Too many companies have failed because they worked on yesterday’s context for tomorrow’s business. I hope to play a small role in encouraging less of that. Tiffani Bova is the Growth and Innovation Evangelist at Salesforce and the author of the Wall Street Journal best-seller Growth IQ: Get Smarter About the Choices That Will Make or Break Your Business (Portfolio Penguin, 2018).