Growth pathways for growing businesses

There are many vectors for growth; only some of these are in the area of business development.

1. Enter a new market — new geography or target new customer types
2. Develop new products — that can be sold to existing or new customers
3. Develop new channels — particularly an indirect channel (eg leveraging another organisation’s face to face, inside sales, or internet based channel (social media, direct lead nurturing, etc)
4. Acquire customers inorganically from a competitor — eg buy their customer base or part of their business
5. Drive sales and marketing harder — new approaches (eg new venues), more targetted incentives, new people, more sales and marketing spend
6. Extract more money from existing customers (introduce more products and services or upsell into other departments)

These are not mutually exclusive — entering a new market will often require product changes and the development of a new channel.

Complexity and Likelihood of Success

I would say that broadly the numbering above is in order of decreasing complexity and so increasing believability and likelihood.

If someone tells me they are going to keep extracting more money from an existing customer, like they have done with customers in the past I’m more likely to believe them than someone who is telling me they can make a positive return on entering into a new market which might require localisation/translation, a local entity and compliance, new product features and a new sales team and approach.

Cost vs Benefit vs Risk

These options will have different costs, benefits and risks. They must be weighed sensibly by management to determine the best use of their limited growth capital.

Investors will spend a lot of time understanding what the underlying drivers of growth are for a business and whether they believe that management will deploy capital efficiently.

Some organisations have a track record of success with these various strategies (eg bringing their business model to new geographies) and a different order of complexity will apply.

Effectiveness of these growth strategies can be a competitive advantage that gives leverage to the underlying business model. For example, Google and Apple’s app stores now allow each to offer new products (their own but mainly third party apps) through a new channel they built initially in their domestic market but then scaled it out globally.

Any organisation would do well to assess its ambitions and perceived strengths in these areas against their historical track record. The experience can be sobering (or reveal a lack of expertise) but should expose key factors that will be critical to address for the venture’s success.