Growth is the focus for most companies, unfortunately margin levels and cost of customer acquisition frequently presents the limiting factor that simply doubling marketing spend is not an option. Reviewing product strategy to design a growth engine for established business is a common ask of product leadership, although few businesses achieve it. This post shows you where do you start so you can design powerful and successful growth engines?
Many established, larger companies are full of politics and cultures that don't openly encourage the "fail fast" culture startups are blessed with. The result is the enterprise typically believes its own hype and the limits within the business are not well understood. My starting point is to formulating a growth strategy is to be honest and dig into the limits of the existing economic engine that drives your profits.
To really understand the limits of the existing business we need to comprehensively explore the following areas with a view to learning where opportunities might exist. At this early stage it is key to "walk before you can run" and avoid solutionizing. It is key to appreciate that understanding your limits does not mean you can flip them all to opportunities and rush out with your new strategy!
- Served Needs, what needs of consumer do you not serve?
- Revenues and Margins, could you make more money from a different part of the value chain? Are high margin revenues streams pushed to the max? Where is your customer life time value negatively impacted?
- Configuration of Assets, could your assets, including talent and skills, be shaped to serve your customer better?
- Flexibility and Agility, how vulnerable are you to a "new game"? If your not sure about the "new game" then workshop how you would disrupt your business from a different industry or from a start up.
To illustrate how to use this tool, below is a made up example reviewing Apple in Jan 2002 after a successful launch of the first iPod.
1. Served Needs, We don't help music listeners personalise their iPod. We don't provide speakers for users to enjoy their iPod beyond headphones. We don't help music listeners in the car.
2. Revenue and margins, the iPod is a one off purchase, we don't make money from software being sold like with the MAC. There is no increased lifetime value. Our iPod users make continued purchases to enjoy their ipod - buying music - but not with us.
3. Configuration of Assets, our newly opened Apple store could provide access to wider products for music listeners.
4. Flexibility & Agility, music labels such a Sony could delight music listeners by founding a legal version of Napster.
When you understand the limits of your economic model you have the focus to evaluate potential solutions and progress the journey of building a growth engine.