After several years of survival mode for many companies, growth is back on the agenda. But the requirements for success have changed. In today’s conditions — uncertain recovery, limited capital, and many new competitors — companies must find new ways to grow.
There’s no going back to the growth ideas that were bouncing around the organization before the global financial crisis. Executives need a robust framework to help them rapidly develop a long list of opportunities and then choose the very best ideas from it. The process must be comprehensive, efficient, rigorous, collaborative, and focused on “market-back” opportunities designed to meet customers’ needs. And it must be bold — the company must resist the temptation to do what has been done in the past.
Booz & Company has created a methodology for this, based on five lenses used for evaluating growth strategies. The five lenses — share of wallet, new regulations, technology and applications, distinctive capabilities, and business models — represent discrete and complementary ways to find and judge unconventional and unseen ideas. This approach has already been used successfully by companies in many industries and geographies.
A Process for Thinking Big and Bold
Too often, companies fail to imagine and fully explore all the potential options available to them, because they have been so intently focused on existing businesses and customers. They rely on conventional growth strategies such as mergers and acquisitions, geographic expansion, competitive pricing, and product or service line extensions. Although all these growth paths are well trodden, they also have limitations. For example, none of them are attractive when capital markets are tight and consumer demand is weak. But there are many new avenues for transformational growth that could be far more lucrative than the current strategies and that could be achieved with reasonable effort.
In seeking these avenues for growth, it pays to think big and bold. Consider how many of the largest, most iconic companies in the world — old and new — achieved their greatest growth when they entered and conquered totally new markets. For example, the Nokia Corporation, the world’s largest maker of mobile phones, started out in the 1880s as a manufacturer of cables, paper, and rubber tires. It was only when Nokia began separating from its roots as an industrial conglomerate to focus on electronics, and eventually telecom, that growth took off.
The Toyota Motor Corporation started out in the textile business making threads and looms. In the 1930s, Kiichiro Toyoda, the founder’s son, then head of Toyoda Loom Works, decided to branch into automobiles, which was considered a risky business at the time. American Express Company was an express mail company before it moved into financial services. Before Nintendo Company grew into a global powerhouse in digital games, it made playing cards and ran a chain of hotels for Japanese and other Asian markets.
These examples are not meant to suggest that wild leaps into new businesses and markets are right all the time and for all companies. For every Nokia, American Express, Toyota, or Nintendo, there are scores of companies that failed to achieve their new growth aspirations. Failure can often be traced back to the ad hoc processes with which many companies determine their growth strategy. When the search for new growth ideas is too unfocused, the best opportunities do not surface, and valuable time and resources are wasted. An unfocused process can also fail to take into account a company’s existing capabilities and assets. The result is a lack of coherence: ideas that require investment in capabilities that fit well with only one part of the company’s portfolio. This can hobble a company, especially if its competitors are more coherent. An ad hoc process can lead companies to implement new ideas based on flawed or overly aggressive assumptions. It can enable executives to revive old ideas that, for good reason, never had support in the first place.