By contrast, an effective methodology can reduce the risks associated with seeking breakout growth, maximize creative thinking, and ensure that companies direct their time and resources toward the best possible opportunities. Investment ideas stretch beyond conventional thinking; they are more comprehensive, and not limited to the obvious proposals. The process also ensures that time, resources, and management attention are deployed with care. Even the most extreme breakout growth strategies are coherently aligned with the rest of an organization’s portfolio of assets and capabilities. The assessment criteria for the “short list” of ideas is more rigorous: the process helps keep the discussion sound, unbiased, and clearly articulated. The process is a collaborative effort, tapping a broad array of executives and energizing the whole company. Projects chosen garner strong implementation support. It is also an explicitly market-focused process. The opportunities that are implemented have a strong chance of securing a first-mover advantage or another competitive advantage in the marketplace.
When a mining services company used the methodology in its quest to double revenues in three years, it identified a set of 13 opportunities, each of which had the potential to increase its annual revenue by US$1 billion. This reframed the boundaries of the business: The methodology helped executives see that although the company had a 40 percent share of a low-growth market, it actually held less than 5 percent of a much larger redefined market with numerous untapped, high-growth opportunities.
Five Lenses for Growth
The Growth Lens methodology has five lenses that can be used, separately and together, to expand a company’s perspective on growth. The goal is to challenge assumptions about the size, shape, and definition of markets through a facilitated, creative, and rigorous process of business idea generation. (See Exhibit 1.)
1. Share of Wallet
The goal of this lens is to determine how to capture a larger portion of existing customers’ spending by selling them more products and services, and a wider variety of them. The core question associated with this lens is, What other products or services do our customers buy or want that we could potentially provide?
For example, retail banks today provide a wide range of products and services beyond traditional lending, checking, and savings services; these new offerings include insurance products, retirement planning, and wealth management. The “financial supermarket” model offers one-stop shopping. When it works well, it increases a bank’s share of wallet and customer retention, and lowers sales and marketing and customer acquisition costs. These savings can be shared with customers in bundle or volume discounts.
Share-of-wallet strategies require a deep understanding of existing customers and the ability to cross-sell and raise profit margins across a full suite of financial services, which is why today’s banks are investing heavily in data mining and analytics.
Automobile manufacturers in many countries have repeatedly expanded their share of wallet by moving beyond making cars to distribution and sales. Some have gotten into sales of new and used vehicles through company-owned and franchised dealerships. Repair services and aftermarket parts sales are also a common approach. Some companies have grown their share of wallet by adding financing, leasing, insurance, navigation services, and roadside services to their business portfolios. In each case, they found and capitalized on new and profitable growth opportunities. As a result, the value captured by auto manufacturers through the sale of a new car can be relatively small, compared to the value that will be generated during the asset’s life cycle. These manufacturers have cleverly created high switching costs for customers (for example, by installing on-board computers that determine servicing intervals and must be reset by branded repairers), which protect this future upside.