Recently, the CEO of an award-winning craft brewery told us they weren’t interested in thinking about their growth strategy because, in their words, finding ways to drive top-line gains wasn’t their main concern. You see, they'd been growing at a tremendous clip for the last several years and believed the party was unlikely to end anytime soon. From our perspective, this represents a dangerously short-term view on the world, one that ignores the challenge every industry and every participant in it eventually faces. What’s the old adage? Make hay while the sun shines. Whether your recent growth has been explosive or more paced and steady, at some point it’ll slow. That’s true company-after-company, industry-after-industry. Why? Three major reasons:
There are only so many customers for a given product or service:
That’s a key premise behind the S-curve that underpins a standard industry lifecycle. As new industries move beyond the explosive, exponential growth seen during introduction, they begin to see progressively slowing growth rates as they move through the growth and then the maturity phases of their sector. Simply put, there are only so many customers to go around. Sure, there are opportunities to expand the size of the pie and / or to compete for a larger slice of it. However, fighting for share in your category alone isn’t long-term sustainable. The global customer base is a relatively fixed market in the short-term. Going back to our friends at the brewery, for example – there’s a proliferation of craft beer and relatively fixed shelf space to hold that liquid as well as “throats” across which to win share. If we were the craft brewery in question, we'd be thinking long and hard about innovation. Not just within their core beer market but also in adjacent sectors like spirits as a means to make careful, calculated bets. Ones that create long-term runway and diversification.
Like the dodo bird, industries go extinct:
While this phenomenon isn’t restricted to just the digital age, the last 17 years have shown the speed and finality with which industries established for decades, if not centuries, can move beyond old-line players. Just ask the New York Times, which in 1999 was wondering whether and to what degree this annoying new upstart called Monster.com posed a threat to its lucrative, semi-monopolistic jobs classifieds business. While Monster.com faded, we all know how that story played out for the New York Times. To fight extinction, innovation once again represents a key lever. Either in helping old-line players pivot away from declining growth and revenue within their own industry (e.g., through business model innovation) or to tap into new revenue streams off of their underlying capabilities (e.g., monetized subscriber databases for the Times).
Whether your recent growth has been explosive or more paced and steady, at some point it’ll slow.
One win doesn’t equate to a long-term culture of innovation:
Hello, Nintendo Wii. OK, Nintendo had tremendous success earlier in the console wars but, after a dormant period, the Wii was widely cited as evidence of Nintendo’s return to glory. And, with that platform, Nintendo managed to substantially expand the size of the pie. Capturing young children, the AARP crowd and everyone in between. Yet, now, over a decade later Nintendo is an afterthought (Pokemon Go aside). Striking gold once or intermittently doesn’t mean your company has the capability necessary to consistently scout, assess and pursue new growth opportunities. Innovation and growth are less about vision or desire and more about having the muscles (culture, people, processes, etc.) needed to successfully execute against that vision year-over-year, opportunity-after-opportunity. The best-in-class develop, invest in and built that capability in a systematic way. It becomes part of their DNA vs. a checklist item on some management dashboard.
Looking out over 5-7 years, do you see growth-related headwinds on the horizon? And, assuming you’re performing well or that you have at least stability through the short-term, what steps do you need to take to harvest your core markets and to make sure you’re poised for long- rather than short-term growth?
Contact us to learn more.