Thanks to near commoditization of B2C and B2B business services through millions of apps and applications, ‘Growth’ has become a cliché yet important word. Welcome to the glory days of Growth-Hacker, Growth-Marketer …. Growth-Everything! What does this mean from a product perspective? If you are an early stage company with constrained resources, how do you optimize for this given the tradeoffs? At the other end of the spectrum, if you are in an old-school commoditized industry looking to grow – is price cutting the only option?
As a first step, it helps to define “Growth”. What is growth – revenue, profit, users, customers, market share, valuation, all of the above? Growth in my mind is increase in customers and increase in sales. The rest intuitively tie into customers & sales. I am a huge fan of Ansoff matrix since it is simple and powerful. This is a great starting point from which we can look at what growth means for the different players in different situations.
Market Penetration
Essentially squeezing more out of your current market and product. As unexciting as this option seems on the surface this could be the reality in quite a few situations – an early startup looking to grow in its beachhead market, a company in a mature market looking to drive out its competition, a growing company looking to dominate its current market. This is also the least risky option because you know the market and the competition, plus the investment required to execute this is also less.
Some of the things you can do
- Targeted advertising
- Sales promotion
- Price Cuts
- Increase sales staff
- Loyalty programs
- Cross-Sell & Up-Sell to current customers
- Incremental product innovations
- Enhance product’s value drivers and create marketing assets
This is ideal when
- You are a cash strapped startup with a product and recently entered a market
- You are a growth stage startup in a current market with other players
- You are a mature “cashflow” business looking to increase revenue with less risks/investments
Market Development
Here we take an existing product and introduce this into a new market. New market is either a new geographical market (Amazon entering India) or a new segment within current geography (Gmail for enterprise). This is my second favorite among the 4 – exciting to look at the new market opportunities albeit limitations of minimal product changes. Generally speaking it is best to start market development only when your product is already established in current market (exception: early stage startup looking for initial customers).
Some of the things you can do
- Identify/create new market segments
- New pricing policies
- Product value drivers for the new customer segment
- Quantify customer value prop (Eg: “Use our new SaaS based sales tool and save $X/month”)
- Incremental product tweaks catering to new market
- Find new sales/distribution channels
This is ideal when
- You are an early stage startup looking to find your first/second customer
- You are a growth stage startup or a large company moving into a new market/segment with same product
Product Development
Traditionally done a lot by automobile or consumer electronics companies as a core strategy. This is my least favorite among the 4 because this is also the most abused. Companies abuse this option because of founder bias (only engineering-centric approach in an early stage startup), sheer cluelessness (“not sure what else to do so lets just build new stuff” – Nokia phones in 2006), or an outdated approach (“build it and they will come”). Building a new product takes immense time & effort but it can be a powerful strategic asset if done at the right time for the right market. It can also be a sink hole if done at the wrong stage.
How excited are you about this (hypothetical) new 7-blade razor that probably has a vibrate button, an LED light and may play a Michael Jackson song when you shave, as a new product to build/market? – not that excited I bet!
Some of the things you can do
- Create a market driven development process
- Do not over-engineer – do just enough and iterate with market inputs
- Identify additional value new product drives in current market
- Cross-sell (if applicable) new and old products thru packaging or price bundling
- Continuously track growth metrics due to new product (thus the ROI)
This is ideal when
- You have more technology obsolescence in your industry leading to constant product re-development (automobile or consumer electronics)
- You are a large firm with enough cash runway and have done all due diligence for a brand new product
- You are an early stage startup and are desperate to pivot (be absolutely certain)
- You are a growing startup with product in current & new markets looking to make horizontal expansion
Diversification
Building a new product for a completely new market (Facebook Aquila). This is my most favorite among the 4 simply due to the sheer excitement of working on something that is at a 2nd or 3rd horizon of innovation. This typically involves moonshot ideas or transformational innovations that are (tenuously) tied to business goals 4+ quarters away (equivalent of working in business version of la-la land in plain English).
Some of the things you can do
- Ensure you have strong knowledge capital in the team
- You are tempted to “Go to town” with the new product but temper it with assessing needs of the new product
- Related to above – ensure a combination of market driven & innovation driven development process
- Create enough marketing content (and thus eventual brand equity)
- If horizontal expansion – make use of current channels for cross-selling
This is ideal when
- You are a large company contemplating horizontal expansion to augment current offerings
- You are an early/growth stage startup with strong IPs to ensure first mover advantage, and a solid team
While the above points are not comprehensive, they should give a general idea on which approach to take when. Take into account long term strategy, time, and execution risk when choosing a path, decisions without these risk being pie in the sky ideas.
Happy growing!