Growing Your Business in Times of Disruption

There are many growth strategies a company can pursue with some being more successful than others. One of the most common strategies companies pursue is trying to grow their core market. The thinking goes that it’s easier to get your next dollar from an existing customer. However, an eye-opening analysis by McKinsey revealed a different picture. According to a McKinsey analysis of over 200 companies, the major components of growth are choice of markets, M&A, and core market growth. The surprising finding is that choice of markets and M&A represents 80% of growth, whereas trying to grow your core business only accounts for 20% of growth.

Driving growth in your core market is important, but during times like these with the coronavirus pandemic-induced recession, you’re going to have to do more than focus on your core market. This is especially true if your core is being severely impacted.

That’s where adjacent market growth opportunities can come into play. According to Chris Zook’s book “Beyond the Core”, individual companies with a rigorous, disciplined process for finding and evaluating adjacent market opportunities have achieved success rates as high as 60% and more. The key to success is a rigorous, disciplined approach. Without such an approach the success rate drops to around 25%. Let’s look at an example of a disciplined approach that yielded great results.

A Real-Life Example

 

A precision wire manufacturer’s market was being disrupted by cheap overseas competitors. The company had focused almost exclusively on one market and that market was quickly leaving the U.S. They needed to find new markets to expand into quickly. They had a unique method of manufacturing wire that produced more precision wire with better surface properties than competitive pultruded wire. The company needed to find new applications that required or would benefit from these improved wire characteristics. They came to ENGINE for help.

Using a proven method we have used with great success multiple times, we worked with this client to understand the most important features and benefits of their wire (that creates their unique value proposition) and matched that with needs in other attractive markets. This proven method involves the following key components:

  • Developing a clear understanding of the real value proposition offered by the current product or service, i.e., its competitive advantage.
  • A quick, reliable method of identifying people with subject matter expertise in other markets/applications that can make the connection between the value proposition and other markets/applications that need or would benefit from it.
  • A defined, repeatable way of evaluating opportunities that are discovered including the key metrics to be used for evaluation.

We worked closely with the company’s key stakeholders to understand their product’s value proposition and boiled it down to the salient points of value for customers. We crafted that into a concise brief highlighting the key benefits, features and advantages of the company’s wire and their associated services. This isn’t a sales piece meant to persuade. This is a statement of facts with any necessary illustrations, tables, and charts to convey the competitive advantage.

Through brainstorming and research, we identified a host of different applications where precision wire is used and needed. You must cast a wide net to ensure you capture the best possible opportunities. We identified applications from superconducting wire to vena cava filters to electric motors to wire wound resistors and many more. These potential application/market ideas are used to identify subject matter experts who can direct you to the most promising areas where your product’s or technology’s unique value proposition will have a competitive advantage. Having a well-written brief is critical. If you can’t clearly convey the advantages of your solution, then experts won’t easily be able to recommend the most attractive opportunities.

Experts can short cut the process of finding new growth opportunities.

Having a quick, reliable method of identifying subject matter experts is critical. You need to contact enough experts to see where the recommendations converge. This is not the time to be penny wise and pound foolish but finding individuals with specific expertise can be a time consuming and costly exercise. That is why it is so important to have a quick, reliable method of finding such people – so you can move quickly to action and keep budgets realistic. ENGINE can do this step with speed and affordability by using our proprietary panel of experts, futurists, and thought leaders.

Gathering insight from experts can be done in several ways just like gathering insight from consumers, e.g., interviews, focus groups, surveys. We have found the most effective methods, in terms of insights and costs, are in-depth interviews and surveys. There are trade-offs between the two.

Surveys can reach a broader group of experts, which uncovers more potential opportunities and provides more convergence on the best opportunities. Surveys can be done quickly and cost-effectively if you have access to a good panel of experts.

On the other hand, in-depth interviews (IDIs) provide much more insight into potential opportunities enabling a better assessment of their value. From IDIs you’ll learn not only about the opportunity fit but also deep insight into competitive solutions, competitors, customers and their needs, channels, the right type of customer contacts, and other details you’ll need to effectively pursue an opportunity. You can’t ask about all those details in a 15-minute survey like you can in a 60-minute interview. People get “survey fatigue” at around 15 minutes.

Once you know the applications where your product or technology will have a competitive advantage you need to evaluate the opportunities. There are several elements that need to be considered including the market, competitors, and customers.

Market

 

  • Is the market large enough to support your entry if you can only capture a small portion of it? What is that size?
  • Is the market growing robustly enough to be of interest so you can ride the growth wave?

Competitors

 

  • Who are the competitors?
  • What are they offering and what is their value proposition?
  • What level of profitability are competitors achieving? What infrastructure do they have in place to achieve that profitability? Will you require similar infrastructure?
  • What is competitive pricing in the market?

Customers

 

  • What are their specific needs, challenges, and goals?
  • Will customers believe that your brand can extend into this market?

Using ENGINE’s broad access to published sources of research and business information, competitive and customer interviews, and our frameworks for market sizing and competitive analysis, we were able to answer all these questions for the wire company.

We ended up identifying 20 different new opportunities where the company’s wire had a competitive advantage. From preliminary research into the markets, we narrowed down the list to bandsaw blades, automotive wiring harnesses, orthodontic wire, catheters and stents, and eyeglass frames. Deep dive research was conducted on these five areas and the company decided to pursue opportunities in steerable catheters and band saw blades. The company had great success in the medical market. After having established themselves in the medical market they came back to repeat the process again to identify further applications in the medical industry.

Without the rigorous approach to research and a disciplined evaluation process, it’s unlikely this company would have found the right markets to pursue, basically a 1 in 4 chance according to Zook’s statistics. This approach not only connects the best matches of solution to need but also the most attractive opportunities and how to pursue them.

Are you interested in learning more about achieving sustainable growth through adjacent markets? Watch our recent webinar recording to take a deeper dive into this topic. Or, contact us to get started!

Written by Brian Reuter, Senior Vice President of ENGINE’s Accelerated Intelligence Service and Expert ENGINE.

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