|The Growth Opportunities Hidden Under Your Nose (Part 1)|
Over the past year I have undertaken several client projects where we have uncovered new growth opportunities that were previously hidden within existing core business activities.
At one retail client, for example, we were able to drive 10% growth in an in-store trial by reallocating space from less productive product categories to a fast-growing, profitable but under-resourced category.
At another client, I helped the business owners better understand the size and profitability of a market - and therefore the opportunities for growth - that the business already participated in but had previously under-valued.
Why is it so difficult for managers to see these opportunities? I believe there are five key reasons why identifying and pursuing these new areas of growth is more elusive than you might expect:
- Unchallenged assumptions and beliefs about your business. In the retail example, above, the retailer had been influenced by some of its key suppliers to focus on certain areas that were, unsurprisingly, where they were strongest. The high growth category did not have a dominant supplier, so the retailer did not receive any advice to invest in that area, and the team's assumptions and beliefs were shaped accordingly. It was only when the management team and I did our own analysis that the opportunity became apparent.
- The burden of day-to-day operations. It is difficult in many organsiations to take the time to properly review and assess new growth opportunities. These reviews not only rely on internal analysis (e.g. financial performance and productivities, operational results etc.) but also external analysis (e.g. customer needs and preferences, market analysis), and most managers are too busy to make this happen. The need to deliver this week's, next week's and upcoming weeks' targets can divert your attention away from what's required to grow the business: the urgent trumps the important.
- Too much planning, too little strategy. Where you do get chance to think about the future performance of your business it is typically done as part of a planning process. Planning leads to incremental thinking: you are immediately working out how to improve sales and profits by 3%, 5% or 10% that you neglect to consider what kind of business you're trying to build and how you could generate growth of 20% or more.
- The attraction of the new. In some businesses, particularly in highly entrepreneurial organisations as well as under-performing businesses that are looking for 'silver bullet' ideas for growth, the leaders of the business can become distracted by the search for exciting new ideas at the expense of making the most of their companies' existing activities. In the early 2000s, when the company was under the threat of a hostile takeover from Philip Green of BHS, the management of the UK retailer M&S spent millions on developing exciting new store concepts, such as the ill-fated M&S Lifestore, rather than focusing on its core business. It took a new CEO, Stuart Rose, to spot and pursue the potential in the existing business as the key route to growth.
- An absence of a simple framework to assess these opportunities. Finally, managers don't have the tools to do the job. As a result, the work feels complex, difficult and burdensome. But that need not necessarily be the case. In the work I do with my clients, we use a handful of simple tools to identify where to grow and to prioritise the list of opportunities we create.
Not all of your company's new growth needs to come from new ideas and radical innovation. Instead it can come from a refocus of your existing activities and operations. In next month's article I'll share with you a framework and tool I use to better identify and develop the priorities for growth that are hidden under your nose.