In this episode, Steven Mario Cavallo discusses business growth.
Growth is a broad concept that encompasses many aspects. Growth can refer to an increase in revenue, an increase in distribution, and increase in market share, an increase in a brand’s salience and an increase in products or services. Each of these can increase or decrease independent of the other. Furthermore, profitability moves independent to each of these also.
Growth Strategies
If the company is new, then it has the advantage of being able to start with a clean slate. It is assumed it has no heavy investments that encumber it from freely choosing any market opportunity. In this case, the word is its oyster and it ought to adopt the marketing approach to business strategy. If the company is already established, then it can pursue growth a number of possible ways (via distribution & innovation):
- Sell its existing products to more customers (i.e. find new customers in existing market with existing products); greater market share
- Sell more of its existing products to its existing customers (i.e. get each of your current customers to buy more – increase share of wallet); greater market penetration
- Sell your existing products in a new market (i.e. same products, new customers, different market)
- Develop a new product to sell to existing customers (i.e. existing market, existing customers, but new product); e.g. Apple creates new a case for its iPhone that does something that third party cases can’t
- Develop new products to sell to new customers in new markets (akin to a start up business with a clean slate) and represents true diversification. E.g. when Apple invented the iPhone it sold to a much larger market than expensive Macs sell to.
Innovation and Entrepreneurship
Innovation requires a long-term commitment to invest in a culture where people are encouraged to do research and experimentation. A corporate environment that is conducive to creativity and allows new ideas to develop is essential.
- Commitment by top management
- Commitment of money specifically budgeted.
- Commitment of time scheduled for innovation.
- Acceptance of risk.
- Tolerance of dead ends and some mistakes.
- Availability of help and support for those doing innovation.
- Reward for those who put effort into ideas and experiments
- Never allow people to feel like there is no use sharing their ideas or there is animosity toward them
- Flatter organisational structures help promote the communication of innovations
- Actively garner suggestions and involvement in the innovation process by all staff, right down to the least senior person.
- (story of lights turned off at robotic car factory…nobody ever asked him before!)
- the idea of internal entrepreneurship and ownership of projects.
Mentality and Attitude
This is about the organisational culture of the individuals within a company. It is those people that comprise the living system within an otherwise inanimate structure. This is strongly linked with the leadership and the attitudinal behaviours and the mental stance those leaders convey to their people. If small mindedness, short sightedness, ego, self-preservation, lack of ambition and avoidance of acknowledging the ‘elephant in the room’ are inherent in an organisation’s leadership, then there could barely be any hope or reason for innovation to sprout forth from the most creative and entrepreneurial thinking people in that organisation.
What is required is a strong example of a leader(s) directing all their people into forward motion and that the natural expectation is that all are encouraged and expected to contribute to the evolution of the business and that the only acceptable belief is that ‘we will…somehow’. In an environment where everyone belongs to a team mentality, where both wins and worthwhile losses are celebrated, assuming sound recruiting delivered a group of good people that want to create good works; then a fertile basis exists for significant innovation. organisation that enjoy such a rich human asset with a fervent mentality is able to make the most use of advanced thinking methods such as lateral thinking (by Dr Edward DeBono) and 10x thinking, the incredible higher-order thinking skill developed by Dr Michael Hewitt-Gleeson and famously used to build billion dollar companies like Google, General Electric and the Commonwealth Bank. I was lucky enough to have breakfast with Dr Michael Hewitt-Gleeson a few days ago and to record an amazing interview with him. You will hear that interview in this episode. Michael founded the internationally acclaimed School of Thinking in Melbourne and his 10x Thinking has been instrumental in producing prodigious innovation and metacognition in many of the world’s foremost leaders from companies such as IBM, Fujitsu, Coca Cola, the ABC, Vodafone, Saatchi and Saatchi, the University of New York and the Australian Department of Defence; including Jack Welsh and Larry Page.
Leadership Psychology and Change Management
Of course, almost all organisations do not already possess the ideal organisational culture or perhaps its leadership strength can be further developed so to eclipse the market potential of its competitors. It is normal then for companies to fortify their capacity with some form of group dynamic audit to pinpoint exactly where your organisation is weak and where it is strong, in respect to its ability to disrupt its market with game-changing innovation. I strongly recommend every listener to visit the website gamechanging.com as this is one of the world’s best resources to empower you to invent the next iPhone!
What about real-world managerial practises? Here are some of the strategic actions and instruments that will help your business grow.
Market Intelligence
Actively seek information that gives you clues as to what the market wants as this is where the commercial opportunities lay.
- Constantly listen to the stories and complaints of your frontline sales staff as they have the closest feedback on what buyers want.
- Survey every customer wherever possible to gain free intelligence on how to improve.
- Invest in formal market research to collect both qualitative and quantitative data
- Test ideas by doing small releases of prototypes to assess viability of innovations
New Product Development Of Physical Goods And Intangible Services.
The core product: the need or want that the customer satisfies by making the purchase. The customer isn’t buying a drill bit; they are buying a hole in the wall. Charles Revlon said it best, “in our factory we make cosmetics; in our shop we sell hope”.
The tangible product: this is the core benefit transformed into something that buyers can buy; consisting of features, styling quality, branding and packaging etc. A European holidays operator that takes young people from English-speaking countries on organised coach tours satisfies those buyers’ needs for excitement, adventure, culture, convenience, security and the hope of romance.
Marketing Engineering
Quantitative marketing analysis uses mathematical models to help determine the potential of a market by analysing how your proposed new product or service will likely perform commercially in that market, by considering your inputs (e.g. product design, advertising, sales effort) as they compete in the present environmental conditions and competitor actions; to predict likely market outputs you can observe such as sales levels, brand awareness and customer preferences. The practise of running such simulations helps in the product development process as it provides useful research to evaluate whether your plans for growth will satisfy your business objectives, or whether more development is necessary, or indeed if the idea ought to be abandoned. Using this form of marketing intelligence before committing significant monies to manufacturing, advertising or the building of distributors; not only saves enormous amounts of money, but informs the development of a much better product that more closely corresponds to buyers’ needs and as such, dramatically increases the commercial success of the new product or service.
Market Response At The Level Of The Market Place.
These focus on aggregate response and track market-wide qualities such as brand sales or market share. One very common equation used to predict the response to advertising and selling effort is the ADBUG Model as it produces an S shaped curve that simultaneously adjusts for three common phenomena inherent in markets: output is zero when input is zero; diminishing returns; and output is limited to saturation point.
Market Response At The Level Of The Individual Buyer.
Markets are comprised of individuals and we can analyse the response behaviours of those individuals. The information can be used directly to describe specific segments, or it can be aggregated to represent the market as a whole. Examples of sources of this information is scanner data from supermarkets (used to track individuals within a database) and direct marketing purchases from individuals that responds to online or traditional mail campaigns. The statistical methods used to capture individual responses return information about purchase probability. Purchase probability at the individual level is equivalent to market share at the market level. Mathematical models that measure purchase probability feature a denominator that represents all the competing brands in a market that the buyer is willing to consider at each purchase decision. This is not all the brands in the market, just those in the buyer’s consideration set.
Forecasting Sales of New Products
Once the best possible product is developed and a thorough understanding of the costs of producing that product or service is reached, then a company next needs as accurate a forecast of sales as can be determined. Any attainment of short-term profits and long-term planning rests on the ability of that new offering to realise sales revenue. One of the best tools marketing science to predict the sales of new products is the Bass Model and this is the equation taught in some of the best Universities of the world within the Bachelor marketing degree. It was the superb work of Professor Frank Bass in the area of product and innovation diffusion that lead to the differential equation called the Bass Diffusion Model that mathematically predicts with a high degree of accuracy the sales of a new product or service in a population. It works just as well for large businesses (i.e. Microsoft famously used this formula when accurately forecasting sales of Windows XP over the previous generation of Windows) and it works just as well for small businesses.
Interview with Dr Michael Hewitt-Gleeson cofounder with Edward DeBono (Six Thinking Hats) and the father of 10x thinking (mentor and teacher of Jack Walsh of General Electric and Larry Page of Google and Alphabet). Michael shares insights on how to become a game changing enterprise and industry leader at a global scale.
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