What Are The Four Major Growth Strategies – Despite what many people think, a comprehensive growth strategy is not just about getting more customers and selling more stuff. I mean, getting customers is very important, but there is more to it
If what you’re looking for is to learn about different ways to target more customers and grow your existing business, I highly recommend downloading your free copy of my book.
What Are The Four Major Growth Strategies
, where I explain how established companies and startups are using artificial intelligence and other technologies in their sales goals.
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But if you’re looking for a comprehensive strategic growth plan, then you’re on the right page, so read on.
As we explained in the principles of business strategy, the first order of business for any executive is to control the core business, which is to ensure that the products and services of the business fulfill a profitable and profitable market position.
Once you have achieved this, you can focus on growth and think of ways to increase the value of your business in the near future.
In an ideal world, we would expect managers to only pursue growth initiatives that are beneficial to their organization, but in reality, we’ve all seen how pressure from demanding shareholders and investors and the wrong incentives can sometimes bring a company down. achieve growth
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In general, we say that a development strategy is comprehensive if the following set of conditions are met:
Therefore, you should pay close attention to the “costs” (both financial and non-financial) of your development efforts and how sustainable you expect these efforts to be in the long run.
In this article, we will look at different ways to grow any business and offer some ideas to help you create your own growth plan. Here are some of the things we cover:
We’ve included charts, links, and other links to help you understand what a good growth strategy looks like. We’ve also created a mind map with all the growth options we’ll discuss that you can download and bookmark as you go through this article.
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This mind map is also a visual representation of the strategic choices you must make as a business leader when developing a new growth strategy.
) or “Cash Flow” (commonly referred to as FCF), concepts we discuss in more detail in our Financial Analysis section.
It’s up to you as a business leader to consider how this list applies to your organization and decide which ways you believe will have the most impact.
Your collection of handpicked solutions is the heart of your growth strategy, along with your strategic deployment plan and execution system, giving you everything you need to succeed in developing and implementing your organization’s strategy.
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While a growth strategy can generally be described as a set of business initiatives aimed at improving a company’s bottom line, I prefer to speak of an executive plan.
Organizational growth, which includes initiatives chosen by the executive team to maximize value in the near future.
Not all development paths affect the business in the same way, so you need to limit the universe of initiatives.
Go for the one that has the most impact in a given period, with the least amount of effort and resources.
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Therefore, your development plan must be strategic in nature, because after all, the company does not have unlimited resources or management bandwidth to pursue all the opportunities presented to it, so you must carefully choose those that you can focus your attention and resources on. sorry . .
This translates into a growth plan that seeks to do more, improve it, and find new ways to create value, resulting in a synergistic and balanced approach to growth.
I have found this classification useful in explaining sources of growth in management meetings and making better resource allocation decisions.
But beyond categorizing growth opportunities, the more fundamental challenge you often face is choosing which growth initiatives you should focus your energy on.
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The best way to start a growth plan is to calculate the growth “gap” we need to fill with new business.
For example, say you are planning your strategy for the next five years and your goal is to grow 15% per year. If you expect your operating business to generate $100 million in net income this year and expect to grow 9 percent per year, you can easily calculate the types of revenue your new business should generate each year. .
Having a profit gap number will help you better understand the type of growth initiative you should pursue.
For example, in the above scenario, you know that the growth strategy initiatives you are choosing must generate $47 million in net profit by the end of five years, which helps you prioritize and streamline your choices.
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A good way to drive actionable initiatives is to follow each of the growth paths we mentioned earlier by asking simple questions like:
Ideas that show the most potential can then be further developed to determine the types of income they can generate, the level of investment required, the partnerships and capabilities that need to be built, etc.
There is no perfect approach to selecting strategic growth opportunities, as the choice must be consistent with the company’s various priorities (including revenue) and current strategic goals.
Our recommendation is to choose some of the most important investment parameters for your company (such as net profit, required investment, revenue, inventory preferences or simply for strategic reasons), then start with initiatives that promise to “fill the growth gap” fill up”. the best until the gap is closed in these parameters.
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In an ideal situation, you want to have a balanced growth strategy of all three McKinsey buckets (expansions, creations and optimizations), but in reality, you probably have a strong bias towards a certain category, based on your foundation. strategic goals that are currently dominant and this is good in our experience.
The next step is to work on your 5-year template, which is the subject of the next chapter.
A mentality where you try to maximize the value of the portfolio as a whole over a period of time, usually five years.
This gives you a 5-year growth template that helps you better balance efforts across different business units and make better capital allocation decisions.
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Putting all your eggs in one basket is always a risk, and while it’s true that many companies have made big bets on new products and technologies, there’s a difference between betting “big” and going “all in” with a growth initiative. .
Your development initiative in multiple markets, business units or products that may be launched at different times in the future.
By creating a map like this, you can easily track all the opportunities in your channel and better balance resources in each of them.
You won’t be able to get the most out of each effort until you know how much it contributes to your company’s growth. You know when Peter Drucker said:
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If you understand how each business unit, product, or optimization practice contributes to your company’s growth, you can iterate on what works, identify what doesn’t, and find opportunities for improvement.
, created by Michael Tracy and Jim Sims, which allows you to create a beautiful waterfall that shows how your income is distributed over a period of time, which is great for measuring growth efforts and reallocating resources. is useful.
We describe this tool in detail in the book, where we provide a step-by-step process for creating a waterfall.
You can do a similar breakdown of profit or net income if you have enough data to break down expenses and split some accounts, but this sales statement can give us a good starting point to understand our profit.
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A mentality in which you seek to maximize the strategic growth of the portfolio as a whole over time.
This helps you better balance efforts between different business units and make better capital allocation decisions for a better growth strategy.
You can do this by placing business units in a four-by-four matrix based on their competitiveness and strategic growth potential in their respective markets.
It was introduced by the Boston Consulting Group (BCG) in its early days, where we use competitiveness and market potential as proxies for the underlying dimensions.
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Following the BCG naming convention for each quadrant, we can define each business unit as one of the following:
To choose the location of each company in the matrix, you can evaluate its competitiveness based on the ability to protect a profitable position.
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