"Growth is the elusive goal at the
top of everyone's agenda. "
Ram Charan, authors of Profitable Growth is Everyone's Business
There are three reasons why the profitable growth that everyone aspires to is proving difficult to achieve.
First, the balance has gone too far in the direction of cost-cutting at the expense of revenue growth. More thought and time have been given to tools like Six Sigma and actions like restructuring, achieving size through acquisition, and looking for opportunities to consolidate in an industry undergoing upheaval than to revenue growth.
Second, when most managers do think about growth, it is in terms of home runs — the disruptive technology, the new revolutionary business model, the mega-merger — instead of the singles and doubles that, when executed at a steady pace, cumulatively can increase revenues substantially.
Third, improving productivity and increasing revenues are seen as two separate issues, when they are, in fact, inseparable for long-term success. If executives concentrate only on raising productivity, they are doing only half their job.
Penetrating Markets, both old and new, to create profitable growth is not magic. In fact, it is more science than art. And the science of profitable growth can be learned by you and your organization.
Penetrating Markets Demands that You ...
- Make profitable revenue growth everyone's business
- Turn the idea of productivity on its head by increasing revenue productivity
- Master the science of penetrating markets to secure profitable growth
We Can Help
If you are struggling to achieve an acceptable level of profitable growth, we can help. Our associates have worked with organizations across the business spectrum. We have the tools, experience and expertise to help your team identify the most profitable market opportunities currently available. We can research potential products, services and/or markets, or we can work exclusively with internally-available data. We can develop powerful Product/Market Matrices for your business, or we can facilitate and guide your internal analysts as they work through the mechanics of this important tool for the first time. Since our goal is to see you succeed in the marketplace, we will use whatever combination of Catalyst and client resources makes sense — and fits your budget and timeline.
If you're concerned with your current success at penetrating markets — profitably — please give us a call for a free telephone consultation regarding how we might be able to help. We certainly don't know more about your business or your industry than you do, but our associates do know how to help organizations to achieve more than they thought possible.
You may also want to peruse our pre-packaged workshop and seminars; you may find just the tool you're looking for to help you and your team learn more about profitably penetrating markets. And if you are considering growth through mergers and acquisitions, visit our Organizations that Work™ page to explore how we can help you beat the M & A odds.
The Science of Profitable Growth
The Product / Market Matrix
The Product/Market (or Product/Channel, Product/Customer, etc.) Matrix provides a convenient tool for displaying and analyzing the relationships between your firm's existing products and existing markets (i.e., existing business), existing products and potential markets (i.e., growth potential from market extensions), potential products and existing markets (i.e., growth potential from product extensions and new product development) and, finally, potential products and potential markets (i.e., the most challenging and risky growth path for most companies). It forces you to segment both your product portfolio and your markets in meaningful ways, and then to evaluate each "cell" in the matrix. In essence, the Product/market Matrix provides a means of developing a common language for discussing profitable growth and the strategic alternatives to achieve that growth. The Matrix becomes your strategic chessboard.
We have found that the "simple" act of agreeing on what product and market segmentation to use in this analysis can extremely powerful. In some businesses, it the first time that sales, marketing, operations, accounting and the executive team have taken the time to develop consensus around how to define the company's competitive landscape.
The Battle for Market Share
Each "cell" in the Matrix provides a glimpse into the competitive dynamics of a particular product in a particular market. In the majority of industries, these dynamics vary significantly from "cell" to "cell." For example, the challenges of selling hand tools via the Home Center channel (e.g., The Home Depot) differ substantially from those of offering hand tools as promotional items via the National Grocery channel (e.g., Kroger). The Matrix can capture a representation of those differences in a way that aids your decision making.
When systematically codified, the information in each cell can be used to assess current market size, growth rate and average margin characteristics, competitor intensity, etc. When you overlay your current and planned sales in each cell, you quickly arrive at your company's current market share of a particular product (or product segment) in a specific market. This admittedly data-intensive step in the process often yields "aha" moments for your company's managers; they frequently find that they are operating with outdated assumptions about the "way things are." Basing resource allocation decisions based on "conventional assumptions" is fraught with financial risk.
Prioritizing Growth Opportunities
The market characteristics of a particular product/market combination (e.g., existing market size, expected margins, rate of growth, etc.) can be compared to that of other "cells" to start to get a feel for where your business should be investing more resources — and where you should be scaling back or exiting a market all together. When thoughtfully developed, the Matrix provides a clear roadmap to profitable growth.
Once your Product/Market Matrix is populated with current and anticipated market characteristics cell-by-cell, company leaders can develop resource allocation plan that, among other things: highlights market growth opportunities that warrant new product development efforts; prioritizes the order in which new channels/customers/markets should be pursued; identifies existing products and/or markets that should be "harvested;" and, raises questions about the long-term viability of some product/market combinations.
Developing Your Growth Plan
The Product/Market Matrix provides a simple, yet powerful, framework for developing a meaningful, fact-based, growth plan. And it provides an effective tool for communicating the market-based action steps necessary to achieve that growth plan. Borrowing from Ram Chanan's analogy, the Matrix helps you focus on the "singles and doubles" that will sustain your organization's growth well into the future.
Every business has momentum, albeit positive or negative. Think of the "Business as Usual" case as the market position your firm is likely to enjoy (or suffer) at some specified time in the future (often 3 years out), given the current path you are on.
The challenge that Catalyst can bring into focus for you and you management team is how you can dramatically improve your companies future market position. Our processes, tools, and experience — coupled with your team's knowledge of your industry and marketplace — is a winning combination that create real value for your business.
Call us today to learn more about our Penetrating Markets process.
