by Mark Brigman
The brothers, Roy and Ryan Seiders, found a reasonably well-built cooler that was made in Thailand. The cooler seemed to be close to what they had in mind, but not exactly. The brothers had new ideas for design and added functionality. After some tinkering and prototyping, Yeti was born. They designed a cooler that could keep ice for days, hold a 300-pound person, and lock so tight it was grizzly proof. In 2006, they slowly began to sell the reinforced coolers at tradeshows near Austin, Texas, their hometown. The major challenge was selling coolers for 10x their standard market price. Wal-Mart offered Igloo and Coleman coolers for $30. The lowest priced Yeti coolers were over $300. Rather than focus on price the brothers decided to focus on value and differentiation. They did not see the standard Wal-Mart coolers as their competition.
The brothers felt sure that other hardcore outdoorsmen would see the value in having a sturdy cooler that was exponentially better than everything else on the market. Apparently they were right. According to Inc. Magazine, Yeti’s 2015 revenues were nearly $470 million and their 3-year growth rate was 748%. The Seiders brothers took a commodity product (cooler) and infused some innovation to create an entirely new market of premium coolers. Today, customers can buy soft-sided coolers and aluminum tumblers that also keep ice for nearly a full day.
For Yeti, the first growth engine was a grizzly proof cooler, their second growth engine was the soft-sided “Hopper,” and their latest growth engine is a series of aluminum drinking cups. Product innovation is in their company’s culture. They are constantly looking for ways to bring additional value to their market. Rather than trying to be the low cost provider, Yeti takes the opposite approach. They focus on value and a strong, trusted brand. So, what is Yeti’s next growth engine? Their product development team is working on a line of bottle openers that promise to be fan favorites.
Best Opportunities for Growth
First things first, we must ask ourselves if we are committed to growing our business. Hopefully this answer is yes! Otherwise, you are wasting a lot of valuable time reading this book. Besides, if your organization is not committed to growing, even growing incrementally, you better hope you are on the brink of retirement. The mere mentality of the status quo and stagnation will kill a company culture. If you are not trying to grow, then you are waiting to die.
Success in business is an attitude, some swagger. If you are not playing offense (trying to grow), your company will start to lose its identity and its value will soon follow. I admit, I love working with business leaders who want to aggressively grow. I do realize, however, that exponential growth strategies require resources and, sometimes, these resources simply are not available. In these cases, your best bet is to execute a plan for incremental growth. But never accept the defeatist road of a zero-growth approach.
Consider the following business growth illustration. This image depicts the series of choices that business leaders have to make as they determine their strategies for growth. Only focus on the elements up to the “Research Phase” at this point. The remaining parts of the illustration will be covered later in this section.
After you commit to growing, you need to decide if you are going to “go big or go home.” That is, are we going to stretch ourselves and go for exponential growth or settle for incremental only? Remember, the incremental path is a given, it is the core of our business that provides monthly revenues that feed the machine. If our commitment is only incremental growth, then our approach is to simply sell the products and services that are currently being offered and/or work to become more efficient and reduce our costs. In the short-run minor enhancements can be made to our products and/or services, but it is unlikely that such changes will enable exponential growth.
When executing an incremental growth strategy, you are essentially telling your product (or service) development team to maintain the current offering(s) and only add or enhance the product by small increments, at best. You are further instructing your marketing teams to execute the marketing strategy to the existing pool of current and potential clients without deploying any significant efforts to substantially grow your base of potential sales targets. Finally, you are instructing your sales team to sell the products that are on the shelves and the opportunity for product differentiation from the previous year is virtually zero. Again, this approach is sometimes necessary for a host of reasons, but it comes with dangers. A perpetual strategy of incremental growth signals a serious lack of innovation, creativity, confidence, awareness, and inspiration. None of these qualities are attractive to customers, employees, or investors.
If your company has the wherewithal to execute an exponential growth strategy, employees will be inspired, customers will build loyalty, investors will take notice, and competitors will grow fearful. Now it comes down to execution—it always does. If you dare to put exponential growth in your crosshairs, you can develop strategies that could incorporate many powerful weapons. As previously discussed, the vast majority of our opportunities for exponential growth will come in the marketing and product development lanes, as opposed to business operations. Nevertheless, an opportunity exists for that segment as well.
Exponential growth means that we need to find our next growth engine,—your market’s next “killer app.” When I say killer app, I do mean application, but not necessarily software application. As a matter of fact, your growth machine will most likely not be software. It may be the innovative product, service, feature, integration, customer base, technology, or information source that allows you to create a competitive advantage.
The vast majority of exponential growth strategies require a long-term approach. That is, exponential growth approaches generally take one- to-two years to identify, create, implement, and begin to realize the significant gains. This fact is critically important to consider because the proper resources must be committed to enable success. Otherwise, aborting your growth engine initiative halfway through will not only be fruitless, it will cost you valuable resources that will bear little to no value to your company, your partner, or your customers.
Having a commitment for exponential growth is the first step, but then you need to determine “how.” What is your growth engine? Sometimes we need a little help in asking all of the right questions to facilitate this very important process. If you are unsure what your best growth engines are, I have a valuable toolset to share!
As you evaluate your company’s best path for growth, I recommend that you use three different tools to foster your evaluation: SWOT (strengths, weaknesses, opportunities, threats) analysis, Constraints Model, and 6-Cs framework. My hope is that these three tools will give you the ability to triangulate growth opportunities for your business so you can more effectively identity and prioritize your next growth engine(s). This approach will not only help your team identify new growth engines, but it will help you validate the current growth engines that you may be executing.
SWOT Analysis
The SWOT Analysis framework offers a simple, yet insightful way to think about the current health of a business. There are many worksheets and tools available for download that will help your team facilitate a SWOT analysis on your company.
The acronym SWOT represents four categories of pros or cons that must be considered within your company: strengths, weaknesses, opportunities, and threats. “Strengths” identifies the assets or capabilities that give your company an advantage over other organizations. “Weaknesses” identifies the shortcomings that put your company at a disadvantage relative to other companies. “Opportunities” denotes potential areas in your industry that your company may exploit in order to develop a new strength. “Threats” identifies potentially harmful elements in your industry, or the economy in general, that could cause harm to your company’s ability to compete.
Strengths
Weaknesses
Internal
A
B
C
A
B
C
Opportunities
Threats
External
A
B
C
A
B
C
The SWOT framework is intended for the strengths and weaknesses evaluation to be internally focused and the opportunities and threats are externally focused. As you complete a SWOT analysis for your company, be mindful of potential partnerships that may be born within each element. For each positive that your company has (strength and opportunity) your company may be a partner fit for another firm and for each negative you discover (weakness and threat) a partnering company may be able to strengthen your competitive position.
Evaluating Growth Constraints
In his 1984 book The Goal, Eliyahu Goldratt introduces the “theory of constraints” to offer a framework to help business leaders continually growth their business. The theory of constraints suggests that a company’s ability to grow revenues is dependent upon its ability to identify and remove constraints within its end-to-end system. Goldratt defines a constraint as anything, internal or external to the company, that prevents the company from achieving its goal [profit growth].
The theory of constraints uses the analogy of a chain to illustrate that a company’s ability to grow revenues (pull more weight with a chain) is limited by the chain’s weakest link. Goldratt contends that rather than having dozens of constraints, any company has only one or two true constraints at any given time. As employees identify and eliminate each constraint (the weakest link of the chain), they should begin to look for the new constraint (the next weak link) in their business system.
Consider the following constraints tool on the proceeding page as you think about growth constraints within your company. The elements in the second column will vary based upon business types and organizational structures. For example, a cabinetmaker will be dependent upon a wood supplier, but an accounting firm will not. Identify each of your company’s functional business processes and give a general grade (A through F) based upon its current level of constraint. Start by identifying each of your teams (accounting), then identify each of their individual business processes (accounts payable, accounts receivable, payroll, etc.).
After you have provided a grade for each of your business processes, identify up to three specific constraints for each element. Below is a short sample list to illustrate the exercise. You will likely have 30-100 rows of business processes within your company, if not more. For this first pass, just hit the high level processes. If you feel it is necessary to spend more time further detailing the elements, arrange a unique project and make it happen. Your department team leaders will be intimately familiar with their major pain points (constraints).
#
Business Processes
Grade
Greatest Constraint(s)
1
Accounting
2
-- Accts Payable
3
-- Accts Receivable
4
-- Payroll
5
Marketing
6
Sales
7
Finance
8
Info Tech (IT)
9
Finance
10
Product Development
Completing this exercise with your team will likely spark some interesting conversations and some passionate debates; this is good! When business leaders ask the question, “Why aren’t we growing faster?” it is common for people to take a defensive approach. Be sure to build and maintain a collaborative environment as you evaluate your constraints and opportunities for growth. Undergoing exercises with your team members will really let you see what kind of company culture you have instilled. Remember, the goal is growth and prosperity, not blame and dwelling on the past. Also, remember back to Chapter 2—Partnership Success Pyramid. Recall the five imperatives for a great partnership (trust, alignment, transparency, esprit de corps, and results). These traits will hopefully shine through in your team as you conduct this exercise. If you notice a lack of these five imperatives in your internal collaboration, your partners will see it too when collaboration turn their direction.
The 6 Cs
Another effective tool to consider when exploring opportunities for your next “growth engine” is the “6 Cs” framework. This powerful tool shares elements to research as you search to discover opportunities and challenges to further develop your company. The elements are competitors, customers, complements, capabilities, concepts, and capacities. Carefully consider the recommendations below as you seek to discover your next growth engine.
Competitors
Although I do not want you to obsess over your competitors, you should understand who they are and what they do well and not so well. I am a firm believer that your greatest competition should be yourself, not your competitor companies. That said, by knowing your competitors and their business, you will have another data point to better understand your growth opportunities. Nothing makes the competitive juices flow quite as well as seeing how we stack up against our competition. The important point to remember is that we must constantly evolve our products and services over time. Never become stagnant or complacent. Our primary responsibility is to add increasing value to our customers. By evaluating our competitors, we will have another yardstick to measure our own performance.
You should also consider partnering with your competitors. Yes, you read this correctly. Sometimes, even your greatest competitors can become your most strategic partners. Take the case of Microsoft and Apple, fierce competitors in the software operating system arena. However, Microsoft Office for Mac is one of the highest selling software suites purchased by Apple customers each year. Consider Apple’s dominance with iTunes. Their revolutionary digital download store achieved exponential growth, but dominated the market only after Apple created a PC version of the application that operated on a Microsoft Windows platform.
Another valuable approach is to consider what strategic moves your competitors could make that may disadvantage your business. What product features or capabilities could your competitors deploy that might cause your customers to leave you and/or join your competitor’s service? As the old saying goes, sometimes the best defense is having a great offense. If you know your weak link(s), go on the proactive attack and shore up your business. If your competitors know of a weakness that your company has, they will exploit it—I promise.
Do you remember Blockbuster, the national home movie chain? Of course you do. At their peak in 2004, they employed nearly 60,000 people and operated over 8,000 stores across the US. However, in the late 2000s, smaller and craftier competitors such as Netflix and Redbox began to take market share away from them. The popularity of streaming video, self-serve kiosks, and the proliferation of mobile video content proved to be too much for the video giant. By the end of 2010, Blockbuster filed for bankruptcy protection and closed its doors. They simply took their eye off the ball and did not adjust their business model to leverage new technologies that were being used by their competitors and customers.
Do you remember Borders Group that operated under the Borders Books brand? They were an international book and music store that employed over 19,000 people and ran nearly 700 retail locations. Borders Group faced a similar fate as Blockbuster. The decades old physical books and music discs were quickly migrating to full digital downloads. The proliferation of Amazon’s Kindle and other e-book technologies combined with music alternatives such as Apple’s iTunes store, Pandora, and Spotify proved to be too much for the 40-year-old company. By January 1st of 2011, every Borders retail store had closed.
Customers
It is important to poll and stay in-tune with your customers. I think customer feedback is one of the best but most overlooked opportunity for valuable information. Customers usually love to provide recommendations, and they can be the most qualified. They feel valued when companies ask for their opinions and recommendations. Your custo
mers can be a useful research and development tool for your team. However, that approach can be a double-edged sword. If you are in the software development space, for example, blindly building a hodge-podge of features that your customers are asking for will leave you with a soup sandwich in a short amount of time. It is always valuable to solicit customer feedback but necessary to have a very disciplined product development process to vet the recommendations. If you ask Apple, they solicit customer feedback, but they build what they feel customers need, not what the customers ask for—yes, they are different.