by Tiffani Bova
When asked what slows growth, it might surprise you to learn that most executives actually cite internal factors. In a Bain & Company study, 85 percent of the executives surveyed, and a full 94 percent of those running companies with more than $5 billion in revenue, said that internal, not external, obstacles keep their companies from growing profitably. What a shame; after all, it is the internal factors over which you are supposed to have control—as opposed to moves by your competitors, market shifts, and even “Black Swan” events.
TEN PATHS TO GROWTH
The more conversations I had on the subject and the more deeply I studied the ways in which companies have grown successfully, the more I came to realize that:
It wasn’t just about what growth strategies companies chose to pursue that determined the likelihood of success but rather the context in which a strategy was deployed and the combination and sequence of initiatives.
Growth is far less complicated than most people make it out to be. You might be surprised to learn that you can categorize most growth efforts taken by a business into one of ten growth paths. Deciding which path(s) are liable to have the greatest (positive) consequence will—and in fact should—change over time. No growth path should be written in stone.
These ten paths are established routes that have been used by countless companies to successfully grow top-line revenues. They can help guide huge multinationals, small start-ups, and medium-size businesses, regardless of product, region, or industry.
THE TEN GROWTH PATHS
CUSTOMER EXPERIENCE: Inspire additional purchases and advocacy
CUSTOMER BASE PENETRATION: Sell more existing products to existing customers
MARKET ACCELERATION: Expand into new markets with existing products
PRODUCT EXPANSION: Sell new products to existing markets
CUSTOMER AND PRODUCT DIVERSIFICATION: Sell new products to new customers
OPTIMIZE SALES: Streamline sales efforts to increase productivity
CHURN (MINIMIZE DEFECTION): Retain more customers
PARTNERSHIPS: Leverage third-party alliances, channels, and ecosystems (Sales, Go-to-Market)
CO-OPETITION: Cooperate with market or industry competitor (Product Development, IP Sharing)
UNCONVENTIONAL STRATEGIES: Disrupt current thinking
WHAT’S OLD IS NEW AGAIN
We’ll soon look at each of these ten paths in depth—for now, just take a step back and look at them as a whole. Some of them may seem familiar, or somewhat obvious, and they should. This list is built on the back of long-standing management thinking and frameworks, including the Ansoff Matrix (a practical framework developed in 1957 by Igor Ansoff for thinking about how growth can be achieved through a product strategy), plus newer sales and marketing concepts used by companies today to stimulate growth.
Let me be clear: these ten growth paths recognize that many of the classics haven’t gone away; paths like Product Expansion and Customer Base Penetration remain as valid as ever; but as the business world has become more complicated, with the rise of e-commerce, software-as-a-service, and other technological and business-model innovations, and the consumer has become more empowered and educated, the application of these requires a more modernized approach.
These various technological advances have provided companies new means to pursue growth alongside tried-and-true classics. Until recently the absence of detailed consumer, product, and market data meant that companies left a lot to chance, gut instinct, and previous experience. What worked in the past, such as increased marketing spends and price reductions/promotions, would simply be repeated. It isn’t that companies didn’t know anything about what was driving growth in the past; it’s more the fact that today companies, in real time, can gain meaningful insights to make the right decisions, at the right time, with the right growth path.
CONTEXT + COMBINATION + SEQUENCE
Growth is never by mere chance; it is the result of forces working together.
—JAMES CASH PENNEY, founder of JCPenney
It isn’t enough to have the “right” new growth strategy. You must fully understand what the current market context is prior to making any moves; otherwise, even the right decision, or the right growth path, can put you in the wrong place at the wrong time. Let me be clear—choosing the right growth path for your company should always start with context, the circumstances or events that form the environment within which your company competes. When companies base growth decisions upon an intelligent appraisal of the product, market, and customer context, and the threat or opportunity those contexts bring, along with the combination and sequence necessary to support the chosen growth paths, it can make the difference between success and failure.
CONTEXT includes current social and economic conditions, existing product portfolio, competitive landscape, and corporate culture.
COMBINATION is the act of selecting key actions that can positively influence outcomes, when done together.
SEQUENCE is the act of establishing a priority, order, and timing to those actions.
Growth IQ is a holistic approach to finding the right path, in the right market context, in the right combination and sequence—creating a multiplier effect that is far more powerful than just focusing on one or two efforts in isolation.
A key thing to remember as you set out to reenergize your growth efforts: a company can attempt to duplicate a growth strategy from an industry rival, but rarely is it able to re-create a particular growth path (how a company grew), along with the exact same combination or sequence of efforts, within a particular market context, that led to that rival’s success:
Don’t try to copy what you think your competitors are doing. Imitation is not the path to success, especially in the overcrowded industries most companies confront today.
Don’t get distracted by what landed you in this current situation—good or bad.
Don’t make the common mistake of believing that what you’ve always done will continue to deliver.
Keep your mind—and your options—open.
WHAT’S IN IT FOR YOU
Follow effective action with quiet reflection.
From the quiet reflection will come even more effective action.
—PETER DRUCKER, author of The Effective Executive
While merely duplicating the efforts of other companies is unlikely to work for you, it’s crucial to understand what decisions other companies made when they faced a fork in the road, and which growth paths, combinations, and sequences they chose. By reading the case studies of companies such as Under Armour, Sephora, Shake Shack, The Honest Company, Walmart, Mattel, Marvel, and others I cover in Growth IQ, you’ll learn how some of the most successful companies were able to achieve growth, providing you with perspective on how to apply the Growth IQ framework to your own business as you push to increase top-line revenue. You’ll also read notable examples of growth strategies that failed or backfired and learn how to avoid those pitfalls as you navigate the pursuit of growth for your business. While all of the companies in this book followed their own decision-making process to take the steps they did, Growth IQ gives us a framework to deconstruct and understand their growth efforts within a single model.
Each chapter of Growth IQ looks in depth at one of the ten Growth IQ paths, initially defining the path itself, what it is, and why it was chosen. We Set the Scene, highlighting the overall market context impacting a particular growth path, and then feature stories of a number of companies, spanning various industries and sizes—showcasing how they were able to leverage a particular growth path successfully over time or combine certain growth paths in just the right sequence to maximize their return on investment.
Each Story highlights companies that followed a particular growth path (or paths
) to accelerate their current (growth) success or to recover from a growth stall or an unexpected slowdown after multiple quarters of strong performance. You will also see stories of “How It Can Go Wrong,” because failures can be one of the greatest teachers. Chapters conclude with: Putting It All Together, What Works—and Potential Pitfalls, and Suggested Next Steps—how to apply the lessons learned to your own business.
My goal is to help you Get Smarter About the Choices That Will Make or Break Your Business—to develop a keen understanding of the ten growth paths and the importance of context, combination, and sequence, so you can deconstruct your own growth initiatives and become a “Growth Navigator”—capable of steering your company, your division, your sales team through even the harshest of market conditions with ease.
PATH 1
CUSTOMER EXPERIENCE
CUSTOMER EXPERIENCE
You’ve got to start with the customer experience and work backwards for the technology. . . . What incredible benefits can we give to the customer? . . . Not starting with “Let’s sit down with the engineers and figure out what awesome technology we have.”
—STEVE JOBS
WHY CUSTOMER EXPERIENCE MATTERS
Three-fourths of three thousand business-to-business (B2B) companies surveyed ranked customer experience as a major factor in supplier choice.
Sixty-eight percent of C-suite executives expect organizations to emphasize customer experience over products in the future.
Eighty-six percent of customers are willing to spend more for a better customer experience.
Seventy percent of buying experiences are based on how customers feel they are being treated.
Analysis shows that companies that excel in the customer experience grow revenues 4–8 percent above their market.
Seven in ten Americans (70 percent) are willing to spend an average of 13 percent more with companies they believe provide excellent customer service.
The promise of better customer service is a draw for shoppers: three in five Americans (59 percent) would try a new brand or company for a better service experience.
CUSTOMER EXPERIENCE IS THE NEW BLACK
How much did your last Uber ride, hotel room, airline ticket, or Starbucks coffee cost? (No cheating—if you had to submit it on an expense report, that doesn’t count.) Now, what company have you recently engaged with that left you sitting on hold for customer service, or didn’t get back to you quickly, or shipped the wrong product and the return process was a nightmare?
I’m betting you remember the brand names of the later ones, those “experiences,” much more vividly than the previous—and you aren’t afraid to share them, either.
The reputation of a thousand years may be undermined by the conduct of one hour.
—JAPANESE PROVERB
Recent snafus caused by subpar customer experience (CX) have made national, and in some cases international, news, including, for example, United Airlines (which dragged a passenger off one of its airplanes) and Wells Fargo (which signed up people for additional accounts without their consent), which erased, quite quickly, I might add, much of the goodwill that these well-respected brands and their CX efforts had built up over many decades.
Current research shows that more than 70 percent of customers look to (customer) “reviews” as the number one source when they are deciding among different brands and products. That is why this growth path can be so unforgiving. We will forever have those “negative” (customer experience) images burned in our memory and our conversations and memorialized on the Web—which means that those companies have to spend much more to “win” us back than they did to acquire us in the first place.
Customer experience is the sum of all of a brand’s touch points, both online and off-line, through both human representatives and now technology (such as bots, artificial intelligence (AI), and “things”).
What is customer experience? For the purposes of Growth IQ, customer experience is centered on the interactions between companies and their customers. A brand promise is what you say about your company, customer experiences will impact what they—customers—say about your company. In principle, customer experience is based on the feelings that arise once customers engage with your products, employees, and various sales, service, and marketing channels.
Don’t make the mistake of thinking that because you have a focus on improving CX, you are actually “on the Customer Experience path.” Using CX as a catalyst for growth is very different from focusing solely on improving specific metrics, within a few groups. More than any other “revolution” in the last century, the shift in customer expectations is proving to upend everything we think we know about business growth.
The true source of competitive differentiation in the twenty-first century is: Customer Experience.
Unfortunately, many companies lose sight of CX and still have a narrow view of the drivers in delivering a compelling CX—mostly because: (1) they don’t agree on what a “compelling” CX actually is, (2) they don’t have a formal key performance indicator (KPI) to manage and track performance against, and (3) there is no “one” owner of CX but rather many roles or people or functions responsible for pieces and parts of it. I’m sure you are familiar with the saying, “If you can’t measure it, you can’t improve it,” and if you agree with that statement, the focus on CX should therefore result in a push toward ways in which CX efforts can be measured for the purposes of improvement—in the eyes of the customer, not the business itself.
Gillette has lost U.S. market share for six straight years. Its share of the men’s-razors business fell to 54 percent in 2016, down from 59 percent in 2015 and more than 70 percent in 2010. This was driven by low cost subscription services Dollar Shave Club, Harry’s Razors, and others. Cost plays an important role in this shift, and quality remains a key element, but experience is a major driver.
Companies that adopt the Customer Experience path need to start by answering the question: Who is the customer? This has grown to be an increasingly difficult question to answer because the definition of what a “customer” is . . . is blurring. It is usually a person, of course, but of late, some companies need to consider that a customer could also be a thing (refrigerator, piece of machinery, a chatbot, etc.) or even a place (household, automobile, hotel). Gartner predicts that by 2018, six billion connected things will be requesting support. Think about it this way: soon your automobile will not only be able to let you know it needs its oil changed, but it could drive itself to the local auto mechanic to get it done— while you are working. Today, your smart appliances can reorder supplies when needed, like your washing machine knowing it has done twenty-five loads and needs more laundry detergent, or it has been ninety days since you replaced your air conditioner filter so the manufacturer just sends you a new one when it’s time. While in all of these examples the machines are still serving people and operating to serve their needs, this changes the business-customer relationship in a profound way.
Furthermore, you have to consider: Are customers the same as buyers? Not necessarily. Keeping with the above examples, who or what is the customer—and who or what is the buyer—and who or what will be requesting support or service? Bottom line: the level of complexity between a company and its “customer” is actually getting worse, not better, especially when it comes to closely monitoring and managing the experience someone has with your brand.
WHAT’S GOOD FOR THE GOOSE IS GOOD FOR THE GANDER
The Japanese proverb Omotenashi (おもてなし) can be translated to “The customer is always right,” but many in Japan will prefer the literal translation of “The customer is god.”
With the advent of social media, smartphones, and the Internet, consumers are more informed and demanding than ever of the business-to-consumer (B2C) brands they interact with. Many B2B brands make the mistake in thinking that all the
hype around CX is only applicable or valuable to B2C companies. That couldn’t be further from the truth. You must remember that B2C customers, the ones who are more demanding and informed, bring the same expectations and purchasing habits into their workplace. Because of this, there are a lot that companies can learn from B2C companies and apply in a B2B environment.
Being on the Customer Experience path, and using it as a differentiator and an engine for growth, has proven to be a successful strategy for brands like Zappos, Nordstrom, Virgin Airlines, and Starbucks. Yes, each of them is a B2C company, but it doesn’t mean that thousands of B2B companies haven’t shown up in Las Vegas at the Zappos campus to attend the “School of WOW Customer Service Training.” They don’t care that Zappos is a B2C company. What they care about is upleveling the way they deliver customer service to improve overall CX.
Whatever you do, do it well. Do it so well that when people see you do it they will want to come back and see you do it again and they will want to bring others and show them how well you do what you do.
—WALT DISNEY
Today, some companies simply consider themselves “B2E” or “business to everything/everyone” to get out from under this long-standing B2B versus B2C distinction and focus on what really matters: the customer.