Growth in a mature business presents a bit of a paradox.
Usually people think of growth in terms of growing the business. But the unique growth challenges faced by mature firms often come from having grown too large for the marketplace.
Once you start butting up against the limits of the marketplace you lead, you’re a big fish in a too-small pond. Becoming a bigger fish isn’t going to solve the problem. It’s just going to lead to suffocation.
You need to grow your marketplace instead.
Why Classical Growth Strategy Leads to Suffocation
The default response to desires for more growth is to engage in the kind of growth strategy pioneered by management consulting firms almost a century ago.
Deeply understand the current state of the marketplace, its sizings, its growth rates, its players. Develop a quantitative model to project where it’s all going. Then fire up that Ansoff matrix and bolt on the most promising new segments, products, markets, vertical and horizontal acquisitions, etc.
People say no one ever got fired for hiring McKinsey for a reason. The method is time-tested. Reliable. Until it isn’t enough anymore.
And for mature firms, it often isn’t.
Consider Sleep Country, the leading national mattress retailer. Decades of successful growth, driven mostly by opening new stores and enhancing the performance of existing ones, made them the unquestioned market leader.
But by late 2018, it was becoming clear to Sleep Country’s C-suite, board and investors that this strategy was approaching saturation. After 21 consecutive quarters of same store sales growth, they reported a decline. People can only buy so many mattresses. And the list of locations for new stores not yet saturated was growing shorter by the day.
At first, Sleep Country expanded their assortment into accessories, like sheets and pillows. They expanded into new channels, pursuing ecommerce for the first time. They developed new value and newcomer segments. They acquired businesses like Endy, a digital D2C bed-in-a-box startup.
These actions were classic growth strategy. And they were effective. But they were only stop-gap measures. Doubling down on the existing conception of the marketplace, they remained limited by it.
The same thing, just more of it.
And while they generated great results, they were piecemeal. Omnichannel growth one quarter. Accessories growth the next. None of it levelled up to a unified platform of future potential.
Meanwhile, analysts were agitating for a new strategic narrative to support the price multiple. One with a compelling promise of another generation of growth.
The Existential Imperative to ‘Grow the Business’
Part of the appeal of growth strategy for mature organizations is that it’s non-disruptive. Unlike the other default approach to the growth challenge—innovation—it doesn’t ask you to give up on your core business. Or to divert attention and resources to something so wild or niche that a meaningful ROI is doubtful.
In no universe would Sleep Country stop selling mattresses, or do anything that might sell less of them. These are impossible asks when the core is still so profitable and needs to continue to generate results.
But doing the same thing, just more (growth strategy) doesn’t work. Neither does doing something different, but less (innovation). Now what?
Sleep Country needed a way to evolve the core business, not just grow it. The same thing, but different and more.
Grow Your Marketplace by Distilling Your Value
To grow beyond the limits of the core business, without giving up on it, Sleep Country engaged in a process of strategic renewal.
It was based on two aspects. First, distilling the fundamental value the firm could offer consumers. Second, expanding the boundaries of the category and marketplace.
Through this process, Sleep Country realized that the value of their mattresses came from the more fundamental value of sleep.
It seems obvious, but the implications were anything but. What people felt was standing in the way of better sleep wasn’t so much buying the right mattress. It was optimizing their sleep routines and environments.
This opened the door to a wide array of services and products with sizeable addressable markets, beyond mattresses and bedding.
Further, the deepest desires of customers were now captured by something much bigger than the functional, highly commoditized offer of a mattress for ‘no more tossing and turning’. They aimed at the promise of better health, better relationships, better performance and a better life from the continual optimization of sleep.
Within this broader category, and broader marketplace, people would pay more, and more often.
Bigger category. Broader offering. Higher frequency. Higher value. And it was all white space, with no lead firm driving the movement forward. It wasn’t a replacement of Sleep Country’s unique right to win in mattresses, but a distillation and expansion of it. They could build for the future and accelerate the core at the same time.
One year after putting their new, sleep-focused strategy into practice, Sleep Country achieved 90% year-over-year net income growth. Three years later, the sleep sector is a well-defined, mainstreaming marketplace, forecast to be worth over $585B globally by 2024.
Don’t just overexploit your current terrain. And don’t turn your back on your core business. Distill your fundamental value, and lead the emergence of a bigger marketplace.
Are you ready to lead and win for decades to come? Our relevance and renewal workshop can help you take stock and take charge. Get in touch if you’d like to connect.