For many mature, market-leading firms, transformative growth strategy isn’t a priority. And rightly so. The core business—the need it serves and its reason for being in its marketplace—is relatively unchanging. The business model or offering has proven its success for years. Successful, sustainable, low-risk growth comes from incrementally building upon it.
But there are two key moments when reinventing your strategy becomes imperative for a market leader. Both stem from the emergence of specific kinds of change in your customer or marketplace.
The first moment happens unexpectedly, when customers discover more fundamental value. A deeper and broader conception of the true problem and solution puts you on the road to irrelevance.
The second moment happens by choice, when you plan to pursue more traditional expansion or consolidation. Evolving to fit a new geography, segment or line of business presents the opportunity—often overlooked—to take charge of the evolution of the entire marketplace.
1. The Unforeseen Moment of More Fundamental Value
You struggle to generate more than incremental growth. Your success and its rewards aren’t as incredible as they used to be. Competitors start to take small bites out of the edges of your offering. These are signals that the context has changed, your strategy is getting stale, and your relevance is in decline.
They often appear when your customer or competition discovers a previously unarticulated need, and a new offering that can better meet it. Unfortunately, it can be hard to realize that this is what’s happening early enough. In stable and mature sectors, your attention and analytics are likely focused on your traditional competitors and their typical offerings instead.
This situation demands urgent attention and investment. That’s doubly so when the newly articulated problem and solution are far more fundamental than what you’ve focused on to date.
Consider the example of one leading retailer we advised recently. Their core offering? Mattresses. They’d built a highly successful, high-margin business selling mattresses—one that has delivered outstanding growth quarter after quarter for decades. Within the marketplace they led, when people had trouble sleeping, the most obvious, most accessible solution on offer was a new mattress.
When the solution your business is focused on is eclipsed by something broader, deeper and more fundamentally valuable, your cash cow’s days may be numbered.
But then the marketplace started to change. I don’t mean the emergence of digital direct-to-consumer bed-in-a-box phenoms like Casper. So-called ‘disruptors’ like this, who enter a marketplace dominated by a market leader without evolving its core value, are often more show than substance. While hard to see at first, the true threat to our client wasn’t coming from a different kind of mattress business.
The threat was coming from a marketplace that was off the radar, and that was talking about something much more fundamental than a new mattress: new horizons of vitality, flourishing and wellbeing. Wellness media and tech, from Dr. Oz to Goop to your Apple device’s built-in sleep goals and tracking, were painting a larger promise of better sleep for a healthier and happier life. Aromatherapy that encourages faster, deeper and more restorative sleep. Silk pillowcases that let you wake up with more beautiful skin and hair. New paradigms and regimens that solve what is now realized as the true problem: people’s inability to transform their habits and achieve ‘sleep hygiene’.
In this emerging marketplace, a new mattress is no longer the key to better sleep. Instead people want to learn about, follow, and continuously improve their own ideal sleep routine and environment. Rather than simply stop tossing and turning, they want to wake up as the best version of themselves.
This threatens to turn that former hero, the mattress, into a mere commodity. At some point in the not-so-distant future, consumer interest and loyalty will be captured by purveyors of sleep wellness long before a mattress even enters the equation. Once this happens, these new lead firms will control the value chain. They will be the ones informing decisions about what to buy, and from whom; they will take whatever margin remains. When the problem and solution your business is focused on is eclipsed by something broader, deeper and more fundamentally valuable, your cash cow’s days may be numbered.
For organizations that long ago resigned themselves to incremental gains, fundamental shifts in value create a massive greenfield for rapid growth.
As always, what might seem like an incredible challenge is also an incredible opportunity. For organizations that had long ago resigned themselves to incremental gains in a saturated sector, fundamental shifts in value create a massive new greenfield for rapid growth. Our client’s new strategy is now to create and own this new marketplace for sleep and wellness—one that is many times larger than that for mattresses could ever have been.
Many mature market leaders are leading marketplaces that are ripe for this kind of evolution. Like any other complex system, they are subject to a cycle of adaptation that is a fundamental feature of our reality, within and beyond the business world: how forests grow and burn, how commodity markets function, and how cities and empires like Jerusalem, San Francisco, and Rome rise and fall.
2. The Proactive Moment of Marketplace Evolution
The second moment arises when a firm decides to pursue more traditional expansion or consolidation. Perhaps you’ve saturated the geography available for opening new stores, or taken as much market share as is efficiently possible. Maybe there’s been a change of ownership or leadership, a sudden influx of investment or potential, or a disruptive crisis that has created an opportunity to consolidate or out-maneuver your weakened competition. In any case, now it’s time to start expanding and executing in new geographies, customer segments, marketplaces, or businesses.
You need to treat expansion as a springboard for creating a fundamentally new level of value.
This kind of expansion necessarily involves evolving your business to fit a new reality, which presents the opportunity to go further, and lead the evolution and expansion of the marketplace itself. But for a variety of reasons—perceived urgency, the effort required to acquire and operate in an entirely new context, or plain unawareness of the potential—this opportunity is often overlooked in favour of the simpler path of simply replicating the existing business and strategy, at least at first. All too often, this lack of thoughtful adaptation results in disappointing results: poor integration, slow adoption, or failure to scale.
Instead, having decided to embark on expansion, your next step should be evolving your strategy to fit the new context. Rather than aim only to understand how to incrementally adjust your offering, take the opportunity to figure out what your new customer truly needs. If you’re especially agile, you can use new stores and products as stimulus for developing and validating the strategy as you go.
You need to treat expansion as a springboard for creating a fundamentally new level of value. Build a strategy for acquisition and expansion that redeploys your best, most unique assets and capabilities to win in the emerging reality. As you create and profit from an evolved and enlarged marketplace, your competitors will be the ones left struggling with a fundamental change in value that they never anticipated.
How to Get Your Growth Strategy Right
Because they’ve rarely needed to engage in this kind of growth strategy in the past, market leaders that find themselves in one of these situations are almost always caught shorthanded. Their talent and culture are optimized for operational excellence and incremental growth, not game-changing transformation. The current strategy is often still quite profitable, and their incentives favour not diverting resources from business as usual until it’s too late.
It’s common to fail to see the need, or fail to act early enough. Worst of all, even truly leading organizations that manage to muster the foresight and momentum to change are still often unable to overcome their own old assumptions and expertise about what matters. Their efforts to evolve then fail to engage their changing reality with fundamental new value.
Market leaders in these situations are almost always caught shorthanded….Their incentives favour not diverting resources from business as usual until it’s too late.
What should they do instead? As they haven’t been exercising this muscle, most will need outside assistance at first. Who provides it needs to be carefully considered.
Creative agencies and innovation firms are great at painting a compelling new vision—but it almost always fails to connect with the needs of the business. Without considering commercial viability and operational feasibility, they have a hard time generating buy-in, maintaining momentum, and winning results.
Meanwhile, the traditional strategy consultants—the McKinseys, Bains, and BCGs of the world—have those skills in spades, but lag in insight and invention. Their expertise is grounded in the kind of incremental, optimization-focused bolt-on growth that their market-leading clients need in all the other moments of their lives—and suffers from the same narrow view of customer value and competitive landscape.
The right partners blend management consulting chops with creativity, and wide-ranging inspiration with respect for your business reality. Both fuel our focus here at Faculty of Change: helping market leaders successfully evolve and grow their strategy in the face of change.
Our growth diagnostic can quickly measure your firm or product’s preparedness for your emerging marketplace, and uncover opportunities to lead it into the future. Don’t wait until someone else tries to take control. Get in touch or book a call to connect today.
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