Congratulations. Sales and revenue have once again soared far beyond last years projections. Your company is growing like gangbusters and you can barely keep your products on the shelves.
Life is good.
For now.
Sales growth is great. It is something that every company strives for and should strive for. Author Jim Collins talks about it in his book Good to Great when he discusses his economic denominator and his “profit per X” mantra. Every time X event happens, your company makes Y-profit. Then he goes on to show how the Great Companies figure out how to quickly repeat X to make Y grow.
That’s sales growth. That gets you an annual bonus. Or two. But your goal in growing your business shouldn’t be a couple annual bonuses. It should be how do you sustain growth? How do you build a legacy?
That’s
Clayton Christensen talks to how many companies, who were managed well and listened closely and intently to their customers, miss the next product wave. By focusing only on their current client demands, they consistently missed their next opportunity growth. They missed that chance to build a legacy.
Henry Ford is another example on the other end. Mr. Ford often gets a great quote attributed to him where he says “if [he] asked [his] customers what they wanted, they would say a faster horse.”
He saw a new opportunity to grow a new market, and he took it!
The importance of this topic can’t be overstated. In fact, it is so important that Gartner recently performed a study on it. They used
Their research, published in an article titled How and Why to Keep Innovation Management on Track by Jackie Wiles, found some staggering conclusions. Such as:
- 93% of companies suffer from top-line growth stalls
- 85% of the growth stalls are avoidable
- In 2011 alone, $1 billion dollars was lost to growth stalls that were related to innovation management
Based on Gartner’s findings (and backed up by the research of Christensen and various others), sales growth alone is not enough to sustain a company long term. No matter how profitable a vertical is today, doesn’t mean that it is not susceptible of drying up tomorrow. Things change. Consumer demands change. And the only way to be ready for that change is to continue to chase Opportunity Growth.
Are Sales Growth and Opportunity Growth Related?
Now, that doesn’t mean that sales growth and opportunity growth aren’t related. In fact, often the opportunity growth your company seeks often comes from tangentially related markets. Maybe this is taking your current product to a new set of clients. Or packaging your product with other products or services that customers typically purchase together.
[Continuously branching out into new markets] allows your company to stay flexible and nimble when fluctuations in the market occur.
Me!
You see Amazon bundle products with their “Often Purchased Together” products. Bundling products together to make it easier for customers to spend more money. And anyone who has seen the social network or knows the story of Facebook knows how they started out as a service for only Harvard students before branching out to other colleges and eventually opening up their product for everyone.
When we work with our clients, we talk to them about leveraging their corporate strengths to find that next wave of income
Apple has been a great example of a company who has done this. They started with the iPod. Leveraged their knowledge from that product to build the iPhone. Leveraged that knowledge to build the iPad. Complimented those products with the iWatch and AppleTV. Each product, building on the previous to enhance their customer’s experience.
Why Should You Care?
By leveraging your current strengths to branch out into new markets, you are providing your company with revenue options. What those options do is it allows your company to stay flexible and nimble when fluctuations in the market occur.
As we discussed earlier, market shifts happen. Growth stalls happen. And, worst of all, they happen unexpectedly. Depending on the market and the pace of innovation, they happen at different times. But they always happen.
Sometimes, newer products replace older products. Such as the Blu-ray replacing the DVD which replaced the VHS tape. Other times, the market shifts in a way that the entire product line gets wiped out. You don’t see many landline phones or Blockbuster Videos anymore.
And while it can be difficult to see shifts coming, make no mistake, it IS coming. And the more revenue options you have, the more likely you’ll be able to survive it.