Four Steps to Strategically Grow Your Business
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Strategy May 10, 2016

Four Steps to Strate­gi­cal­ly Grow Your Business

Look beyond the usu­al sus­pects to iden­ti­fy your company’s next market.

Use your competitive advantage to grow your business.

Michael Meier

Based on insights from

Michael J. Mazzeo

Launch­ing a great new prod­uct or a must-have ser­vice in an unchar­tered mar­ket may be exhil­a­rat­ing, but it also intro­duces uncer­tain­ty. Pour resources into the wrong endeav­or and you may be risk­ing dis­as­ter. One com­mon response to this com­plex­i­ty is the equiv­a­lent of an orga­ni­za­tion­al shrug: com­pa­nies qui­et­ly edge into a mar­ket that rough­ly par­al­lels one in which they are already working.

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Growth is not often eval­u­at­ed in a dis­ci­plined way,” says Mike Mazzeo, an asso­ciate pro­fes­sor of strat­e­gy at the Kel­logg School. Busi­ness­es sim­ply per­ceive their oppor­tu­ni­ties as exist­ing on planes relat­ed to cus­tomers or planes relat­ed to prod­ucts or ser­vices.” This approach tends to uncov­er a nar­row band of options — the usu­al sus­pects, if you will — while over­look­ing mar­kets that are both bet­ter fits and rich­er with opportunity.

To max­i­mize growth poten­tial, com­pa­nies should instead think in terms of the fun­da­men­tal val­ue they cre­ate and how well this val­ue might serve oth­er mar­kets, how­ev­er far afield they seem. Mazzeo has pin­point­ed four steps to help com­pa­nies more intel­li­gent­ly deter­mine where those oppor­tu­ni­ties may be lurk­ing — and how to enter confidently.

Audit Your Resources and Capabilities

Before look­ing to future growth, a com­pa­ny should reflect on the present. Com­pa­nies must first under­stand why their cus­tomers are choos­ing them,” Mazzeo says. What about the busi­ness cre­ates val­ue for its cus­tomers? Is it a unique prod­uct, extra­or­di­nary cus­tomer ser­vice, dis­tinc­tive design — or is it low prices, achieved through cost leadership?

Learn more about the Com­pet­i­tive Strat­e­gy course in Kellogg’s Exec­u­tive Edu­ca­tion Pro­gram here.

This infor­ma­tion can be obtained through a range of cus­tomer insight tools, from direct inter­views and sur­veys to big-data analy­ses. Once this val­ue propo­si­tion is under­stood, it is up to the com­pa­ny to scru­ti­nize its oper­a­tions to uncov­er pre­cise­ly what it is doing that sup­ports the deliv­ery of this value.

A rig­or­ous audit of the company’s resources and capa­bil­i­ties goes beyond think­ing of new audi­ences for your prod­uct. That’s just not a deep analy­sis,” Mazzeo says.

Con­duct­ing a full audit opens doors on unfore­seen prospects. When busi­ness­es start to think about growth oppor­tu­ni­ties as relat­ing to capa­bil­i­ties,” Mazzeo says, then it opens up the pos­si­bil­i­ty of them cross­ing into much dif­fer­ent prod­uct or cus­tomer dimensions.”

Draw the Com­pet­i­tive Picture

Com­pet­i­tive advan­tage is a nec­es­sar­i­ly com­par­a­tive con­cept. When con­sid­er­ing new avenues for growth, com­pa­nies must exam­ine not what they do well, or dif­fer­ent­ly, but what they do bet­ter than oth­er com­pa­nies. That requires iso­lat­ing com­pet­i­tive advan­tages in two par­tic­u­lar spheres.

The first is dis­tin­guish­ing the company’s com­pet­i­tive neces­si­ties from its com­pet­i­tive advan­tages. I don’t want to do an audit and say that mar­ket­ing is an impor­tant capa­bil­i­ty of my com­pa­ny sim­ply because I’m good at mar­ket­ing,” Mazzeo says. Every com­pa­ny needs to be good at mar­ket­ing — how­ev­er they choose to define good.” I have to be bet­ter at mar­ket­ing than my com­peti­tors if I’m going to base a prof­itable growth strat­e­gy on the use of mar­ket­ing to sell prod­ucts and cre­ate differentiation.”

Think deeply about what you can do bet­ter than every­body else — not just dif­fer­ent­ly, but better.”

The sec­ond is dis­tin­guish­ing the company’s strate­gic dif­fer­ences from its com­pet­i­tive advan­tages. For exam­ple, the flight mod­el that South­west Air­lines uses — a point-to-point route struc­ture — is dif­fer­ent from most oth­er air­lines, which tend to use a hub-and-spoke sys­tem. But this dis­tinc­tion alone does not mean that point-to-point rout­ing con­sti­tutes Southwest’s com­pet­i­tive advan­tage: it is not a unique capa­bil­i­ty, and oth­er air­lines could read­i­ly imi­tate the approach. More like­ly, Southwest’s com­pet­i­tive advan­tage has to do with under­ly­ing resources that allow it to oper­ate a point-to-point route struc­ture par­tic­u­lar­ly well.

Before grow­ing, then, a busi­ness must answer two cen­tral ques­tions: First, on what essen­tial skill does the suc­cess of the growth rely? And sec­ond, can oth­er com­pa­nies read­i­ly imi­tate or repli­cate this engine for dri­ving growth?

This means real­ly think­ing deeply about what you can do bet­ter than every­body else — not just dif­fer­ent­ly, but bet­ter,” Mazzeo says. Then say, Okay, what does that con­nect to?’”

Bring a Diver­si­ty of Opin­ions to the Table

Audit in hand, gath­er­ing a mul­ti­dis­ci­pli­nary team is essen­tial for deter­min­ing which of a company’s unique capa­bil­i­ties will pro­vide trac­tion in new markets.

I’ve asked com­pa­nies many times, What do you think are some of your impor­tant capa­bil­i­ties?’” Mazzeo says. A hand­ful of peo­ple might respond that the integri­ty of cus­tomer rela­tion­ships is most impor­tant. Then I’ll ask, How is that dri­ving val­ue for your com­pa­ny? Are the rela­tion­ships so strong that if you raise your prices peo­ple would still buy your prod­uct based on the rela­tion­ship?’” That, Mazzeo says, is ulti­mate­ly the kind of ques­tion that needs answer­ing, and one that dif­fer­ent depart­ments might answer differently.

For instance, the sales team can offer a very deep insight about the strength and val­ue of cus­tomer rela­tion­ships, giv­en the team’s con­nec­tion with the cus­tomer. They own that rela­tion­ship, so they know how strong it is,” he says. The engi­neer­ing team, on the oth­er hand, may stress the com­pat­i­bil­i­ty of its intel­lec­tu­al prop­er­ty with oth­er sys­tems, or the way that cus­tomer feed­back is inte­grat­ed in updat­ed prod­uct rollouts.

Hav­ing a team with dif­fer­ent angles of expo­sure to the strengths of a resource is real­ly crit­i­cal,” Mazzeo says. Get­ting the whole pic­ture in this regard may lead to dif­fer­ent out­comes than if all the assump­tions about a company’s capa­bil­i­ties were gen­er­at­ed from the prod­uct-devel­op­ment team.

Con­nect Dis­tinct Capa­bil­i­ties to New Opportunities

To achieve growth based on com­pet­i­tive advan­tages, com­pa­nies then need to con­nect their most unique­ly valu­able capa­bil­i­ties to new oppor­tu­ni­ties — wher­ev­er they may be.

Find an activ­i­ty or a mar­ket or prod­uct where suc­cess requires exploit­ing capa­bil­i­ties that you as a com­pa­ny already have, and that you uti­lize in the busi­ness that you’re cur­rent­ly doing,” Mazzeo says.

This typ­i­cal­ly requires a com­pa­ny to think more broad­ly about appli­ca­tions for its capa­bil­i­ties. TiLite, the largest man­u­fac­tur­er of man­u­al wheel­chairs in the U.S., start­ed out in the mid 20th cen­tu­ry mak­ing tita­ni­um tub­ing for the nuclear pow­er indus­try. Though it had deep knowl­edge and supe­ri­or capa­bil­i­ties in tita­ni­um swag­ing and weld­ing, there were few growth oppor­tu­ni­ties as the nuclear indus­try waned in the 1980s.

TiLite began a com­pre­hen­sive search of oth­er indus­tries to see where else its spe­cial­ized skills could be applied. After reject­ing bicy­cle, ten­nis-rack­et, and golf-club pro­duc­tion, the com­pa­ny found its niche with man­u­al wheel­chairs. Because wheel­chairs need to be cus­tomized to pro­vide max­i­mum val­ue for users, the bedrock of the busi­ness was in place. TiLite need­ed only to update its sales and dis­tri­b­u­tion net­work to grow its business.

IBM pro­vides anoth­er, more famil­iar exam­ple. While it was found­ed on tech­nol­o­gy — and may tra­di­tion­al­ly be known as a com­put­er com­pa­ny — its mar­ket lead­er­ship for more than a cen­tu­ry is due more to the ser­vices it pro­vides than to the prod­ucts it man­u­fac­tures and sells. IBM rec­og­nizes that its advan­tage lies not in the tech­nol­o­gy itself, but in the trust it has estab­lished with its busi­ness cus­tomers. By lever­ag­ing this rep­u­ta­tion, the com­pa­ny has very effec­tive­ly exploit­ed growth oppor­tu­ni­ties in mar­kets where con­sumers face uncer­tain­ty over the best tech­ni­cal solu­tion to a problem.

IBM is a great exam­ple of a com­pa­ny that under­stands its capa­bil­i­ties and uses this under­stand­ing for strate­gic growth,” Mazzeo says. Yes, it is a com­pa­ny that over the years has been in a lot of dif­fer­ent com­put­ing-relat­ed busi­ness­es. But what ties those busi­ness­es togeth­er is the impor­tance of rep­u­ta­tion and mak­ing sales to customers.”

Featured Faculty

Michael J. Mazzeo

Associate Professor of Strategy, Faculty Director of the Chicago Campus

About the Writer

Dylan Walsh is a freelance writer focusing on criminal justice and science. He lives in New Haven, Connecticut.

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