Five Not So Easy Lessons on Growth Leadership

Most of us watched Superbowl 52 between the Eagles and the Patriots. Part of the charm of the

Superbowl and the parties we attend, relates to seeing the commercials. In fact, much time is used “rating” the commercials in terms of humor, appeal, and somewhere down the line the effectiveness of the advertising spend. As a piece of trivia, a Superbowl commercial this year costs $5 million for a 30 second ad PLUS the actual cost of designing, developing and shooting the commercial. Note that Nick Foles, the Eagles’ Quarterback and MVP, made only $1.6 million for the entire year. By the way, as a Giant’s fan I really liked the Eli/Odell Dirty Dancing commercial.

Last year, Coke eliminated the role of Chief Marketing Officer and reorganized around a new role of Chief Growth Officer (CGO) to integrate marketing with customer and commercial teams. Other consumer package goods (CPG) companies, such as Hershey and Kellogg, have also moved to a similar function with Kellogg instituting the function in mid-2015. How successful are those companies? It may be too early to tell. Kellogg’s results over the past few years have been passable and they might not be the best model to use. Their CGO was an advertising executive – albeit very smart and well regarded and their revenue the year after his appointment was DOWN.

We can argue that a title change may be necessary but it is certainly not sufficient for improving growth and making that revenue and growth profitable. The Chief Marketing Officer has significant issues in a corporate structure. I have seen many times that marketing is regarded as a function of planning more ads, designing creative billboards, winning the contest of the best Superbowl ad, and winning creative awards. This is more “fluff and stuff” vs the reality of hard marketing and on this basis alone, a change in title from marketing to growth officer seems warranted.

Let’s take a look at five (5) lessons that can be applied to what I call Growth Leadership.

1. Growth starts with the CEO. Without the CEO and his strategy, successful growth plans cannot be put into place. I keep reminding myself of the Alice in Wonderland quote: If you don’t know where you are going, any road will take you there. Companies who want to grow have to put a CEO with that objective in place and not all CEOs fit that bill.

2. The company has to have a growth mentality. While this may start with the CEO, the people he hires and the culture of the organization must be focused on growing. I know this may sound strange to some. Unfortunately, most of us have been in companies that believe growth is based only on EBITDA increasing. While that is important, EBITDA can be improved – at least in the short term – by cutting cost. I have never believed that you can shrink yourself into greatness.

3. Innovation must be a hallmark of a growth company. Without a solid business model and without good products companies will not grow. There is just too much competition and the internet and agile development around software puts many companies on an even footing. Think about companies you know. How many of them are growing? How many of them have a solid product line and product portfolio? Growing companies have solid portfolios and products in the wings – or a good acquisition strategy to acquire new products or partners that have these new products. A creative ad on the Superbowl is not sufficient. Recall the commercials you watched. Which ads pushed minor line extensions or existing product vs. new ones? I only recall two really new products: a Kia Stinger car and a new Lexus LC500. (BTW, I like both of these cars!!)

4. P=R-C. Let’s get to basics. Any officer in a company must recognize this fundamental equation and determine how they can affect the elements which create profit. Clearly, a Chief Growth Officer will be responsible for the revenue side as well as the investment which will be put to use in generating that revenue. As a correlate, growth officers must change their internal perspective of being cost centers to investment centers. They need to think about a concept called return on investment. Even good marketing officers that I have known, focus on a concept called ROMI or return on marketing investment, treating marketing as a business and not merely a creative channel. So, when we look at the Superbowl commercials, how many of these were merely “fluff and stuff” creating awareness for the company vs. a means to drive growth? Would the company be better off spending more than $5 million on alternative marketing activities that would directly drive growth? What is interesting is that small companies with lack of budget dollars focus on the bottom line and are tactically driven.

5. An integrated approach to growth can be achieved with forethought. Whether you call the executive a Chief Growth Officer, Chief Revenue Officer or Chief Marketing Officer, I believe this person is an integrative force within the company. This person, whether directly or indirectly, must be a linking pin between the outside world of the customer and the internal world of production and manufacturing. That person needs to connect and get different functions such as marketing, product, demand generation, social media, customer service, usability/user interface, and customer service to work together to a common end.

 

That person must be responsible for a) managing at least part of the investment in growth initiatives, b) managing or certainly influencing the innovation process relating to new products, line extensions, and processes to make the customer experience better, c) the overall go-to-market strategy and tactics that are broad to include all customer touchpoints. I call this Big M marketing where the company executives are aligned for a common purpose and focus on providing the best products and services to the customer.  Individual silos are eliminated and therefore a consistent brand image can be projected. And most, important, all these components need to have targets and be measured and reviewed as part of the business battle rhythm of the company.

The title of a function is important just as a brand and its meaning is important to a company. I am not a huge fan of marketing as it is implemented in many companies because in my opinion current Chief Marketing Officers have failed with regard to helping a company grow their revenues profitably. I have argued this many times before. I believe I am correct in my assessment, as the tenure of a CMO is approximately 4 years, lowest tenure in the C-suite and approximately half as long as their CEOs. But I also believe that there is an opportunity for companies to improve their top line growth and margins by following these 5 prescriptions. We, at C-Level Partners, are focused on helping small to mid-cap businesses improve their growth and margins. Write to me at dfriedman@clevelpartners.net to see how we can help your company grow.

How Successful Leaders Prioritize - When Less is More

An old Russian Proverb says:  If you chase two rabbits, you will not catch either one. Think about

that in the context of priorities at work and the resources companies need to employ to chase those priorities. How many of you have worked for a company where the boss indiscriminately piled on projects that sounded just too good to pass up? CEO said that the company is not doing enough and her desire was to see how many more projects can be handled? 

One of my colleagues, Dennis Drent, was a new CEO of a specialty insurance company. It was an operational turnaround situation and much needed to be done to correct course. With the best of intentions, Dennis tried to fix all the problems in his first year! Needless to say, nothing got done in that first 12 months. In year two, Dennis directed the management team to choose the three top priorities after rigorous debate. All three initiatives were completed and the results began to improve immediately.

When I worked for US Cellular, a new CEO came on board and while I did not subscribe to everything he said, I did like his approach to strategic initiatives. He told us that we will focus on doing one thing well and when that is complete we will move on to the next priority.

I personally believe that there is a middle ground whereby the resources and competencies of a company determine how many projects can be handled simultaneously. Yet even with multiple projects, when a critical need arises, resources are refocused on the top priority.  So how do you know what is really a priority?  How do you set priorities?  How do you manage priorities?  And how do you incorporate their prioritization results into a "business battle rhythm?” 

Here are 6 steps to setting and managing priorities.  If you want copies of these tools, please write to me at dfriedman@clevelpartners.net and I will send them to you.

 Clearly define the project or initiative. Make sure there is clarity of the end results and the metrics for success. One tool we use is the Opportunity Template, a picture of which is located here. 

Note that each project has a clear owner, i.e. the person defined as “A” on the top line and has the basic tasks and metrics laid out.    

      Develop and use a process to rate and score the various, and perhaps disparate projects. One tool we use is called the Analytical Hierarchical Process. It ensures that the evaluators and decision makers agree on the way the projects are evaluated. 

In this case, I show a one level system and the key areas of evaluation are strategic, financial, competencies, and operational. Each area is weighted and a score can be given on how well the project meets that criteria.  A total score is then developed and an ordinal ranking of the projects can be determined.  If there is a legal or regulatory requirement that must be completed in the planning cycle, that automatically goes to the top of the list.

While many executives don’t like a mechanical process, the exercise enables all projects to be evaluated in a consistent manner based on what the organization or company wants to achieve.  If there are lots of projects, the executives can see what is on top and what is on the bottom and can debate which project is to be staffed with the right resources. The goal is to help the decision making, not to let a mechanical process determine the answer.

Resource the project with the right people.  Develop a strong team. This sounds so simple yet sometimes is hard to do. At C-Level Partners, one of the tools we use is called RACI. This enables projects to be resourced correctly. Eventually, depending on the number of projects, companies will run out of the right resources as those resources will become a limiting constraint. RACI stands for:

• Responsible:  who will be assigned to work on the project
• Accountable:  who has the authority to make a decision and whose head will roll if something goes bump in the night?
• Consulted:   who are the stakeholders that will be consulted before a decision is made
• Informed:  who has to be kept updated on the project e.g. those whose work depends on the project?             

      Track progress through a dashboard and make the project part of the organization or businesses “battle rhythm.”A business battle rhythm is a way the organization manages its business activities, processes, decisions and control points.  If these projects are priorities, in my opinion, they should be part of the executive dashboard where the results are measured, tracked, and adjustments made to the plan. We use a stop light tool on the overall project as well as on the subordinate tasks.  Each task or project is given a Green light (things are on target and going well, a Yellow light (the project is in for some turbulence and this is an early warning of potential issues), or a Red light (we are missing milestones and metrics and need to put more resources on the project, change course, or abandon the activity). 

       Note on abandoning projects. Abandoning projects is something that is difficult. Many companies never kill a project because there is too much politics in admitting failure. At one company we worked, executives were brutal. If a project was off course and in retrospect they made a mistake the executives killed the project.  When I was a VP at Ameritech I publicly made a special award to people who made the right business decision and one award was to a director for killing a favorite project.  The person who received the award did not want it because he perceived it would kill his career.  It did not! People were in shock at first. But abandoning projects for the right reason yielded some discipline to the company as people knew if a project they were on didn’t perform there would be accountability.

      Proactively manage risks.  We believe in managing risk and the impact of those risks on any project especially those that are strategic, revenue oriented, or operationally critical. One way to do this is through a tool called the Risk Impact Matrix which lays out the risks to a strategic objective, a project, a product or other priority.  Once the risks and potential impact is specified, the person in charge of the opportunity or project will work with the team to determine ways to develop contingency plans.  These contingency plans will be put into place if the overall project or even some of the tactics veer off course. See Brian Newton’s blog on ways to measure and manage at http://clevelpartners.blogspot.com/2016/02/defining-ways-to-measure-and-manage-risk.html.

      Conduct post mortems. Every organization is a learning organization. What this means is that we learn from our successes but sometimes we learn more from our failures. After a project is completed or terminated, the team lead, the person accountable, should provide a post mortem debriefing to determine what went well, what did not go well, and share the learnings of the project with other executives and team leads.

An Example

Let’s see how one fictionalized company handled priority setting.  Let’s look at a fictionalized company called HyperCorp.  The executives developed a list of projects prior to an executive off site that each thought would be important to the company and their functional area.  The initial list of 25 projects was winnowed down to 7 based on their determination that these projects met their financial, operational, strategic goals and they had the competencies and skills to resource these projects.  Some projects would have high priorities for the executive team itself, others for HR, others for IT and still others for Marketing and Sales.

This executive team concluded that of these 7 projects, two – integrating a newly acquired company and updating operating systems to conform to a new regulatory compliance requirement had to be accomplished.   These two initiatives consumed a substantial amount of IT resources; yet the good news was that integrating two companies used operational IT resources whereas updating the operating system required application development. 

The Marketing and Sales team had to make a choice as it did not have the resources to perform more than one initiative and because IT resources were consumed on the two higher priorities, Marketing and Sales had to forgo launching a new product at this time. 

The team decided to focus on only four projects:

1.       Updating the operating system for compliance

2.       Integrating the newly acquired company

3.       Redesigning and updating the website to remain competitive and to improve customer acquisition

4.       Designing a new sales compensation plan to retain and engage the sales team

One executive was given primary responsibility (the “A”) for each respective initiative, was required to develop a detailed project plan using the RACI system, and was obligated to report the status in monthly operations reviews.    The initiatives were announced to the entire company with the CEO stating that if anyone is ever in doubt about priorities, these initiatives get “fed first” in the order listed.  Case closed.

If everything is a priority, nothing is a priority!!!  Accordingly, this blog provides some structure and tools to be used by corporate executives to manage their priorities.  The number of priorities may vary in different organizations. Yet, in my estimation, at the top level of each company or organization, there should be a clear focus on no more than 2-4 priorities which are properly resourced. As one priority is finished, then the company can move on to the next one. We, at C-Level Partners are here to help you and your company with determining your priorities and advising on managing these projects.

If you have questions, please feel free to contact me at dfriedman@clevelpartners.net.  Also please like this blog and feel free to share it or forward it to your colleagues and friends who might have an interest. 

The 5 C's of Clairvoyant Companies

No one is a psychic at TechCoastAngels.  Yet, we believe there are keys to success for start-ups.  For the past f weeks, myself and 6 other angel investors from TechCoastAngels of Orange County have screened more than 120 entrepreneurs in preparation for the “finals” of our fast pitch competition at TCA’s recent Celebration of Entrepreneurship event held on March 10.  We listened to these entrepreneurs’ 60 second pitches which would be provoking enough to take a meeting with them and listen to their pitch decks.    

In the past, I have looked at pitches of Unicorns and through my work and consulting practice reviewed or developed business plans, marketing plans, competitive analyses, positioning statements, branding architectures, and product road maps.  So, in this blog, I want to put it all together and share what I see are the common themes that came out of the pitches, pitch decks, business, and marketing plans- at least from my perspective.   

The following principles, which I call the 5 C's of Clairvoyant Companies are equally applicable to start-ups and on-going companies, large and small.

1.  Conveying the story.   The first “C” relates to conveying a story of what problem(s) the company is solving and telling a succinct story to entice the listener to ask for more information.   If it is a start-up, the entrepreneur has to put the listener in the shoes of the person having the problem and convey the solutions.  In the pitch deck, or the business plan, the CEO provides the details on how he or she will execute on the plan and drive financial results.  Conveying the story clearly applies to all companies, particularly if the company wants to attract new customers and brand itself in the market as something special.  Just think about the stories being conveyed by Nike and Under Armour or your favorite consumer or business product.

2.  Customer Clarity.   The second “C” relates to the target customers.  Who is the ideal customer?  Can you describe them and how do you find them?   If you think about Airbnb, the customers are both the person wanting to rent his property for a short period of time, to the other customer, a person wanting to rent a room or house.   The marketing and business plan should clearly indicate the problem the customer is facing and the solution offered.  Additionally, the company needs to present a cogent case for their marketing tactics to drive awareness, adoption and use.  Without clarity on the customer and how to find them and motivate them to action, financial success will not be achieved.

3. Competencies of the Company.   This third “C” relates to the existing or needed competencies within the organization that can drive the financial results.  It also relates to the intellectual property (IP), the culture of the company, and the way the employees think and execute the plans that are required to support the business or product.    How do you acquire and sustain the competencies that are needed for success?  Do you hire software developers on your team to build the product or can you outsource that skill?   What is critical based on your strategy and your competition?  

A competitive analysis and environmental scan may lead to the conclusion that skill sets that were once required are no longer required and new skills must be added.  That may lead the company to a training program, a partnership, or replacement of existing resources with new ones.  Some competencies such as Intel focus on technology as the prime competency and they develop the next generation of product even as they roll out the current generation.  Others, such as Zappos, focus on the uniqueness of the customer experience and the culture of the company, both of which are hard to duplicate.  Competencies help provide a “competitive moat” which brings up the next “C.”

4. Competition.   This fourth “C” is pretty evident.  No company operates in a vacuum.  Both start-ups and on-going companies need to be aware of the existing and potential competition that exists.   A competitor in the future may not be apparent today but may have the competencies, technology, leadership and resources to compete in a new and growing market.   Five years ago would GM or Lexus have considered that Tesla would be a competitor or that Google would enter the realm of cars with their automated car program?  A few short years ago, who would have thought that Red would be the camera of choice and used in three of the 2016 Academy Award nominees for best film? 

With technology and apps changing so quickly, competition can change just as fast.  Technology is the new enabler helping young entrepreneurs compete with established companies and with each other.  Recall what Andy Grove, former Chairman of Intel said:  Only the Paranoid Survive.  Whether you are a start-up or an established company, be paranoid and keep your eyes open.

5. CEO vision and passion.    We at TechCoastAngels say that we have to like the horse (the business concept) but must LOVE the CEO (the jockey and her team.)  As we screened the candidates for our upcoming event, we looked for a CEO with passion and vision and who can relate to us, the investor.  We wanted to find someone who had a history of success, was decisive, yet approachable and coachable.      

Think back to the great leaders of businesses or coaches and CEOs of sports teams.   Who is your model for a CEO with vision and passion?  I personally thought Lee Iaccoca was great when he resurrected Chrysler.  Jack Welch turned GE into a world class company with his vision to be #1 or #2 in his markets.   Steve Jobs showed the world a new vision for technology. And Alan Mullaly took Ford after the great recession to a new level of respect and performance.   

I trust that our C-Level Partner blogs and the ideas will help executives of start-ups and on-going companies be successful and also be used by executives to help them guide their companies to business success.   C-Level Partners has been established to be a beacon for value creation.  My partners and I would be glad to continue the dialog on what makes a successful company and help you optimize your business value and achieve your business goals.  Feel free to reach me at dfriedman@prodigy.net or call me on 949 439-4503.  And if you enjoyed this blog please like it, repost, and retweet it.

Growth Vectors and Strategies: You Can’t Shrink Yourself into Greatness!

In this blog I will present a couple of useful tools to help companies define different growth paths- growth vectors and strategies.  It’s a little lengthy, but I trust it will provide value and will be thought provoking.

Do you know of company CEOs that say, "We don’t want to grow; we are comfortable where we are?”  There may be a few small businesses that are under the leadership of a founder or family member that take that approach and maybe that company serves a very small niche market that generates a nice income.  Typically, growth and how to grow are foremost on the minds of a company’s leadership.  Why? 

Why companies want to grow

Regardless of the ownership structure of a company, the pressure to grow is apparent because CEOs want to increase their company’s value. Whether through share appreciation for a public company or the increase in a private company’s multiple because it makes the company a more attractive acquisition candidate, value cannot increase without growth.

Growth must include both the top and bottom line.  Companies that grow top line revenue are normally accorded a higher multiple (e.g., price to earnings ratio) so upon merger or sale, the company will be at a higher value (market cap) than a comparable company with less growth.  But growing revenue alone is not necessarily sustainable.  Companies have to couple that revenue growth with reasonable margins i.e. EBITA, and margin growth.     

Some executives are less concerned with top line growth and focus on managing operational expenses, especially in times of economic downturn. I am sure we can think of executives such as Al Dunlap who was recognized as a cost cutter.  Yet, there are only so many expenses that can be cut.  Eventually, as we say, you cannot shrink yourself to greatness.

Growth is second nature to many executives.  Top line revenue growth can be developed in several ways using different strategies.   Executives have to guide their company to grow intelligently given their company’s competencies, the competition they face, the customers they have, and the culture they have created in their companies.

Growth is also important for other less tangible reasons. With growth, a company will be able to retain its employees, as opportunities for personal growth are tied to overall corporate growth. Top employees will leave a stagnant company for a company that is expanding and promises them the opportunity to grow with them.  Just look at the tech companies in Silicon Valley as poster children for this.

Growth is typically driven by innovation in products, services, processes, and technology.  A company that is stagnant will likely lose its ability to remain innovative and thus take on a much greater risk of becoming obsolete.  Once you lose the momentum of growing, it is hard to restart those efforts.

Most of our clients are interested in growing.  One company wanted to grow their business because they had a limited number of very large customers.  Losing a major customer would be a very high risk to the company, not only their value but their ability to pay for their infrastructure and salaries.  Unfortunately they lost a major customer representing approximately 30% of their business. It took several years to recover from that debacle.

Another client had a more unique problem.  They were a B2B chemical company and bought a relatively strong brand from another company.   However, they started to lose market share to competitive products and technology was such that existing customers were willing to invest in the technology on their own and become their own supplier.   The question we faced was whether their brand could survive and if it did, would they be able to grow their brand.   Fortunately, we were able to map out a product strategy and plan to enable them to stem the exodus and expand their market.

A third client wanted to grow as they positioned themselves for sale.  Yet they set self-imposed constraints on their growth because they did not want to build certain types of products because of their internal competencies and what they perceived to be competitive threats.  This company was bought in short time frame at a bargain price given the patent portfolio they created.

The Product-Market Matrix

Growth is fundamental to creating value for owners, employees, and customers. In all three cases above, there were obstacles- real or perceived- to their growth.   Their goal in all cases was to grow their business.    So the question they faced was:  How does one grow intelligently? 

Let’s take a look at a couple of tools that can be used to break down a difficult problem into smaller bite-sized chunks.  A very powerful strategic planning tool is called the Ansoff Matrix developed and reported initially by Igor Ansoff in a Harvard Business Review article in 1957.  The product market matrix described below is a classic method for analyzing the opportunities and risks facing a company seeking profitable growth.

The Ansoff Product Market Matrix

There are four broad categories for growth based on a combination of expanding products and/or markets.  Each category presents different risks, opportunities, and returns for the company.   For example, developing new products or markets assumes a higher risk than increasing market share in your existing markets.  Diversification, where a company not only develops new products but targets new markets is the most risky.  However, different strategies may be necessitated based on the business life cycle of the company, its products, and the competitive landscape.

A CEO needs to consider its strategy for growth and the risk he and his/her board want to take.   Let’s briefly look at each of the four quadrants.

Market Penetration

This strategy suggests there is room to further penetrate the current market with current products.   The product life cycle may be relatively young and both revenue and margin growth are possible.  Maybe there are new ways customers want to buy, or perhaps changes in customer buying habits increase their willingness to buy your company’s products. If the price of the company’s product is inelastic, a price increase can generate additional revenue and margin.   One small insurance company we know used this precise tactic. 

Another way to increase market penetration is by increasing awareness of your company’s products to other similarly situated customers in the markets you serve who may not know about your company and your products.  A third way to increase penetration is by expanding channels of distributions and partnership relationships.  A partner who is selling into the same market can sell your product as a tie-in sale.   One wireless company for whom I worked increased its channels of distribution and added more market development funds to several channels.  Sales increased by more than 25%.   Uber is increasing penetration in their current markets by adding new drivers.

Market Development

Companies can grow by selling its existing products into new markets.  Market development opportunities may be implemented in several different ways: by advertising different features, modifying the core product slightly by feature, repackaging the product to be more suitable to the new market, focusing on new uses, developing new applications, and expanding geographically. 

For example, it is not uncommon for veterinary medical devices to be slightly modified for the human market.  Panasonic Toughbook which is a PC slightly modified for rough terrain.  GE modified its standard bulb with a tougher covering for harsh outdoor environments. Black and Decker modified its tools slightly and rebranded them as Dewalt for the professional. Meguiars Mirror Glaze for the professional detailer market was repackaged as Meguiars Wax for the consumer market.  Arm and Hammer baking soda was repackaged as a refrigerator deodorant by changing the packaging.   Uber started in San Francisco and expanded to other US cities and then internationally.  Microsoft offered its Office product to Students and Teachers by reducing the price, changing the licensing options, and eliminating Outlook from the Student and Teacher version.  

Other means for market development may include partnerships and building a stronger eco-system.

Product Development

This growth vector relies on creating new products and selling them in its current markets.  This strategy offers a company the ability to expand its “market share of wallet” in existing markets.  Product development has its own unique risks and constraints and will be discussed below.   However, product development and innovation have the potential to yield solid financial results if performed correctly.  

Look at Apple and how they were able to expand from the PC, to the series of I-devices like the iPod, iPhone, iTouch, iPad, and then add larger sizes (line extensions) for the iPhone and iPad.  Boeing was able to take the 747 platform and develop a tanker for use in military applications.  Honda and other car companies have developed new models to appeal to specific sub-segments of the markets they served.  McDonalds developed the McCafe and Burrito to complement their existing products in their breakfast menu.  

Diversification

A company can grow by developing new product in new markets through diversification.  It offers the company a new opportunity to grow with high margins.  However, it is the most difficult because the company may need new competencies in development, new partners, new channels, new sales and marketing skills, and new processes and infrastructure.  Some companies have chosen to reduce risk by partnering with another company which brings complementary skills. 

Some companies have been successful in making that transition.  Here are some examples.   Coca-Cola diversified into Vitamin Water (related diversification) as well as branded merchandise and clothing.   The NFL has moved from the teams as the products to licensing deals for clothing with the team’s logos and other merchandise.   Eddie Bauer diversified from rugged outdoor clothing to car interiors for Ford.   Google, which was founded on search algorithms and advertising keywords, is developing self-driving cars.    

Another way companies can diversify is by taking an internal competency and commercializing it.  Amazon leveraged its internal computing and server management skills and built Amazon Web Services which is one of the dominant providers in its market.  Motorola was attempting to be diversified yet became overwhelmed and had to retrench and spin off some of its business.  So it is fraught with a high degree of difficulty.

The product development spectrum

Since product development is a major component of growth in the Ansoff matrix, I want to briefly cover the product development spectrum.  Depending on the type of product development undertaken, the risks can be relatively small or very large.  Companies need to develop a product development strategy reflecting their growth plans and include how to manage the risk of development. 

Several questions must be asked.  Does the company have the right resources and competencies?  What is the amount of time the company is willing to invest in developing new products?   Can the company protect its product through new Intellectual Property or by otherwise developing a “moat” surrounding the product?  Or is there some other strategic control point that can be developed by the company that enables a new product to be successful.  How much risk is the company willing to take in developing a new product?

From lowest risk to highest risk, the spectrum of new products is as follows:

Type of Product	Risk Level	Organization Effort
Pricing/packaging change:	Low	Very low
Minor line extension (different shape or size of product e.g. WD 40 in larger spray can)	Low	Low to Mid
Major line extension (adding significant features to the product to make it different e.g. Panasonic Toughbook or GE Tuff Bulb. Hyundai marketing the Equus as a high end competitor to Mercedes and BMW.)	Low- Mid	Mid
New to Company (adapting a product in the market or copying a competitive product, e.g. Kroger developing Cola K to mimic Coke.)	Mid- High	Mid-High
New to the World (a new technology, new IP, new process like the iWatch or iPhone when it first was commercialized.)	High- Very High	Very High

The rewards for different product development activities will vary with the ones toward the bottom of the table normally providing greater returns and a potential position of dominance in the market.  But clearly there is a higher risk to the company, especially in the area of product development costs and R&D.

Managing the growth path

This blog shares a few ways to grow a company’s business.  There is, of course, organic growth using one’s own resources as well as growing via partnerships, alliances, joint ventures or other business combinations.    The right answer depends on the analysis of both internal and external factors and the risk – technological, regulatory, business, or financial- that the company wants to endure.

Depending on the size and complexity of the company it may be pursuing several of these strategies at the same time. As part of the planning process it is helpful to plot each growth strategy against the Product Market Matrix and assess the level of risk being undertaken. We worked with a company that, upon mapping its growth strategies, realized it was taking on too much risk and slowed down its efforts to enter a new market with a new product.

As companies seek growth, they need to keep in mind the following key issues.   First, what are their new routes to revenue?  Where do they want to play on the product-market matrix and do they have the right skills, competencies, resources, and culture to be successful?  Second, as companies grow their business through these new routes to revenues, who are their ideal targets?  How will they identify them?  How will they market and sell to them?  Third, what are the financial and market metrics the companies will use to gauge success?  Will those metrics be incorporated into operations reviews and a balanced scorecard?  Fourth, how will the company determine the best growth path?  Is there consensus on how to score opportunities?  (In a future blog I will present a method called the Analytical Hierarchical Process to score disparate opportunities.)  Finally, how will the company manage risk and impact?   Brian Newton has written a couple of blogs on this topic and can provide some thoughts and tools to use.

Regardless of which direction a company takes to increase their growth vectors, metrics for success and a continual review of progress need to be implemented.  This should be accomplished through operations and strategic reviews, and incorporated into a dashboard for review and action. We suggest that companies implement a test of their strategies and tactics in order to gain feedback from customers and suppliers prior to releasing a final product.   The readers of this blog may be able to suggest other ways to manage the risk of growth (or the risk of non-growth if companies perceive they just want to manage cost efficiencies.) 

We, at C-Level Partners, would like to continue this dialog and welcome any thoughts you might have.  Feel free to contact David Friedman at dfriedman@clevelpartners.net or via phone at 949 439-4503 for a confidential discussion on how to develop new vectors for growth.  After all, you can’t grow without a plan and you can't shrink your company into greatness.