Ensuring you achieve significant business growth is all about making the correct decisions for your business and where you focus your time, energy and resources.
This week I want to share a simple framework, that we use with our clients, to determine where to correctly focus energy in the development of a business.
Deciding on a strategy
In the framework above there are four quadrants. On the side is the market, we can account for an existing marketplace as well as new markets. Along the top is existing products and new products. There are a number of factors that will determine where you sit in this framework but once determined, it will help to determine the best course of action in that scenario.
Determine where your focus should be
Existing Marketplace + Existing Product =
Here you should be looking at market penetration. If we were to look at an existing product in an existing marketplace, the groundwork is set but you really need to be focused on how you can penetrate the market even more and get yourself out there. Here the growth is around 15%.
Existing Marketplace + New Product =
The focus here should be product development, on the back of fully understanding your clients’ or customers’ needs and requirements. With proper focus you can expect around 20-25% growth in these conditions.
New Marketplace + New Product =
This is quite a tough quadrant, you should be looking at diversification. As you can imagine, new territory and new products, untested as far as the business is concerned. Here someone can expect around 3-5% growth.
New Marketplace + Existing Product =
You need to be focusing on market development. If you’re looking at a new marketplace and existing products, the challenge is that you don’t know how it’s going to be received. Here you’re looking at under 10% growth.
Looking at these different areas, I want you to think about your business right now and where you are focusing your energy currently. That could be where you are spending the most time and resources.
There is nothing right or wrong, but there is a very important study, that has been done around this and soft matrix, which gives you a good sense of what level of growth you can expect in each quadrant.
With the correct implementation, you can get an idea of how much growth you can realistically expect to see.
A distinction that you need to make here is, looking at the existing marketplace section, you will notice that the majority of the growth is sitting there, sales growth. If I am focusing on sales growth in the organization, the top line and the bottom line, the other thing that you need to be mindful of is that the margins will be higher, because you already know this existing marketplace and therefore automatically, the conversion, the margins are going to be higher, compared to a new one. So not just top-line growth, we are talking about strong bottom-line growth here as well.
Which quadrant are you in?
This is the point I want you to mull over. What number of people are sitting in each quadrant, and what percentage of their time is going into each of these quadrants. You need to think of your resource allocation at this stage.
I will give you a rule of thumb. For the existing marketplace section, it should be around 60-70 %. And for new marketplaces it should be around 30-40%. This is because we know that it is six times easier to get more business from an existing marketplace than from the new marketplace. So again, we’re looking at better returns on investment of time, effort and money.
Just that decision, can make a huge difference, in terms of what growth you’re experiencing versus what your competitor is doing. It is not always about getting into a new marketplace, it’s actually about saying, “How do we saturate our existing marketplace? How do we develop our existing marketplace through product developments?”.
Then if you want to move to the next step, it should be to market development, because that is where you start to increase your market share with the same products. The final step after this should be to diversify.
As I said, there is no right or wrong. It is just correct decision making, as to what you are trying to achieve and therefore ensuring your resources are aligned with those growth objectives.
I hope that helps you to reflect on where you are focusing energy in you business right now and where you need to move next to make a significant impact.
If you would like to discuss this or any other strategy covered in recent articles, please feel free to get in touch and we will happily provide some pointers.