A couple of weeks ago I penned an article with the topic; reasons why a CEO would want to grow their company. This week I would like to stay with the subject of growth but pivot to the issue of how a CEO might achieve growth. There are many tactics available. Each business owner must determine which tactics are best suited for their companies.
Growth strategies can be classified as either internal or external. Internal are those developed by the company itself and external is defined as those created by developing relationships with other companies. Whether internal or external a CEO will probably need outside financing to implement the growth strategy. The more thought out the strategy is the easier it will be to attract bank capital.
For Internal, the growth tactics could include:
New Product/Service DevelopmentImproving an existing product/serviceIncreasing market share of an existing product/ serviceProduct/service line extensionExpanding the geographic footprint
For External, the growth tactics could include:
MergersAcquisitionsStrategic AlliancesJoint VenturesFranchising
Due to space limitations I will not cover external tactics in the article but many of them are self-evident. I will focus instead on internal tactics for growth.
New Product Development– This tactic is one most of us are familiar with and it is the most exciting. The challenge for most CEOs of small companies is that the cost for R & D and building a prototype can be prohibitive. It also can be high risk.
Improving an existing product & service- This tactic is less costly and less risky than a new product. Smartphone manufacturers are notorious for using this tactic especially Apple.
Increasing market share of an existing product /service- This tactic does not involve a new product or an improvement of an existing product. This growth is achieved by taking market share away from competitors by spending more money on advertising, marketing, public relations and more efficient sales activities.
Product Line Extension Strategy-This tactic involves providing different versions of a product or service that would be attractive to a different target market. A CPA who has basic suite of services that are offered to middle income business owners might offer a “low cost, no frill” version of this suite of services to low income business owners.
Expanding the Geographic Footprint- This tactic is common to all of us, where a CEO opens a new office, store etc. in a brand new geographic location. The hope is to expand sales by offering products or services to prospects that have never been exposed to the company’s offerings. The challenge is that the demographics of the geographic market might be slightly different than that of the original location and the company is entering a new area where they may have a weak brand or no brand at all. These two issues will retard new sales.
New Product Development is the most difficult tactic to be successful at. Here a few reasons why:
What CEO’s believed was an unmet need that their new product would fill was not viewed by prospects as compelling enough. As a follow up to this comment; prospects too didn’t see any real value in the supposed benefits, prospects saw the new offerings as too expensive, company’s definition of target market was too broad, they didn’t “niche it” enough, the product or service was poorly designed resulting in customer complaints, the new product was no different than the competitors’ products, competitors who had established brands.
Good luck, don’t have growing pains!