From the Author of The Art of Profitability
IN A WORLD OF PRODUCT SATURATION AND MARKET TURMOIL...
CAN YOUR COMPANY ACHIEVE DOUBLE-DIGIT GROWTH?
Absolutely! Even as you read this, old-line companies are creating new profits through "demand innovation." They're thinking beyond their products, exploring the opportunities that surround them, and discovering exciting, new possibilities for growth. The acclaimed guide to this new approach to expansion, HOW TO GROW WHEN MARKETS DON'T shows you how:
- Cardinal Health, a drug wholesaler, overcame a price squeeze by developing profitable new prepackaged surgical kits
- Johnson Controls went beyond the assembly of car seats by designing complete, integrated automobile cockpits
- Virgin created a brand that embraces markets from travel to mobile phones-all linked by a spirit of youthful exuberance.
Packed with more inspiring success stories, insights on mining your company's hidden assets, and "moves for Monday morning" that can improve your bottom line immediately, this book gives you the tools you need to keep your company vital in challenging economic times.
In this shrewdly titled volume for today's tough economy, global strategy consultants Slywotsky (The Art of Profitability) and Wise analyze companies in mature markets that have managed to achieve significant growth without venturing outside their industry, manipulating their financial statements or acquiring dot-coms. Their chief insight is that established companies with experience in their field have, aside from their core business, a wealth of hidden assets-customer contacts, technical expertise, efficient business models-that they can exploit to grow new businesses. Take John Deere, which studied the growth in home ownership (and consequently in the residential landscaping market) and decided to graft its trusted brand name and expertise in agricultural equipment onto a significant growth market. Clarke American took an apparently waning business-check printing-and morphed it into a customer services firm for large banks. By building on intangible assets like brand recognition, knowledge of the customer and distribution channels, these companies transformed themselves into growth centers for new products and services. The authors gloss over many of the problems that hamper blue chip companies seeking growth, however-e.g., market attrition, declining cash flow, recalcitrant middle managers and stodgy tradition-and fail to note that many of the corporations they cite here fall into current growth industries like personal banking, health care and home ownership. Nevertheless, the book does take an imaginative look at the possibilities open to mature companies looking to rejuvenate themselves.
Copyright 2003 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.
-- PUBLISHERS WEEKLY.
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November 01, 2004
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Excerpt from How to Grow When Markets Don't by Adrian Slywotzky
The Growth Crisis
This is a book about growth-specifically, about how you can grow your business in the difficult environment most companies are facing now and will face in the decades to come.
Many businesspeople think of the postwar decades as a golden era of routine, almost reflexive growth. This picture is exaggerated but fundamentally accurate. It was significantly easier for most firms to rapidly and steadily increase their revenues and profits during those years than it is today. Many great companies were built using a model that appears, in retrospect, exceedingly simple: Invent a great product. Launch it. Sell it like hell. Go international. Acquire and consolidate. Cut costs. Raise prices if you can. Repeat ad infinitum.
But as most businesspeople realize, cracks have long been spreading in that traditional model of business growth.
The first major stress on this traditional growth model came with the rise of the business design innovators beginning in the mid-1980s. Companies such as Southwest Airlines, Nucor, and Wal-Mart focused not on product innovation but on inventing new ways to better serve the customer, capture value, and create strategic control in their industries. They created innovative business designs even as they sold products similar to everyone else's.
The result was that billions of dollars of shareholder value migrated from the traditional industry leaders such as United Airlines, U.S. Steel, and Sears to these upstarts. We've learned a lot by studying the business design innovation methods developed by these companies and other industry leaders, and many of our consulting clients, as well as readers of our previous books, Value Migration, The Profit Zone, and The Art of Profitability, have benefited from applying the same ideas to their own businesses.
Within the past five years, though, we've begun to observe a new and troubling pattern. What was once value migration from one business model to another has increasingly changed into value outflow. Profits and shareholder value are leaving industries altogether as markets become increasingly saturated and traditional sources of growth run out of steam.
This value outflow points out a key challenge to business design innovators in today's marketplace. Most have done little to shape new customer needs beyond those addressed by traditional product offerings. Take Southwest Airlines, for instance. It has built an innovative point-to-point route system with lower overall costs than the major airlines, but it still sells only the standard airline seat. It hasn't redefined the travel experience or created new demand by helping customers in some special way before or after they occupy that seat. The same is true of Nucor in steel or Wal-Mart in general merchandise retailing or Dell in computers. All have successful but fundamentally product-focused business designs.
Out of Steam
Unfortunately, in the years to come, traditional product-centered strategies alone will be unable to create the kind of growth companies desire.
In the past, companies searching for growth opportunities have relied on classic product-focused growth strategies: Create innovative products, expand the market for them globally, and make acquisitions to gain market share and create efficiencies. These traditional growth moves are as important as ever (and for a few companies, even more important). But for most companies, these moves will merely replace revenues and profits lost to commoditization and increased competition. They won't represent a platform for driving significant, sustained new growth. This is true for a variety of reasons. Let's begin with the challenging dynamics facing product-innovation-oriented growth moves: brand extensions, core product enhancements, and new-product introductions.
After years of brand extensions, most spin-off products are serving ever-smaller niche markets and fighting for space on increasingly crowded shelves. (The same applies to such basic services as banking, hospitality, and travel, which can be thought of as "products" in this context.) For example, between 1980 and 1998, the number of annual new food product introductions in the United States grew five-fold, to nearly eleven thousand. Similarly daunting statistics could be cited for cars and CDs, books and cosmetics, toys and televisions. In such an environment of saturation, is the world waiting eagerly for your next product extension? Not likely.
Thus, most companies' product extensions-think of American Express Optima or Pepsi Blue-are producing increasingly small returns in terms of growth, especially in percentage terms.