VP of Strategy: Growth Strategy (page 1) The Growth Strategy is a long-term strategic plan for sustained growth of an organizationʼs revenue, profits and talent (people). It is comprised of specific business strategies designed to move the organization through a series of phases defined by target goals (revenue, profit, and talent). An effective Growth Strategy will be determined after a thorough Situation Analysis, comparison to standard business growth models, and comparison to historical growth strategies of successful organizations in similar industries or business environments. The Growth Strategy should be a guiding force behind other Business Plan components such as the Sales Strategy and Marketing Plan. A good place to start when determining a Growth Strategy to pursue (after a Situation Analysis is completed) is the Ansoff Growth Matrix (a.k.a Ansoff Product-Market Matrix), pictured to the right. This is a standard Business Plan tool that provides four common Growth Strategy options (summarized below) by analyzing the relationship between Products (existing and new) and Markets (existing and new). Market Penetration - This strategy focuses on continuing to sell existing products / services into existing markets. The goal is to increase market share in the current marketplace by winning a higher percentage of new business opportunities, and / or taking customers from competitors. Typically, this strategy is most effective when the overall market is growing, and it is done by implementing one or more of the following competitive tactics:

a) New targeted marketing campaign(s) b) Increase sales force / refine sales process c) Aggressive pricing changes (undercut competition) d) Value-added services aimed at dominating high growth market segments.

Product Development - This is the strategy of introducing new products / services into existing markets. The goal is to increase market share in the current marketplace by increasing revenue per customer, and attracting new customers in the current marketplace with new product options. This strategy is often part of the natural growth of organizations, however it requires the development of new competencies (often done through acquisition or strategic partnerships), which inevitably brings new risks and expenses. Market Development - This is the strategy of selling existing products into new markets. The goal is to increase revenue by moving beyond the immediate customer base, attracting new kinds of customers for existing products. Typically, this involves identifying new vertical market segments that have not yet been served, developing new distribution channels, or international expansion. New pricing or packaging strategies can be effective with this strategy. Diversification - This is the strategy of diversifying into new businesses by introducing new products into new markets. This is the most risky of the four strategies, and the least attractive option unless there is a unique circumstance that would warrant such a move. Also, Diversification can be a move into either a related business or completely unrelated business, but the former is almost always preferable. An ideal way to use the Ansoff model is to consider each of the Growth Strategy options above from the perspective of your own organization. For each strategy describe likely scenarios for the current, near-term and long-term product-market situation, then rank them in order of the strategy most likely to see tangible results in the near term. While itʼs possible (and common) to pursue more than one of these Growth Strategies simultaneously, it is often recommended to pick one (or two), and focus company resources on supporting that strategy.

 

VP of Strategy: Growth Strategy (page 2) The standard models for Horizontal and Vertical integration are also helpful tools for formulating Growth Strategy: Horizontal Integration - This strategy (a.k.a Horizontal Expansion) has similarities to Market Development (described above) in that it seeks to expand by selling a product (or variation of that product) in numerous markets, although generally Horizontal Integration is on a larger scale than Ansoffʼs Market Development strategy. Horizontal Integration often refers to a firm merging with or taking over another firm in the same industry, and often in the same stage of production of a similar product. (e.g. car manufacturer merging with another car manufacturer). The primary goals of Horizontal Integration strategy are to increase market share for a particular product or service, and build economies of scale. Vertical Integration - This strategy (a.k.a. Vertical Expansion) is a method of expansion by owning upstream suppliers and / or downstream buyers in the supply chain. Itʼs a variation of Ansoffʼs Product Development strategy (described above) in that seeks to expand by introducing new products / services in an existing market, although Vertical Integration tends to be on a larger scale and is focused on the supply chain. There are variations of vertical integration including “Backward Vertical Integration” which seeks to control the production of products, and “Forward Vertical Integration” which seeks to control distribution. Finally, when formulating a Growth Strategy, itʼs always a good idea to look at the history of organizations your firm wishes to emulate -- specifically, those firms that have recently been successful in similar industries. While there is no guaranteed Growth Strategy blue print, understanding the path these firms took with consideration of their unique timeframe and business environment can be very helpful in formulating your own Growth Strategy. For details on Business Strategy or DAM / ECM consulting engagements with VP of Strategy, LLC, explore the www.vpofstrategy.com website, or contact Scott M. Eilers to set up a free consultation: scottmeilers@gmail.com 971-269-5021