Is Your Growth Strategy Flying Blind?
by Mehrdad Baghai, Sven Smit, and Patrick Viguerie
Very interesting article that I strongly urge you to read.
Despite an abundance of raw data, few organizations have figured out how to parse and analyze all that information to reveal the best opportunities for growth. Even fewer have attempted to structure and manage themselves to match the texture of the markets in which they play. But a fine-grained understanding of company performance and markets is critical which calls for a nuanced approach to cutting costs and making long-term investments.
Baghai, Smit, and Viguerie urge firms to target narrower market slices and to measure sources of growth—market momentum, mergers and acquisitions, and market share gains—in a more detailed way. When they reviewed growth patterns of global firms from 1999 to 2006, they found that companies can get a much more accurate picture of growth prospects by digging deeply into micromarkets (typically ranging from $50 million to $200 million in value) than by looking at the division-level performance numbers commonly used for measuring, organizing, and managing.
The authors examine several companies—including Amazon and Ping An—that have benefitted from greater granularity. For instance, one large European manufacturer of personal-care products went beyond an aggregated view of performance and discovered that some of its higher-growth segments were lurking in the unit with the lowest overall growth rate. Another company, an integrated telecommunications service provider, retooled its marketing mix—making fewer roughly calculated media trade-offs (television versus direct mail versus radio) and instead selecting the right media within narrowly defined regions for specific lines of business. As a result, it boosted sales between 10% and 15% in several regions and increased average lifetime customer value by 15%.