Professional Documents
Culture Documents
BUSINESS
January/February 2002
Volume 23
OF
JOURNAL Number 1
STRATEGY
The Magazine for the Corporate Strategist
SOWING GROWTH IN
YOUR OWN BACKYARD
Growing a business in tough times isn’t easy, but it can be done.
By Bob Lurie and Toby Thomas
G
and triple growth rates. Throw out the fads and begin the
economic times. Your customers aren’t buying as much hard work—a cornucopia lies in your own backyard.
or as frequently as they used to, and the usual programs
don’t seem to work as well anymore. And that’s frustrating, Take a Closer Look
because the benefits of growing your core business are clear. The first step is to look more carefully at the parts of your core
Nothing creates greater shareholder value or builds a more market in which you have not traditionally participated. You
vibrant organization than generating higher and higher levels of may find the most attractive sources of growth in places where
growth in your principal business. you haven’t looked before, or where you’ve looked but haven’t
But sowing growth in your own backyard is hard to do—really seen. Managers often fail to notice all the potential sources of
hard to do. Even talented and seasoned managers blessed with growth in a business. No surprises here. Every company has its
boom times have toiled with this problem year after year. They reflexes, its biases. It looks at the sources of growth that have
have broken their analytical picks trying to make sense of the worked in the past—say, poaching new customers from big
complexities of their market, they have harvested all the low- competitors—not necessarily at those holding the most promise
hanging fruit, and even when they do spot promising new for the future—for instance, stimulating existing customers to
opportunities, their organization often rejects them in favor of use more of the product.
business-as-usual programs. The reward for their hard work: For example, in the late 1980s, Fujitsu had an active busi-
frustration and tepid growth. ness customizing its PCs for sales-force automation tasks at
And yet, even in really tough times, and perhaps especially companies that sold big-ticket, information-intensive products.
in tough times, there lies a golden opportunity. Slowdowns Salespeople at these firms would typically make two or three
compel managers to take a hard look at their organizations, to sales calls a day; then, at five o’clock, they’d enter the day’s
challenge conventional wisdom, and to reconnect with their activity into their home PCs, using Fujitsu’s software.
markets (lest they fall further out of step with it). To make the But this method made little sense for the salespeople who
most of the unfreezing of the way their company thinks and supplied, say, snack foods to convenience stores and might
acts, they need a fertile, concrete approach to guide their make as many as 70 sales calls a day. They couldn’t possibly sit
thinking. Actually finding golden opportunities doesn’t require down at a PC and write memos about each call. And in the
access to a silver bullet, just the discipline of employing the late-1980s many of them didn’t own PCs and were unaccus-
tried and true growth principles that deliver in good times and tomed to using them. Fujitsu helped address the problem by
in bad. In fact, these principles consistently serve to double building a portable, task-specific computer for Frito-Lay’s sales
Create Meaningful and Actionable Segmentations Align Your Organization for Growth
Traditional market segmentation can succeed in identifying You also need to design your organization itself for growth. Every
groups of customers who share the same basic needs and department of your company—marketing, product design, even
beliefs, but it’s often done in such a way that no one can ever finance—must target the desired customer behaviors. Internal
find them. For instance, say you commission a study that con- factors that can retard growth range from organizational struc-
cludes that “You have tremendous growth potential among ‘feel- tures that focus on products rather than customer needs, to
gooder’ types,” or “You need to use a different pricing strategy on inconsistent reward-systems, to a growth-averse company culture.
‘self-assured’ young women.” Well, these assertions may be It’s also helpful to organize you company’s growth budget just
quite accurate, and “feel-gooders” and “self-assureds” may be as you would organize your growth plan itself: around particular
perfectly well defined groups in a laboratory setting. But many behavior changes in particular customer segments. You start by
managers will sensibly ask: “Where does a feel-gooder shop?” budgeting specific amounts of money to change behaviors:
“What advertisements do self-assureds see?” In short: How do I “$2.8 million to persuade the segment of office secretaries to
find these people? Too often the answer is, “We don’t know,” buy their office supplies on line.” Only later do you allocate that
and the manager is left with an honorary Ph.D. in psychology money to particular departments and product lines. Finally, if
rather than a growth strategy. you lack data on key customer segments, you may have to seek
The lesson here is always to organize your market research, out data specifically on those segments. Packaged-goods makers
your customer profiles, and your growth strategies around seg- have reams of scanner data from large retailers, but if the people
ments that your company can somehow act on. If your company in the chosen market segment do their shopping at mom-and-
and its distribution channels cannot isolate a particular type of pop stores, the companies might as well use their scanner data
customer—speak to him, market to him, and price to him— to paper a birdcage.
you’re never going to influence his behavior, no matter how inti- To summarize, if you want to generate superior growth year
mately you understand him. The game is to find customer seg- after year in your traditional lines of business, you need to do
ments that are relevant to the realities of your company—its the following things:
organizational structure, sales capabilities, distribution channels, 1. Divide your market into segments that are both actionable
and so on—and also economically well-defined, in the sense that and meaningful;
all members of the same segment have similar needs and experi- 2. Use the five types of growth—1 through 5 above—to help
ences concerning your product. In other words, your customer identify the most important growth opportunities;
segments must be both meaningful—in that those customers 3. Make sure you understand all the economic activity of
exhibit distinct behaviors, needs, and beliefs—and actionable, in each segment;
that your company can conceivably do something to affect their 4. Focus on customer behaviors you need to change to take
behavior. One of these without the other won’t work. advantage of those opportunities, and on the barriers that you
The right customer segments are not always the obvious must overcome to effect the desired behavior changes;
ones. For instance, studios that make animated films for chil- 5. Create a holistic, fine-grained picture of the relevant cus-
dren often gather their market data according to standard demo- tomer segments, to bring the customers to life for the whole
graphic categories, such as “mothers with young children.” But organization;
it turns out that this segmentation is not meaningful: The 6. Insure that your organization has a growth-orientated
movie-going needs of a working mother and a stay-at-home structure and mindset.
mother are so different that they render a single customer pro- Successful growth-oriented firms work on all of these tasks at all
file useless. In particular, the life of a working mother is often times and know how to integrate them so they work in harmony.
filled with notions of being tired, feelings of guilt toward her Hard work? It certainly is. But it’s well worth the effort. ◆
children, and a desire to share with them special, potentially
educational experiences, such as going to see an animated
movie. The stay-at-home mother spends half her life carting her Bob Lurie is CEO of Market2Customer (M2C), and managing director
and global account manager of Cambridge, MA- based Monitor Group.
kids from one activity to the next, and regards children’s movies He can be reached at bob_lurie@monitor.com. Toby Thomas is an offi-
as no more than a discretionary diversion. Subdividing the seg- cer and global account manager in M2C, and can be reached at
ment into “working moms” and “stay-at-home moms,” gives you toby_thomas@monitor.com.