7 strategies to reposition your organisation for growth
Long article: This is a 20 minute read.
INTRODUCTION
Think about this scenario: You’ve noticed that another organisation in your industry is getting a bigger share of the market. Their approach is clever, and it’s working. You want to know how they did it, and whether you can find a strategy that works to boost your business. Finding the time, creativity, the finance, and the right team to make it happen can be challenging. You want to see a direct return on your investment and choosing the wrong path isn’t an option.
How do you reposition your organisation for growth?
The following paper offers 7 key strategies, each with real world examples from well-known companies, which can be applied to create a point of differentiation and ultimately position your company for growth. As with all things, a good idea is nothing without good implementation – hence the following are separated into (1) design strategies, then (2) implementation strategies.
DESIGN STRATEGIES
The first of the four ‘design strategies’ are designed to specifically direct focus towards your core offering and how that improves the life of your customer in some way.
Strategy 1: Creating a value proposition
Your value proposition is core to your business. All other strategies hinge on this. You need to decide who your customer is, then create the right value proposition for them.
Mantra Hotels focused on creating the right offering for business travellers, who are their target market segment and form a large part of their core revenue. Check that you are creating the right value proposition by:
1. Getting the minimum things your customer needs up to the minimum standard: Mantra Hotels does this by having great quality beds, pillows and showers. Every business traveller needs these and won’t go to a hotel that has a second-rate version. It is unlikely that these things will create advocacy, but not getting the necessities right makes for detractors who will warn other customers away from your business.
2. Getting the things that are overdone down to the minimum, and putting those resources into something else more useful: Mantra Hotels generally don’t have a restaurant or room service, which means they don’t have the cost of restaurant space, a kitchen and the necessary staff. Instead, Mantra Hotels are normally situated near restaurants and cafes. Guests can also order in from nearby restaurants, now made even easier with companies like Uber Eats and Deliveroo. Mantra Hotels don’t normally have a spacious lobby, which adds to real estate cost for no direct return. They use that real estate on rooms, which bring them income.
3. Getting the expected things that are inexpensive and offering more of them: Once installed and with an unlimited package, Wi-Fi is inexpensive for a hotel to offer guests. Most hotels then want premium Wi-Fi access to be part of their revenue model. Mantra Hotels don’t charge extra for unlimited Wi-Fi access, and guests appreciate it. For business travellers, synchronizing files and sending emails is just the start. After business is done, unlimited free Wi-Fi allows guests to keep up to date with their current Netflix series without having to explain the extra charge on their expenses later. This is the opposite of the pay-per-view movie experiences at other hotel chains.
4. Getting the expected things that are expensive and price-pointing them: For a hotel, the bigger the room, the bigger the capital cost. The best way to deal with this is that bigger rooms cost more than smaller rooms. Mantra Hotels are no different to rest of the industry when it comes to room pricing.
Every business needs to know their customer and understand how to get value right for that customer. This is a fundamental strategy for repositioning your organisation for growth.
Ask yourself: What do my customers really value and are we offering enough or too much for the price?
The next three ‘design strategies’ can help a business design a path to growth. A critical aspect of this is who your customers are, which relates to your segment target positioning strategy. Often growth can be unlocked by switching to a new segment or a finding a new way to segment.
Strategy 2: Re-segment your market
LinkedIn offers a re-segmentation approach for social media, creating a place for its users to proactively communicate and share content. It is essentially the business targeted version of Facebook. That creates a unique value proposition for its users, especially when it comes to recruitment.
In the recruitment market, there are normally 3 channels for an organisation to hire somebody. You can do it all in-house, outsource it to a standard recruitment firm on contingency, or work with an executive search specialist via retained search (head hunters). These three channels correspond to ‘Do it yourself’ [DIY], ‘Do it for me’ [DIFM] and ‘Do it with me’ [DIWM]. All three have pros and cons.
· DIY in-house: The cheapest but most time-consuming option.
· DIFM outsource on contingency: The highest value option because the risk is transferred to the recruitment firm. If you don’t hire their candidate, they don’t get paid. But you lose some control over the process.
· DIWM retained search: The most expensive option because you generally need to contract exclusively to a single head hunter. However, this option is almost the only way to fill high-level or specialised roles where there is a very limited pool of active job seekers. Often the value that the head hunter adds is in finding someone who is already employed, not actively job seeking, and is prepared to switch to your firm. They will also take more care trying to find the candidate that fits with your company culture than contingent recruiters, who are essentially operating on commission.
Generally, the harder it is to fill the role i.e. in Executive Search, the more you need support.
The market then segments around the industry that the job is in, for example, Government, Construction, or Information Technology jobs.
LinkedIn disrupts the market because it makes some of the key aspects of the DIWM Executive Search offer able to be done by in-house managers or recruiters. In effect, LinkedIn makes Executive Search potentially a DIY proposition because unlike Facebook, they are positioned specifically for the business segment. Using LinkedIn, in-house recruiters can cost effectively search for and contact potential candidates to find out if they are interested in entertaining an offer – making executive search a DIY proposition.
This does two things. Firstly, it means that they can grow without competing directly with Facebook (and indeed many FB users also have LinkedIn accounts). Secondly, it means that they can disrupt the Executive Search market because the cost to use LinkedIn is a fraction of the cost of retaining a head hunter. Executive Search firms are caught because they cannot use their assets to compete against LinkedIn. Instead, many are adding LinkedIn to their search activities for the very same reasons that in-house recruiters are.
LinkedIn is fundamentally a digital platform that offers a better customer experience [CX]. Leveraging technology to improve CX is the third approach to redesigning for growth.
Ask yourself: What other segments in your market might you be able to grow into?
Strategy 3: Leverage a digital platform to create a better customer experience
Kindle, Uber, Airbnb and Shoes of Prey are able to deliver exactly what their customers want by leveraging an online platform. It is a solid strategy for growth.
This story might sound familiar: you go to the bookstore at the airport, browsed for a while, and then found the book you wanted. There was a line of 10 people waiting at the till. You look at your watch, your plane is boarding soon. You give up on the bookstore, walk down the concourse, and use the airport Wi-Fi plus mobile phone to search for that title on Amazon’s Kindle. You download the book instantly, have no extra weight, pay 1/3 of the price, and reminisce about paperbacks.
With Kindle, your book was delivered faster, weighed less, and was cheaper.
Uber shook the taxi industry with its car service digital platform. The taxi industry started using apps to augment their customer’s experience, but they didn’t get it right fast enough. For many customers, the days of booking and waiting for taxis is over. Now, we can order on the Uber app, watch our screen to know exactly where our car is, how long it will be before we are collected (normally under 5 minutes), what the name of our driver will be, and what car we will travel in. After a conversation with a polite driver, we arrive. We no longer need to sit in the taxi finding our wallet. We can just open the door and get out of the car. The Uber app confirms and pays for our ride with our credit card as we leave the vehicle. We can also rate our driver, which encourages better service all round. Taxi services are now starting to catch up on service quality after a shake up by their new competition.
Airbnb competed against hotels with their digital platform, and changed where we stay when we travel. It introduced us to welcoming homes where we could live like a local, often at a fraction of the cost. Property owners used the Airbnb digital platform to advertise to hotel customers who were looking for something different. It became an easy way for property owners to make additional income from an asset they already owned (or leased). Traditional ‘bed and breakfast’ businesses that used to advertise on hard-to-find sites or accommodation boards now also use Airbnb’s site to access a global market.
It turns out designing a pair of shoes can be done in about 5 steps, by anyone. Only a handful of decisions is necessary – shoe shape, the height of the heel, material, colour, and any accessories. So, Shoes of Prey, an Australian fashion company, digitised the design process. Their users can create and order a truly unique pair of shoes online.
Because customisation is expensive, they make their shoes to order in China, taking advantage of less expensive (than Australia) factory and labour prices. Plus, they have no store, which means no real estate costs and shop labour. By doing these two things, they are also leveraging cheap inputs [Strategy 4, below] for their business.
A key part of these platform retailers’ strategy is that they leverage low-cost factors of production to increase the value of their offers. This is often a key part of a growth redesign because extra value is needed to attract customers away from their current suppliers.
Ask yourself: How could a digital platform help your customers access what you do faster, better and | or cheaper?
Strategy 4: Lower your costs
Organisations that are able to creatively minimise their cost of sales can achieve higher levels of growth.
In both Airbnb and Uber, the capital cost of the property or car isn’t factored into the pricing cost. Without that capital cost, and by using more effective labour costs, they can offer a greatly improved price to customers compared to hotels and taxi services.
Add in an effective digital platform, re-segmenting the hotel and taxi industries, and understanding the value proposition for their customers (online, fast, quality, friendly, at a lower price), both of these companies use all 4 strategies to give their customers great value.
Guzman Y Gomez (GYG), a Mexican food franchise, know their customers and what they want: adults who are in a shopping centre and are after something tasty, healthy, and a bit spicy.
They have systematised kitchen production like a fast food chain, which lowers their cost inputs (they can have lower paid staff to do a simple job), however, they use great recipes and quality ingredients to offset that.
GYG was able to deliver great Mexican food reliably and inexpensively to more customers. They did this by re-segmenting fast food to target Mexican cuisine, which in Australia was normally eaten in traditional restaurants, into a higher end fast food franchise. The USA already has many Mexican fast food chains and GYG was able to take an idea that works there into a new market in Australia. Learning from other markets and making them local is another excellent growth strategy.
‘Athleisure’ clothing in Australia was pioneered by Lorna Jane. She knew her customers well and gave them clothing they could wear to the gym, then feel gorgeous enough to sit in a cafe afterwards. She designed a range to suit her customer, re-segmented athletic clothing into leisure clothing and had it made cost effectively in China.
Now, other big athletic brands like Nike and fashion brands like Stella McCartney are heading into the crossover “athleisure’ segment of the market. Many of them focus on expensive design (a one off per item) and cheap production, normally in Asia, which lowers their organisation’s input costs.
Ask yourself: How can the cost of your key business inputs be lowered?
IMPLEMENTATION STRATEGIES
The following three implementation strategies help great ideas to become reality, not just sit on the whiteboard waiting to happen.
Strategy 5: Rapid prototyping and testing with real customers
Whether it is a service or physical product, it is hard to know if what you are creating is really something that your customer wants to purchase. When we ask a customer what they think, they will often say one thing, yet when it comes to buying, they behave very differently. An effective strategy, based on the concept of “Lean Startup” is to create the product or service quickly and cheaply, and test your theory and your customers’ response, before you invest fully into the idea. Creating a ‘minimum viable product’ (MVP) and testing it on real people is an excellent way of understanding what works.
Google needs to adapt to constant change, so they built innovation into their business model. They have called their version of rapid prototyping and testing sessions a ‘design sprint’. They regularly run a five-day process for answering critical business questions through design, prototyping, and testing ideas with customers. The intention is to implement by the end of each week, starting again the following week on the next critical question. This process helps them to quickly understand what works, and what doesn’t. They fail fast, revise, and test again.
Xero, an online accounting, Software-as-a-Service (SaaS) company, made a product and service that its customers actually enjoy using. In an interview with CMO Andy Lark (in Marketing Magazine) he says, “Every customer I meet - including my mate, who’s a plumber, and who I didn’t even know was on Xero - was like, ‘Oh my God, we love Xero. It’s changed the way we run the business. We love it and we love how simple it is.’ That core idea of customer experience is crucial.”
In addition to using an iterative process to create a service that customers enjoy, Xero uses data driven testing to perfect its marketing strategy. They are constantly testing, deploying and honing every marketing method available, including television adverts in New Zealand, and driving amazing growth as a result. Since 2006, the New Zealand start-up has listed in two markets, grown to count revenues of more than AUD$207 million in 2016, and Xero offices now occupy the world’s major English-speaking markets.
Fender is an American manufacturer of amplifiers and string instruments. It is perhaps most well-known across the world for its famous ‘Stratocaster’ used by many musicians, including Eric Clapton and Jimi Hendrix. Fender was founded in 1946 and has a rich history for quality and brand eminence and has continued to evolve its product line to keep pace with technology and design. In the past, this required Fender to constantly develop and test new ideas and designs, a process which involved working with external suppliers over multiple weeks in order to build working prototypes to test.
To improve its design-to-prototype cycle time, Fender moved its prototyping processes in-house by investing in 3D printing. Simultaneously incorporating Strategy 4 [Lower your costs] to lower their cost base for prototyping, Fender is now able to develop a concept at a design or marketing meeting one morning, and by the end of that day or the next morning, have a prototype to test, whether that is a knob for an amplifier or a full guitar.
Ask yourself: How can you innovate upon, then rapidly design and test part of your current offering?
Strategy 6: Excellence in delivery
In industries where there is no viable differentiation left, it is possible to compete and grow based on excellence in delivering a product or service. Instead of guaranteeing 100% delivery of service promises, often the business will offer a guarantee, and then pay out if that isn’t fulfilled, or provide other ways to improve the customer’s overall experience of receiving the product.
Domino’s, the pizza delivery company, offers their customers a 20-minute delivery guarantee. If your delivery has not arrived in the guaranteed time, they will give you a free pizza voucher for your next order. This means that if the company occasionally fails, there is a cost, but it is realistic in terms of ongoing business and is directed towards maintaining customer loyalty.
Domino’s Group CEO, Don Meij, is quoted as saying, “Our focus on innovation is always with our customers as our first priority; we continuously work on streamlining the order experience, and ceaselessly conduct testing to ensure this is as smooth as possible. Our investment in technology is also helping our store managers and franchisees become more efficient and productive”. Domino’s constant focus on innovation and technology (and Strategy 5 Rapid prototyping) to improve the customer delivery experience (pizza-by-drone, anyone?) is a core part of their success.
FedEx has grown to be one of the largest transport and logistics companies in the world, holding around 14% global market share in 2016. It provides freight management services in both residential and commercial sectors across more than 220 countries. The entire concept of FedEx was formed in 1965 when Frederick W. Smith determined that existing routing systems for shipping were not economical in making urgent shipments. He devised a system to provide superior delivery capability that leveraged under-utilised airport capacity at night and thus created a market niche, eventually also adopting the hub-and-spoke model pioneered by Delta Airlines for moving goods more efficiently around the USA.
Over time, however, competing logistics companies commoditised the market, and end to end delivery timeframes became a function of logistics costs and customer urgency. In 2000, to create a unique point of difference, FedEx once again focussed its strategic intent on providing excellence in delivery. FedEx introduced a single point of access to customers for sales, customer service, billing and other automation systems, and created a new low-cost residential delivery service. Perhaps more importantly, FedEx realised that the primary issue for customers was knowledge, in the form of status updates of their packages and certainty of delivery times. In response, they build a state of the art, 24-7 tracking system for customers to log in and validate the location of their shipments, anytime, anywhere (a direct application of Strategy 3, Building a digital platform).
Even in apparent monopoly industries such as urban rail, companies compete for passenger traffic and funding. While some systems are lamented for punctuality, cleanliness, safety and comfort, Hong Kong’s Mass Transit Railway (MTR) is frequently lauded as an exemplary provider of transportation services.
Moving more than 1.7 billion+ passengers per year across 93 railway stations and 218.2km of track, MTR is also one of the most profitable metro systems in the world, recovering 24% above operating costs through fares (a remarkable event – most metros don’t actually recover costs from fares) whilst still providing a 99.9% on time rate for its train journeys. The entire system provides 4G mobile phone coverage (including in tunnels), high speed Wi-Fi access for video streaming, and utilises a rechargeable, contactless, smart “Octopus card” system to manage electronic payment for journeys – all of which improves the customer experience of the “delivery of services” and thus increases uptake.
The company routinely conducts customer satisfaction surveys including ‘mystery shoppers’, scores itself on its own ‘Customer Satisfaction Index’, benchmarks itself each year against other Hong Kong based transportation companies and scores itself every few years against the leading metros of other countries, all in an effort to continually improve its services to its customers.
Consistently delivering excellent products and services reliably, on time and to budget is a significant management challenge. There is often a requirement to redesign the processes, information flows and organisational culture to help it happen.
Ask yourself: How can you uncover your customer’s pain points with your services and target improvements in the overall delivery experience?
Strategy 7: Leading through change
If your team doesn’t believe in what you are doing, any initiatives you attempt will fall flat. Simplistic assessments of this effect often suggest that ‘people resist change’, but more extensive analysis often determines that, in fact, peoples’ intrinsic motivations or the potential consequences they expect to experience in respect to the proposed change, have simply not been adequately addressed. True change leadership not just addresses all elements of the change journey, but inspires customers to leap onto your product or service and become avid fans.
The most obvious company responsible for leading change through modern times is Tesla. Led by celebrity status CEO, Elon Musk, the company first made a name for itself in 2008 following production of its first electric sports car, the ‘Tesla Roadster’, selling 2250 units by August 2011. Whilst garnering massive excitement for its technological advances, the competing practical realities of vehicle range and supporting infrastructure, as well as the high cost of ownership, limited early adoption.
Subsequent improvements to vehicle design and technology have driven costs down by more than 300%; however, it has been the company’s change leadership strategy that has resulted in more than 373,000 backorders placed for the Model 3 by the end of 2016. By focussing on the perceived constraints to mainstream adoption for electric vehicles and by diversifying the company’s focus into reducing the total cost of ownership, Musk has in fact started building an entire electric vehicle ecosystem that begins with dramatic innovation in generating electricity at home through attractive looking solar roof tiles and storing that electricity in home storage batteries, thus providing cheap sources of fuel, then supplementing that fuel source with a constantly expanding network of (initially, free!) charging stations across “well-travelled routes”.
Tesla has caught the international eye and public consciousness, bringing the possibility of electric vehicle ownership into reality by supplementing their core product with products that reduce resistance to change.
Ask yourself: Have you considered all aspects, including potential benefits and objections for your customers’ change journey, and how can you build a product to address them?
Where to next?
Regardless of the position your organisation finds itself in, there are many strategies for growth that might apply. The majority of companies used in the examples above did not rely or constrain themselves to just one strategy. By combining multiple strategies, it became possible for them to truly differentiate themselves and generate massive customer following, revenues and success.
Companies that are successful in finding and implementing such strategies rarely rely on luck, fortune or group brainstorming activities to uncover what will work best for them. They are best uncovered through a directed process, using tools and techniques applied in a structured way to yield unique, creative outcomes.
Getting your business to the next stage includes assessing what you are doing now, looking at what your customers really want, designing the right strategy (or group of strategies) and implementing them the right way.
Most organisations don’t have the in-house capability to run this process, which is where an external team which can augment the business becomes useful.
Designing your growth strategy
You are welcome to reach out for a conversation on how your future business growth might look. Find us at https://coriolisinnovation.com.
You can also send me an email at [email protected].