The model for achieving ambitious growth is well documented: a combination of organic and inorganic growth that sees companies looking to gain market share at the expense of their competitors in markets they already occupy, as well as looking for inorganic growth through an adjacent market strategy and/or prospecting for high-return greenfields markets beyond that.
Organic growth often stems from increasing brand likeability within the industry that your consumers already associate you with. In today’s economy, in most sectors, it’s a zero-gain scenario. In order for you to win market share, someone else has to forfeit.
There are at least two other options for organic growth that we should discuss. You can look to specialise within a market – selecting niches and tapping them for profit. It’s not always the easiest way to find above-market margin, but it’s certainly an option in sectors where specific skill adds value and the field is swamped with middle-market generalists. Or you can look to pincer your middle market competitors by having offerings on either side of them – below them, to compete on price, and, above them, to compete on prestige, with an “upgrade” strategy between those two stations to pull consumers through from high volume to high profit. In most cases, the zero-gain dynamics still apply, at least for now. To win, you need to take market share off an incumbent, and keep it away from them.
At the other end of the growth opportunity spectrum, the high-risk, high-return innovation of green field industries takes capital, faith and patience, and lots of each.
But what of adjacency? As convergence brings us closer to what Charles Prabakar refers to as the “boundaryless industry structure” inherent in the social media/digital technology driven global business environments of today, what opportunities for growth exist there?
Adjacency is all about finding business beyond your core. It’s about identifying new markets that intersect with what you do well. It’s about new geographies, new audiences and redefining the value that customers receive based on what you know/can do. It’s the space between where you are and disruptive innovation. As such, it seems like the pragmatic middle ground, ripe with untapped revenue, ready for those looking to step beyond what they already do and looking to use brand extensions to maximise the return from their current brand equity.
Most companies, it seems to me, tend to judge “adjacent growth opportunities” on competitor strength, synergy of skills, market attractiveness, application of technology and availability of partners. Those are the technical requirements.
What they don’t necessarily factor in are the two questions that a strategic marketer would ask:
1. Are we fundamentally believable, and ultimately are we more desirable to consumers in that new space than our competitors?
2. Why? (In other words, what are we bringing to this new market from the market we know that the incumbents don’t have because they haven’t been there?)
If you’re not entering a market or even a different part of your current market to change it, you’re simply entering it to fill it. A market that’s untapped by you is not, by presumption, an untapped market overall. Most markets are full enough already with companies that have a home-ground advantage. And if indeed it is a totally empty market, then there’s probably a very good reason for that. No-one wants to buy.
You may see an alignment between your current brand positioning and another sector, but the fact is that the world doesn’t need another coffee brand, another shoe brand, another brand of beans. Unless of course you’re going to do things with coffee, shoes or beans that revolutionise what consumers experience or that noticeably add to what they already experience with your brand, what are you bringing to the market that’s extraordinary? And by extraordinary, I mean – more than what they get already.
If you can’t answer that, the “growth” you see is probably a mirage. It may look like expansive return, but really it’s just presence based on hope. Don’t go there.
More reading
Strategy: 11 ways to purposefully achieve growth
Market leadership – the –out and the –est
The business of cloning
Always be branding
You can’t lead as a brand if you follow another brand
Great brands unearth
Is your brand ready for the experience war?
Brands at the speed of life
Seen and not herd
Other perspectives
Great reading from one of my favourite authors in this area. Someone who definitely knows how to do it right. Christopher Zook: Beyond the Core (Choosing your Adjacencies)
Case study of Cisco’s work in this area: Cisco’s Commitment to Smart+Connected Communities: Transforming Cisco from an Internet Plumber into a Solutions Architect
Forbes article on The Rise of Radical Adjacency
