For Next Year, Plan to Grow Smarter
by Tim Berry, Guest Blogger
- Created: December 16, 2010, 9:00 am
- Updated: March 2, 2012, 8:02 pm
Out in the real world, in small business and entrepreneurship where growth comes more as a result of hard work and following through than because of broad strategies, it's too easy to lose site of the big picture and instead focus on the driving route and never ending details. My suggestion for 2011 is: step back for a bit, take a look at the big picture, and focus on growing smarter, not harder.
The illustration here shows the basic wisdom of the Ansoff Matrix Model, developed at Harvard a couple of generations ago, yet still worth considering as part of a growth strategy. I still see the impact of it in the real world, a lot.
The idea is to think of your growth in terms of two key factors: product (which could of course be service as well; for this analysis, i-s the same thing) and market. You can also think of it as what you sell (product), and to whom you sell it (market).
If you step away from the business and think in broad terms, the product element of growth is either existing product (selling the same thing you always have) or new product (selling something brand new). And the market element is either selling to existing markets (the same buyers yo-ve been selling to) or new markets (new and different kinds of buyers, buyers from different groups, new types of buyers, new target markets).
As it turns out, some kinds of growth are a lot more expensive than others. It's generally accepted that the least expensive growth is what I show in green here, the lower left quadrant, focusing on selling more of the same thing to more of the same kinds of buyers. That's selling existing product to existing people. And by least expensive I mean that on average this takes the least capital, the least time, and the least effort.
For example, a computer store growing in this more conservative way might focus on selling more computers, more RAM memory, more hard disk space, and more networking hardware to its existing small business client base. That would be growth in existing product to existing markets, in the green quadrant.
The other extreme, the red quadrant, is usually the most capital intensive, hardest, and most expensive. That's about expanding into different products and markets at the same time. With the computer store example, that might be growing by selling new technologies (product) into different markets (government, large companies, or whatever hadn't been their market before).
And, as you might guess, growth in the blue quadrants, along the diagonals, is somewhere in between. Introduce something new to your existing markets, or take what you now sell into new markets. The general rule is i's harder and more expensive than the green quadrant, but less than the red quadrant.
And what does this mean for next year's strategy. Here are a few concrete suggestions:
- Look first for the untapped low-hanging-fruit opportunities - ways to sell more per buyer to your existing buyers. Wha's your equivalent of selling extra RAM and hard disk storage to your existing clients? Tha's the easiest growth.
- Then look for those nearby opportunities, the diagonals, expanding into something new to sell to the existing customer base, or finding a way to take what you now sell to new customers. This is more expensive, yes, but it's also a way to broaden and diversify the business and reduce risk.
- Don't rule out the long jumps into the new areas. Thatâ€™s more risky, and harder, but also more rewarding if you can do it.
How to decide? Plan. That's just another reason to make sure you have a good planning process in your business. Give your business a fresh new look. Scan for the right opportunities. Figure out the steps andresources required, and give yourself some new horizons for the new year.
*Not a government website.
About the Author
Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 44 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.
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