Owners and managers often ask how to evaluate growth opportunities and select the one that suits them best.
The process usually starts with a few ideas and a framework or process to compare them.
That's fine, if that's where you are. But there are more fundamental ways to evaluate growth opportunities in general that will then lead to good ideas. Horse before cart, so to speak.
I think of these as adjacencies.
Adjacencies are like dots on a map. You are looking for proximity to a reference point – and the reference point is the current state of your business. Your core competency. Your product or service offering. Your markets. One trucking client I worked with recently decided its reference point was superior service at competitive prices, and we went from there.
Core competency adjacency
You know what you are good at, and not good at. Your strengths might be customer service, manufacturing quality, or pricing. It could be any number of things. For the trucking company, it was definitely service – its drivers are empowered to solve problems in the field, and the firm guarantees on-time delivery.
The point is, when you are thinking about growth and thinking about adjacency in terms of your capabilities, an idea that takes advantage of what you're good at is likely easier to execute than one that stretches your competencies. The trucking client decided service had to be part of any growth opportunities.
If you've been in business for any length of time, you've probably thought about what comes next in terms of product or service. Timing is one question (for another discussion), but adjacency can be another. If you were to map your current products or services, with your top seller in the middle and your others plotted further away depending on the degree to which they differ from the top seller, you'll probably get a good idea of some reasonable directions for product/service adjacency growth opportunities.
For the trucking company, the closest business line to focus on was freight forwarding, which represented a product opportunity it wanted to pursue.
Your current market is made up of at least two core elements: customer segments and geographies. Whether you sell to one industry in one province, or you sell to different consumer groups in many countries, you can think about adjacency growth opportunities stemming from “same product, different market.”
Plotting your sales regions by customer segment will give you a good idea of where your next market could lie. Is it across the border, or in a new demographic? Is it further afield but “close” because of your relationships with distributors who can help? Or is it in a new industry that has similar needs to the customers you sell to now? For the trucking client, it was the U.S. eastern seaboard, serving the same types of clients.
Growth can be exciting but intimidating. Making more rational and less stressful decisions on growth can be a structured process, and thinking about adjacencies may help that process along. In the end, adjacency growth for my trucking client will come from a high level of service in its current line of business, and freight forwarding, in the eastern United States. The process of uncovering those opportunities was thorough, and the client felt assured of having made good decisions.
Special to the Globe and Mail
Mark Healy (P.Eng, MBA) is a partner at Torque Customer Strategy, a boutique consultancy focused on go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to managing professional service firms, and he has completed more than 100 engagements in this space over the past five years. Mr. Healy is known as much for his aggressive sense of personal style as he is for intense and engaging conversations. He lives with his wife Charlotte and their bulldog McDuff in Toronto.