Four Elements of Growth Engines for New Market Success

Traction in new markets or new customer segments is often the best way to drive growth and valuation for companies of all sizes. That’s because new market traction pulls multiple levers that elevate business valuation including...

· Financial performance

· Strategic vision

· Diversified customer base

· Diversified product/service offering

· Economies of scale

· Ability to attract top talent

· Strategic partnerships

· Industry thought leadership

Utilizing existing assets and capabilities in solutions that serve new customer segments, channels, and applications is often the best way to leverage company resources to drive growth and valuation. But how do you build the growth engine to make that happen?

A recent article by McKinsey & Company entitled Building an Engine for Growth That Funds Itself attempts to answer that question by addressing how to finance growth ambitions. It describes how to “think like an investor” and squeeze money from underperforming products/services in order to fund a prioritized portfolio of exciting new growth initiatives. Wouldn’t that be nice? McKinsey fails to explain how to build a growth engine to drive new market success, particularly for smaller companies. It’s approach is based on a couple of big assumptions that often don’t exist. Small and mid-market companies may not have a portfolio of declining businesses where they can squeeze costs to fund new initiatives. And, they may not have an exciting portfolio of growth initiatives waiting in the wings to choose from.

After 25 years of leading successful new market development initiatives across many industries, I’ve learned that a better way to drive growth and valuation is by understanding and applying the four essential elements of growth engines for new market success. Small and mid-size companies can implement these principles today without starving other business lines. When done correctly, the market will fund the capability build needed for new market success. This is the specialty of High Gear Labs.

Four Essential Elements of Growth Engines

The four essential elements of growth engines for new market success include…

1. New market strategy design

2. Sponsor customer and strategic partner acquisition

3. Solution hierarchy design

4. Business development capability build

While effort in all four growth engine elements often starts simultaneously, the key to self-funding from the market and risk management is to validate each step in sequence before making heavier investments in the following steps. Too often, leadership teams in search of growth jump directly to Step 4 – Business Development Build, hiring sales and marketing teams to generate new pipeline opportunities. This can become an expensive and high-risk approach that bypasses any opportunity for self-funding from the market, often resulting in frustration, employee churn, disappointment and soaring costs.

The most effective way to drive new market success is by building each of the four growth engine elements. Moving quickly through the first two steps for validation of the new market offering can be accomplished with minimal investment.

Step 1: New Market Strategy Design

Articulating and validating the Value Proposition and Business Model for new market opportunities establishes the foundation for early traction and long-term success in new growth initiatives. This primarily involves an investment of thought and effort using a proven methodology to articulate the new market strategy in the most simplistic terms that all stakeholders can understand.

· The Value Proposition Canvas makes explicit how you are creating value for your customers in new market segments. It helps you design products and services your customers want.

· The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model to best monetize the Value Proposition.

Each unique customer segment deserves a documented Value Proposition and corresponding Business Model. These documents then need to be validated with stakeholders in the marketplace – prospects, partners, influencers, etc. This is all low cost activity with high strategic value, providing the foundation for new market success.

Strategyzer, in Zurich, Switzerland, has created a world-renowned set of tools and methodologies to deliver a fast and effective approach for completing this first step. The results include one-page Value Propositions and Business Models that your entire organization can understand, and provide the foundation for customer messaging, solution development, and new market success. High Gear Labs incorporates Strategyzer tools and methodologies into its New Market Strategy Design services.

Step 2: Sponsor Customer and Strategic Partner Acquisition

Winning customer contracts validates the Value Proposition for the new customer segment and proves the Business Model structure. We refer to them as “sponsor customers” because they help shape your product/service offering for the new segment and provide funding to do so through a new customer contract. As you can imagine, there’s often a lot of back-and-forth between Steps 1 and 2 as you iterate the value proposition to meet the requirements of the new customer segment.

Sponsor customers often emerge from the group of potential customers that are engaged to validate the value proposition. Strive to engage the largest prospective customers in the new segment. If you can validate and build a solution that’s right for one of the biggest customers, it will likely be right for most others in that segment. Your sponsor customer will become your referenceable customer for the new segment if you do a good job delivering on your value proposition.

Strategic partners are often needed to make the Business Model whole while limiting risk and cash investments in new capabilities. Extending your offerings to new markets usually involves some type of new capability build, and strategic partners can be a great way of filling those capabilities without having to build them from scratch. As you get traction in new markets, it usually means incremental business for strategic partners as well. Done right, strategic partners can also be an important source of significant funding for solution development and demand generation activities. Strategic partners should be treated and managed like strategic customers as they can often refer you into new customers that you may not otherwise have access to.

Step 3: Solution Hierarch Design

Repeatability is at the core of scalability and new market success. The aim of new market strategies is to deliver your value proposition in a repeatable way to many referenceable customers. Repeatability must be strategically architected into your solution hierarchy in order to achieve this and scale margins faster than revenues.

The key to solution hierarchy design is defining Basic Sales Items (BSI) that become the repeatable components. BSIs make solutions easier to configure, price, sell, buy and deliver. They drive better margins, higher quality, and higher customer satisfaction.

Differentiated solutions for individual customers are built on a scalable platform of BSIs that contain options of configurable components.

Step 4: Business Development Build

While the first three growth engine elements set the strategic direction for new market success, business development capabilities supply the horsepower for acceleration. If done correctly, investments here can often be funded by sponsor customers and strategic partners.

The business development build is all about creating sales and marketing capabilities geared for consistent pipeline fill, efficient sales cycles, and simplified selling methods. Again, repeatability surrounding the core customer value proposition is the key to lower selling costs, shorter sales cycles, and higher close ratios. The primary components of business development capabilities includes…

· Thought leadership and industry evangelism surrounding your company’s point of view on solutions for the new market segment. The foundation for this comes from the validated value proposition and referenceable customers. Thought leadership is about sharing best practices and case studies with prospective customers, often at industry conferences and events.

· Sales enablement tools and methods create the process, content and stories for winning new business and measuring effectiveness. Repeatability of solutions sold is supported through repeatable customer contract structures.

· Recruiting, training and incenting business development teams for repeatable and consistent selling methodology to drive effectiveness and predictability.

· Demand generation programs and campaigns fill the top of the sales funnel with new, qualified opportunities for repeatable solutions. Thought leadership content delivered through digital customer journeys, sales presentations and industry conferences are great examples. Here’s where strategic partners can provide funding support top generate mutual pipeline opportunities.

Total Solution Approach to Building Growth Engines

The four elements of growth engines are inherently integrated. When executed correctly, they provide the most effective and lowest-risk approach to organic growth in new market segments. High Gear Labs provides fractional leadership for building growth engines that drive growth in new markets. Our total solution approach includes selecting, pursuing and winning sponsor clients and strategic partners that can often fund new market initiatives.

Contact us today for a no-obligation discovery meeting about your company’s growth opportunities in new markets.