A Simple Growth Strategy Framework To Get Your Business Out From The Death Zone You had a brilliant idea, which inspired you to take action. Dropbox Growth Strategy: Viral Loops. The first step to solve any growth strategy case is to identify what the company is trying to grow. At the same time, if your wallet is in the hand of a group of people with mixed motivations, that relationship becomes too complex to be left to marketing and branding alone. That is why, as a entrepreneurship“>founder or CEO, you might want to look at those few customers to serve, which can make a difference to your business. Each of these methods of inorganic growth have their advantages and disadvantages. Thus your organizational structure will highly focus on hiring marketers and engineers. Once you have quantified the company’s target or goal, you can walk the interviewer through your growth strategy framework. Interviewer: That sounds like a great plan. 5 Steps to Solving a Growth Strategy Case Interview. Interviewer: Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. on Growth Mindset & Strategy, Growth Process & "How To", July 31, 2018 Ask any self-proclaimed ‘growth hacker’ or ‘data-driven’ marketer how to achieve your marketing goals, and chances are their growth strategy will involve ICE scoring marketing tactics. Diversification strategies: A strategies to increase the variety of business, service, or products types within organization, diversification is a growth strategies, taking advantage of market opportunities, or it may be aimed at reducing risk by spreading interests over different areas. © Copyright Hacking the Case Interview 2021. In this article, we’ll cover a comprehensive framework that you can use to structure the different ways a company can grow. Internationalization - Maximize the customer base in every global market with local currencies, languages and native-speaking support and sales. The matrix shows four strategies that can be used to help a firm grow and also analyzes the risk associated with each strategy. In addition, there may be revenue synergies that the acquiring company can realize. Usually, growth strategy cases are introduced by open-ended questions such as “A firm XYZ wants to increase their revenue. The four growth strategies are Market Penetration (offering more of the existing products to existing markets), Market Development (offering the existing products to new markets), Product Development (offering new products to existing markets) and Diversification (launching new products in new markets). They have hired you to determine the best way to grow. The Case For A Post-It Business Plan, How To Use The Bullseye Framework For Marketing Channel Prioritization, Marketing vs. The immediacy of concerns around horizon-one businesses can easily overwhelm other efforts important to the future of a company. This works best in a scenario where there are no new products, and there are no new markets to enter. However, initially, when companies have limited resources and funding, tuning in the right customer is critical before the company runs out of cash. And at the same time, those salespeople will need to be able to reassess by time to time how those motivations change, converge or conflict with your offering. The material in the course has helped 6,000+ students across 13+ countries land offers at top-tier consulting firms such as McKinsey, BCG, and Bain. Then you know you need to organize your company around content marketing. Similar to joint ventures, one disadvantage of a partnership is that it takes time to generate revenue. 1. We are using cookies to give you the best experience on our website. This type of case interview may look something like the following: Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. Therefore, it is a great exercise at that stage to understand the least customers you can serve by raising prices as much as possible. Make sure that your recommendation meets these goals. The post-it business plan is a methodology that helps you focus on keeping a long-term focus on your mission and... Post was not sent - check your email addresses! These two categories form the foundation of our growth strategy case framework. Are they trying to grow revenues, profits, number of customers, or something else? Business Model Canvas Explained, Blitzscaling Business Model Innovation Canvas In A Nutshell, What Is a Value Proposition? To drive growth through new revenue sources, a company can: Inorganic growth can be segmented into three categories: The first way that a company can grow inorganically is by acquiring another company. And in what time period are they looking to achieve this level of growth? You’ll most likely want to start by looking at organic growth opportunities first because this type of growth is more sustainable than inorganic growth. In short, Moz is able to create short term liquidity and cash flows for its business by investing minimum resources on the SMEs segment, even though that is not the primary driver of the company’s revenues. This will imply an organization that leverages on a very specialized salesforce. The five most common growth strategies - the Growth Stars. First, I’d like to consider potential organic growth opportunities. Next, I’d like to look into potential inorganic growth opportunities. Additionally, joint ventures are much cheaper than acquisitions. Or those customers that might want to buy your product even if it is not perfect yet. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. You need to be very specific and be able to identify the early adopters. Understanding what the company is trying to grow will help you determine what growth strategies will be most effective. Therefore, rather than starting from the solution you have in mind. For instance, we create many categories for companies, like differences between B2B, B2C, B2B2C, and more. View all posts by Gennaro Cuofano, Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | And what’s the proper balance between marketing and sales? However, it promises to solve a specific problem. Additionally, there are many revenue synergies that Coca-Cola can take advantage of to grow revenues even more over the next few years. In other words, the company is growing through its own capabilities and efforts. Organic growth Organic growth can be segmented into growth through existing revenue sources and growth through new revenue sources. Interviewer: They are looking to grow revenues. Therefore, if the key customers are willing to stay with you longer because they know you will keep adding key features to the product, you’ll need to hire more engineers. Learn the right framework and see how it is applied from ex-McKinsey consultants. The most common type of growth that companies pursue is organic growth, which is growth driven by expanding output or engaging in internal activities. Let me share with you some further information…, 5. Sorry, your blog cannot share posts by email. If you found this article helpful, you’ll love our comprehensive case interview course. We take that convenience for granted today, but it wasn't always the case. 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A partnership is an association between two or more companies that provides some kind of benefit to each partner. A Strategic Growth Framework. It is not uncommon for the plan to be maintained solely in … Is aimed at growing the company from many angles (revenue, employees, etc). You: After looking at organic growth opportunities, we determined that Coca-Cola could increase revenues by $600M by entering three niche drink beverage markets. The Strategy and Growth Framework outlines our priorities for 2020-2023. Organic growth can be segmented into growth through existing revenue sources and growth through new revenue sources. Revenue growth is one of the most popular strategy cases in a case interview. Look for the price point and the acquisition costs that make the most sense to build a viable. For next steps, I’d like to look into Coca-Cola’s market entry strategy for entering these emerging markets. However, often, those same opportunities come when you already have an established brand and a scalable business model. Select Your Location. Are there particular drink beverage markets that Coca-Cola has no presence in that they could expand into? Each company in the joint venture is responsible for profits, losses, and costs associated with the project. When market is fully penetrated, it is advised for businesses to either proceed with the market development for existing product or product development for existing market. In most other cases, focusing on the customer segment, which is not in line with the business might be too risky. Your growth strategy is the big-picture roadmap you’ve created to get your business from where it is now to where it wants to be in the future. Also, you need to understand what makes the wallet holder keep paying for your product. You had a brilliant idea, which inspired you to take action. This includes growth through existing revenue sources and growth through new revenue sources. To increase the quantity of units sold, a company can: To increase the average price per unit sold, the company can: Remember that changing prices will impact quantity of units sold, so it is important to look at the net effect price changes have on revenue. USA 23 February 2021 14:00 - 15:30 PST. In that case, your organization will be primarily comprised of outside salespeople (those that meet the client face to face regularly) and engineers able to swiftly change the product features and specifics based on the feedback of the sales team. This is slightly different from a joint venture because in a partnership, companies do not necessarily have to combine resources or efforts. Value Proposition Canvas Explained, What Is a Lean Startup Canvas? Moving your growth journey forward in a structured way will sidestep a common trap that we have observed: pushing growth and product initiatives almost haphazardly in hopes of jump-starting a strategy. Left with no choice, the small business will then look at what it currently has, right where it currently is. AUSTRALIA 24 February 2021 9:00 - 10:30 AEDT. Also, all partners get the benefit from the brand names and customer access of their partners. Market penetration is probably the first – almost default – option of small businesses hoping to grow and expand their operations. Therefore, bringing in an additional customer is a painful process. Sequencing the growth journey. Interviewer: Great. In what time period are they trying to accomplish this by? Look at potential inorganic growth opportunities. Book Now. The most important part of solving growth strategy cases is to be structured and methodical in considering all of the different growth opportunities. And I don’t mean it in a generic way. Objective – direction setting statement. Often that death zone comes from a misunderstanding of the proper customer segment. Growing revenues versus growing profits can lead to very different strategies. More blindly that happens when a company never reaches that sweet spot between growth, profitability, and cash flows to enable it to build a sustainable business model. A business’s growth plan is relatively simplistic when it is first starting up and usually consists of rolling out of a handful of products or services to a manageable geographic market. You’ll likely need to develop some kind of rubric to evaluate each growth opportunity. However, many do fall into that. You: Okay, so let’s look at potential new revenue sources. For that matter, a tool like a customer/problem quadrant by Ash Maurya might help you focus right away to the customers you can serve when wanting to solve a specific problem. Also, the company does not have full control over the operations of its partners. Understand what the company is trying to grow. It is aligned with the Strategy and Capital Allocation Framework that we introduced in … In a joint venture, two or more companies enter a business arrangement in which they pool together resources and share risk in accomplishing a particular task. One advantage of a partnership is that it is most often cheaper than a joint venture since resources don’t necessarily need to be contributed. The mantra of serving more customers wants that successful entrepreneurship“>entrepreneurs need to serve as many customers as possible. In short, usually the larger the wallet value, the more you’ll need salespeople able to interact and meet with the person or people in charge of that wallet. It’s a classic consultant’s 2×2 matrix that we’ve used to help our clients think about where and how they can pivot their businesses to recapture lost revenue and lost demand. That might sound trivial. This means that every time you visit this website you will need to enable or disable cookies again. Basic tactics underlying this growth strategy include: Invest more in marketing, sales, advertising, promotion; Price and terms adjustments; Acquisitions; Modifying or customizing P/S lines to attract specific, larger customers; Basic tactics for the Product/Service Development Strategy include: Invest in R&D to develop new products or services The main disadvantages are that acquisitions are expensive and there could be difficulties fully integrating the acquired company. usually starts by identifying and accessing opportunities within your market Thus, you will need a specialized, high touch sales team able to understand conflicting motivations among the group of people in charge of the wallet. You can score each growth opportunity on the basis of: In step two, you quantified the specific target or goal that the company is trying to achieve. The result is a comprehensive, robust and executable strategic plan. They could increase revenues by $600M over three years fairly easily. A growth strategy or revenue growth case interview is a common type of case you’ll see in your first round and second round consulting interviews. A third and critical point is about the organizational structure. There are a few acquisition targets Coca-Cola is considering. In the business world, often things might get confusing. Two, the acquisition of Company X would increase revenues by $500M, helping Coca-Cola achieve its revenue growth target. Interviewer: They are looking to grow revenues by $1B over the next three years. If you disable this cookie, we will not be able to save your preferences. This encompasses the activities that are most closely aligned to your current business. After a bunch of pitches, you also managed to get some venture capital funding. After you have thoroughly investigated the organic growth opportunities, move onto looking into inorganic growth opportunities. However, we’ve seen how in building up a successful company, once you’ve picked up the proper customer segment, you’ve understood what the highest price you can charge for that segment (based on the value provided) is. Growth through existing revenue sources is either driven by an increase in quantity of units sold or by an increase in average price per unit sold. However, we are still $400M in revenue short of our goal. Follow these five steps and you’ll be able to solve any growth strategy or revenue growth case that you get. The stage of the company, how much free cash it has on hand, and the level of urgency the company is facing will help you narrow down your options. Growth Strategy Examples 1. Why The … Answers the … Book Now. When you do master your customer segments, the problem to solve, and you’ve developed the product that solves that problem, you’re ready to get to the next step. They have hired you to determine the best way to grow. With this sales strategy guide you will learn the fundamentals of sales growth strategy and how to develop a sales strategy plan that addresses the sales goals, organization, pipeline development, initiatives, and other strategic elements. Through that process, managers, researchers and academics have created a wide range of frameworks to guide you to structure your strategic thinking and business growth. Raise prices, don’t look for more customers, Successful Types of Business Models You Need to Know, The Complete Guide To Business Development, Business Strategy: Definition, Examples, And Case Studies, What Is a Business Model Canvas? As highlighted in the infographic above, successful enterprise companies, from Hootsuite to Qualtrics have mastered three things that those in the death zone might have not: One of the biggest mistakes most companies make is to choose and pick the wrong customer. 3. How do you solve a revenue growth strategy question? That is a place where the lifetime value of your customer is barely sufficient to cover for your cost of acquisition. You can find out more about which cookies we are using or switch them off in settings. Next, you want to quantify the goal or target that the company is aiming for. Learn more about business strategy in CFI’s Business Strategy Course. NEW ZEALAND 24 February 2021 11:00 - 12:30 NZDT. The OGSM framework is designed to connect big picture strategic elements (mission, vision, values) to operational elements (goals, strategies, initiatives, measures). VIRTUAL MASTERCLASS - 24 FEB 2021. How should we proceed? As a trailblazer in the cloud storage software arena, Dropbox launched in 2008 and introduced the world to the ease of keeping files in the cloud, rather than on a physical device. The framework continues to be useful, especially in uncertain times. If you lay out a comprehensive and organized framework, the rest of the case should be a simple process of elimination. You: To determine the best opportunities to achieve a $1B increase in revenues over the next three years, I’d like to use the following framework. In short, are you going to leverage marketing, sales, or both? The growth rate can be calculated on a historical basis and average. That means the focus will be on the current products or services, in the current market.It is pretty straigh… We’ll also show you the five steps you should take to solve any growth strategy or revenue growth case. Common business growth strategies In his book The Breakthrough Company, Keith McFarland recommends that small businesses and startups considering growth should proceed in a way that brings “the most results from the least amount of risk and effort.” This is another important aspect of prioritizing goals. I’d also like to look into whether the acquisition price for Company X is fair and reasonable. Those cases, of companies built on a massive and distributed customer base, are more an isolated phenomenon, rather than the rule of thumb. Take Moz (a leading tool for SEO), for which 70% of the revenues come from six hundred of its enterprise customers. You: Is Coca-Cola looking to grow revenues, profits, or something else? However, after growing your company to pass the seven-figure mark, you find yourself close to the death zone. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful. APEC aims to achieve Balanced, Inclusive, Sustainable, Innovative, and Secure Growth. Framework for Creating a Smart Growth Economic Development Strategy: A Tool for Small Cities and Towns (2016) is a step-by-step guide to building a place-based economic development strategy. Joint ventures are beneficial to companies because they can share resources, expertise, and can decrease costs due to scale. Inorganic growth, on the other hand, is growth driven by acquisitions, joint ventures, or partnerships. Go For Growth: A Strategic Planning Framework for 2021 Shannon Byrne Susko. Also, it is critical to understand the motivation of the key customers you’re serving. After practicing a few growth strategy cases, you’ll notice that these cases follow a predictable pattern and you’ll be able to solve any growth strategy case that comes your way. If your customer acquisition for segments that are less valuable for your business (for instance, because they have a higher churn rate and lower lifetime value) is low, then you might still want to exploit those opportunities. I’d like to look into inorganic growth opportunities next. Indeed, that stage requires a deep understanding of the customers to serve. The four growth strategies are: market penetration, market development, product development and diversification. Balanced Growth: We seek growth across and within our economies through macroeconomic policies and structural reforms that will gradually unwind imbalances and raise potential output. Is there a particular acquisition, joint venture, or partnership that would make sense for Coca-Cola to pursue? Look at potential organic growth opportunities. This data is from Nathan Latka’s [list of SaaS companies]. Instead, proper distribution and sales strategy should identify right away the kind of customer to target. Indeed, if we look at some of the primary reasons startups fail; some of them can be traced back to no market need, running out of cash, pricing/cost issues, and a product without a business model. We suggest moving this party over to a full size window. The three horizons framework offers a way to concurrently manage both current and future opportunities for growth. Quit your 9-to-5 job, and start your own company. You can think about growth through two major categories, organic growth and inorganic growth. Rather than looking at complicated things, I want you to focus on a single idea: the wallet. This website uses cookies so that we can provide you with the best user experience possible. They also have full control over how they want to manage and operate the acquired company. Unfortunately, there are so many strategic frameworks that it has also become difficult to determine where to start for most new managers, CEOs or executive directors who are seeking to lead their teams. Book Now. Where the company’s growth is in jeopardy, and you still didn’t manage to master the proper organizational structure to scale further. Quit your 9-to-5 job, and start your own company. Interviewer: Let me share with you these exhibits on potential drink beverage markets Coca-Cola could enter…, 4. Also, companies do not have full control over their partners’ operations. It is intended for small and mid-sized cities, particularly those that have limited population growth, areas of disinvestment, and/or a struggling economy. Instead, companies need a more deliberate, stepwise approach to building growth initiatives and capabilities. Developed by an ex-McKinsey consultant the guide includes best practices, examples, and a complete 54-page Sales Strategy Plan PowerPoint Presentation. A look at Apple…, Growth Hacking Canvas: A Glance At The Tools To…, What Is A Post-It Business Plan? You: Let’s look at organic growth opportunities first. Or trying to figure out the problem, you can start from the customer segments. The wrong, For that matter, founders and CEO should focus on understanding the key customer. And a deliberate execution. McKinsey's Strategic Horizons are all about keeping you focused on growth and innovation. That’s the death zone. This strategy framework requires you to categorize your goals into 3 different 'horizons': Horizon 1: Core Business. Among the biggest mistakes, startups’ founders might make is to want to serve pretty much anyone in that industry. That is because we like to generate useless complexity when we can get along with simple heuristics. There are two reasons that support this. Once again, Moz is the most established brand in the SEO industry, and it can leverage its brand and business model to execute this sort of strategy. Since Coca-Cola is a mature company that has seen flat growth, I am guessing that there won’t be significant opportunities to increase revenues from existing revenue sources. That might sound counterintuitive, as the first examples that are readily available to our minds are those of large tech companies like Facebook and Google; which became successful by serving masses of free users, with an asymmetric business model, financed by businesses and marketers bidding for attention on those platforms. For example, if the company wants to grow revenue, how much of a revenue increase are they hoping for? A strategic assessment of the market. Understanding the Ansoff Matrix Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here, Key Lessons In Lean Analytics With Alistair Croll, How To Design A Winning Business Model With Adam J. 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Growth through existing revenue sources This is extremely dangerous, especially in the initial stage of growth. How should they go about it?” Gather the necessary information about volume and price to … They just need to be associated with each other. Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here Growth strategies are never pursued in a vacuum, and being willing to change course in response to feedback from the market is as important as implementing a strategy … The company still focuses on SMEs as Moz has an extremely low acquisition cost for those customers. Delivered Values vs. Competition Market Offers vs. Competition Customer Needs Time for Effective Action Financial Resources Team Strengths & Weaknesses Growth Framework Links External and Internal Customer assessment, targeting, strategy Benefits, Advantages, Functions, Features Packaging, pricing, communications, partnerships Assessment, training, recruiting Business planning, risk … These desired regional growth attributes are deeply interconnected. You: To achieve its revenue growth targets, I recommend that Coca-Cola enter three emerging drink beverage markets and that they acquire Company X. After a bunch of pitches, you also managed to get some venture capital funding. Lean Startup Canvas Explained, What Is Market Segmentation? You need to be very specific. The advantages of making an acquisition are that the company increases its revenues immediately. What motivates that person or group of people to make such a purchase? There is a place where no startup wants to be. Sales: How to Use Sales Processes to Grow Your Business, Affirm Fintech Payment Platform Business Model, Bimodal Portfolio Management And Why It Matters For Your Business, Behavior-Driven Development In A Nutshell, AgileSHIFT And Why It Matters In Business, Agile Modeling And Why It Matters In Business, Acceptance Test-Driven Development In A Nutshell, Disciplined Agile And Why It Matters In Business, Evidence-Based Portfolio Management In A Nutshell, Experiment-Driven Development In A Nutshell, Scaled Agile Lean Development In A Nutshell. A Framework for Pivoting Into Growth I introduced this simple framework in our April webinar on resetting your marketing strategy for the pandemic . One, Coca-Cola can leverage its existing production and distribution capabilities to gain meaningful market share in these emerging drink beverage markets quickly. This gives the acquiring company all of the revenue that the acquisition target generates. And what motivates that person or group of people to keep your product in the long-run? Thank you for your recommendation. Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Prioritize and recommend the best opportunities for growth. Interviewer: That seems like a reasonable assumption. You: How much is Coca-Cola looking to grow revenue by? The acquiring company may be able to increase revenues by cross-selling products, up-selling products, or bundling products together. Framework in our April webinar on resetting your marketing strategy for entering these emerging markets they to... Acquisition price for company X is fair and reasonable determine what growth strategies will be effective... 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Solve a specific problem marketers growth strategy framework engineers Coca-Cola has no presence in that they increase! Understanding what the company ’ s distribution channels, customers, and costs associated with each other preferences for settings... Applied from ex-McKinsey consultants company from many angles ( revenue, how much Coca-Cola... About business strategy in CFI ’ s situation closely aligned to your in. The acquired company growth strategies will be most effective you get marketing, sales, or partnership be! To develop some kind of customer to target out a comprehensive, robust and executable Strategic Plan acquisitions joint... Learn more about business strategy Course framework continues to be outlines our for. - the growth Stars, companies need a more deliberate, stepwise approach to growth. Ll cover a comprehensive, robust and executable Strategic Plan walk the through. 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Ex-Mckinsey consultants they have hired you to categorize your goals into 3 different 'horizons ': Horizon 1 Core. Product because it trusts your brand be most effective they also have control. Gather the necessary information about volume and price to … growth strategy case is to be useful, especially the! Startups ’ founders might make is to be associated with each other the project to solving a growth question..., rather than starting from the brand names and customer access of their partners ’.... Are still $ 400M growth strategy framework revenue short of our growth strategy framework into 3 different 'horizons:...