Following the successful launch of a business, there are three stages of growth, each of which require different management styles and focus.
- Refinement. Once a business is growing sustainably and profitably, particularly in relatively stable markets, the emphasis is on refinement of the business model, improving the customer experience and driving productivity. This is, perhaps, the most commonly adopted growth strategy.
- Renewal. As markets become more turbulent and your competitive position begins to weaken, renewal is required to drive growth. Over the past 15 years Tesco, for example, has successfully introduced new non-food categories, including mobile phones and banking, as well as new formats, such as Tesco Express, to accelerate growth and reduce its reliance on its traditional but lower-growth, lower-margin food business.
- Reinvention. Sometimes your position in your market becomes, or is likely to become, so weak that reinvention is required. Whitbread, for example, no longer brews beer, but runs hotels and coffee shops instead, and in the 1980s Intel shifted from the manufacture of memory chips to microprocessors in order to move away from a commodity market into a knowledge-drivn market and drive new growth.
The risks of reinvention and even renewal are, in steady state markets, of greater risk than refinement. Equally, however, focusing on refinement when you’re market position is crumbling away is a Nero-esque approach that is unlikely to bring success – just ask the management teams of Kodak or HMV.
The key to success is to understand the dynamics in your market and face into your true competitive position, both now and in the future, and match your growth focus to that reality.
What is the reality of your market position, and which ‘R’ should you be focusing on?
© Stuart Cross 2012. All rights reserved.