Growing markets and staying profitable
To survive and sustain growth we need a business culture that embraces change and continual innovation.
When a business first introduces a new product into the market there may be an initial high growth phase as consumers rush to buy. But once the market becomes saturated a bell curve growth path emerges with a slowing in the number of new customers purchasing. The challenge then becomes a process of encouraging additional purchases from existing customers very often in the form of upgrades or buying more than one item.
This bell curve phenomena in market growth is what creates a rush to introduce new products ahead of the competition. This has been very evident in consumer products especially in the technology sector.
The challenge in developing new products is in doing so without losing on sales to the established market. When the major part of your income and profits is from an established product line it is difficult to shift into a new product area.
When you have a winning product why shift to a new product line that may or may not succeed? That is the challenge faced by all business leaders when addressing the issues of investing in innovation and change.
Business is all about taking calculated risk.
How do we decide if it is right to adopt an innovation that may create a new industry?
High Growth Innovation
High growth innovation as a business proposition requires thinking like a start-up business.
The strategy is to serve new customers or customers who are being served worst.
Case Study 1: Serving New Customers
The rapid growth of the information technology sector can be traced back to new business plans to serve new customers. Much of the technologies that went into the creation of personal computers were created by businesses manufacturing other products such as photocopiers.
Established businesses made the decision to stick to the established business because personal computers were just too expensive to manufacture for a mass market. The Information Technology companies targeted a niche market of professionals which was a very small segment of the overall market. But as production cost went down a new market of small businesses and home users needing computing power came into being.
Case Study 2: Serving Worst off Customers
I remember when hand-held transistor radios first came out. The target market was a new segment of the rock & roll generation of youths.
The Japanese manufacturers realized it would be difficult to convince parents to give up the better sound quality of their diode valve large radios. For the youths it was a choice of no radio to listen to rock & roll or to have a small radio away from their parents even if the sound quality was not as good as the large family radio.
Patient for Growth Impatient for Profits
High growth innovation requires growing market share fast. This means reducing profit margins in order to establish a niche market. As more innovation creates better quality products a business can shift into growing profit margins.
However the cycle of high growth innovation needs to be continued to create new products for a continually evolving market. Hence we see the personal computer companies innovating with software that has revolutionised the music, movie and news media industries.
Separate Business & Marketing Plan
The key to high growth innovation is in building “innovation teams” independent of the teams delivering on the established products. These innovation teams should have their own business and marketing plan. However, the business leaders need to ensure that these plans create new pathways within the existing corporate values, vision and mission that maintains the common corporate brand identity. This has allowed Information Technology companies to remain focused on the brand identity while breaking ground in new sectors of the economy.
Promenade Business Exchange itself is staying true to its core vision of being an exchange for the cross pollination of ideas and groups while growing its directory membership on several social media platforms that will allow members to continue business exchanges 24/7.
International Business Consultant
Reboot your business plan for sustained high growth
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