Growth Strategy
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This document outlines a business framework for growth strategy, covering traditional and modern strategic thinking, including Porter's Five Forces and Blue Ocean Strategy. It discusses common growth challenges, the importance of aligning strategy with operations, and provides a structured approach to developing a growth strategy project. Additionally, it includes case examples of companies like Cirque du Soleil and Nintendo that successfully implemented innovative growth strategies.
Growth Strategy
- 1. Business Framework Growth Strategy This document includes instructional slides and templates covering the following areas: -Growth challenges -Traditional strategy thinking (e.g. Porter’s Five Forces) -Modern strategy thinking (e.g. Blue Ocean Strategy) -A growth strategy project initiative (project approach, design, frameworks & analytics, deliverables) -Case examples Competitive Advantage Lower Cost Differentiation Cost Leadership Differentiation Cost Focus Differentiation Focus Competitive Scope Broad Narrow Find our other documents at http://flevy.com/seller/learnppt
- 2. 3 Contents • Growth Challenge • Traditional Strategy Thinking - Porter‘s Five Forces • Modern Strategy Thinking - Blue Ocean Strategy - Blue Ocean Examples • Growth Strategy Project - Project Approach - Project Design - Analytics & Frameworks - Deliverables
- 3. 5 Few breakthrough growth offerings identified Focus is on existing markets and demand (e.g., line extensions, substitutes) Current Situation Strategic Issues Create customer value (Value Innovation) Growth at the expense of profitability Benefit trade-offs are not made (e.g., the right mix of attributes) Pricing and cost structure are driven by competition Align value proposition with operations/organization Lack of execution follow- through for growth initiatives Effectively execute strategy Consumers are increasingly sophisticated and hard to please The Resolution Metrics and rewards based on current operations Lack of committed financial resources Organizational structure is not in line with new business Opportunities are defined by internal/operational capabilities Structure and processes to develop and manage growth do not exist Growth is commonly inhibited by a lack of breakthrough ideas, balancing cost-out and margin trade-offs, and execution challenges Growth Challenges
- 4. 7 However, many companies are inconsistent in managing short and long- term thinking and investment to create growth-enabled organizations Source: The Alchemy of Growth, Baghai, Coley and White, 1999. Horizons 1 2 3 Common Barriers Under siege Losing the right to grow Running out of steam Inventing a new future Generating ideas but not new businesses Failing to seed for the future • Core business underperforming, lack ideas in the pipeline • Need to earn the right to grow by putting the core business back on track • Obsessive focus on new business without developing the core, spreading the organization and management thin • Basic performance improvement in core required • Strong focus on core business, but no focus on next big idea; businesses could mature, position could be threatened • Start journey toward growth • Due to external triggers (regulatory change, technology), company must transition out of core business to new space • Good core business with a lot of new ideas, but lack initiatives to translating ideas into real businesses (Dot.com) • Have strong core and new businesses to drive returns for several years, but lack institutional capabilities for innovation Barriers to Growth
- 5. 9 Contents • Growth Challenge • Traditional Strategy Thinking - Porter‘s Five Forces • Modern Strategy Thinking - Blue Ocean Strategy - Blue Ocean Examples • Growth Strategy Project - Project Approach - Project Design - Analytics & Frameworks - Deliverables
- 6. 11 Traditional approach to growth strategy is based on the teachings of Michael Porter—namely Porter’s Five Forces framework 4. Suppliers Suppliers negotiation power 2. Competitors in the industry Rivalry among existing companies 1. Potential new competitors Threat by new competitors 3. Substitution products Threat by substitution products 5. Customers Buyers‘ negotiation power Traditional Strategy Thinking – Porter’s Five Forces
- 7. 13 Headline message Porter’s Five Forces – Template Suppliers Internal Rivalry New Entrants Substitutes Buyers • Bullet point 1 • Bullet point 2 • Bullet point 3 • Bullet point 4 • Bullet point 1 • Bullet point 2 • Bullet point 3 • Bullet point 4 • Bullet point 1 • Bullet point 2 • Bullet point 3 • Bullet point 4 • Bullet point 1 • Bullet point 2 • Bullet point 3 • Bullet point 4 • Bullet point 1 • Bullet point 2 • Bullet point 3 • Bullet point 4 Competitive Advantage Lower Cost Differentiation Cost Leadership Differentiation Cost Focus Differentiation Focus Competitive Scope Broad Narrow INDUSTRY COMPETITIVE ASSESSMENT COMPETITIVE STRATEGY
- 8. 15 The modern strategy thinking of Blue Ocean Strategy focuses on enabling innovation, value creation, and effective execution Growth Focus Source: C. Kim, R. Mauborgne, Harvard Business Review (1997). Value Identification Value Creation Effective Execution • Start with customer needs • Look beyond traditional markets, industries and competitors • Create multi-horizon portfolio • Develop growth platforms for ―market mining‖ • Understand what the customer values • Prioritize initiatives Growth Platform Consumer Need Market Trends Value • Select and develop growth option • Align operating model to deliver value and fair value Concept Execution • Venture Launch • Organizational alignment • Funding / Resource Allocation • Measurements • Accountability Sustainable Growth Structure • Infrastructure • Culture • Alliance Management • M&A Modern Strategy Thinking Eliminate Reduce Raise Create Costs Value Value Innovation
- 9. 17 Pioneers (Need beyond buyers cognition) 14% of launches 38% of sales 61% of profits 86% of launches 62% of sales 39% of profits (Company sampling) Source: C. Kim, R. Mauborgne, Harvard Business Review (1997) Deliver Platform Product Platform Service Platform Value is created from more than just “meeting customer needs” Portfolio Positioning Migrators (Need known but not articulated by the buyer) Settlers (Need identified)
- 10. 19 • Journaling—diary of observations, mental connections made between ideas, interesting areas to explore further • Delphi Interviews—business leaders from non- competing organizations provide insight into a Company‘s top issues, potential solutions and partners • Ethnographic Research—observations of the Company‘s customers in their normal purchasing/using habitat • Anthropological Immersion / Mystery Shopping— project resources ‗become‘ the customer by mirroring their behavior • Thought Leader Idea Exchange—web-based tools used to share ideas within the Company and potentially with external thought leaders • Lead Consumer Research—observations of how early-adopters or experts might be adapting a product to fit specific needs Industry Trends Discovery Current Emerging New Anthropological Immersion Ethnographic Research Lead User Research Delphi Interviews Journaling TL Idea Exchange A variety of creative techniques are used to gain customer insight Insight Generation Analytics
- 11. 21 Cirque Du Soleil achieved breakthrough growth in a declining industry and revolutionized the venue-driven entertainment market Source: C. Kim, R. Mauborgne, Blue Ocean Strategy 2005. Result: Productions seen by 40M people in 90 cities around the world, and in less than 10 years achieved revenues that took the incumbents 100 years to attain. Price Star Performers Animal Shows Aisle Concessions Fun & Humor Thrills & danger Unique Venue Theme Refined Environment Multiple Productions Artistic Music & Dance BuyerValue __ + Ringling Bros. and Barmum & Bailey Smaller Regional Circuses Blue Ocean Example – Cirque Du Soleil
- 12. 23 Nintendo transformed its position in the console gaming industry by offering a unique value proposition toward games and service Source: C. Kim, R. Mauborgne, Blue Ocean Strategy 2005. Result: 14 competitors pulled out of the gaming market during the 1980s/90s (including Atari) and Nintendo recently innovated the console gaming market with Wii. Violence Humor Intellect.challenge Interactivity Graphicquality Speed Numberofgames Gameprice Club After-sales Product / Games Service BuyerValue __ + Blue Ocean Example – Nintendo Wii
- 13. 25 Contents • Growth Challenge • Traditional Strategy Thinking - Porter‘s Five Forces • Modern Strategy Thinking - Blue Ocean Strategy - Blue Ocean Examples • Growth Strategy Project - Project Approach - Project Design - Analytics & Frameworks - Deliverables
- 14. 27 A typical Growth Strategy project has 3 stages • Determine need for growth • Perform external assessment - Market/industry trends - Customer insights - Insights about future - Competitive dynamics • Perform internal assessment - Capabilities/ barriers - Growth concepts - Company insights • Develop baseline value curve • Generate ideas/New attributes • Finalize criteria for selecting growth options • Evaluate and recommend strategic growth options • Detail growth platforms and design realization program - Market attractiveness - Competitive position - Ability to execute - Company attractiveness - Economics / Business Case • Develop implementation plan - Financial and human resource commitments - Action plan (including barrier removal plan) • Identify and prioritize growth alternatives and platforms • Validate growth platforms through executive review • Select growth alternatives for further evaluation (~6-8) Growth Strategy Project Design Key Activities Growth Strategy Execution Design Growth Options & Strategy Development Analysis and Insights Generation
- 15. 29 • Growth Mission: Articulation of the direction that Client will pursue to reach growth objectives • Growth Platforms: Outline of areas or categories that will provide the focus for growth initiatives • Breakthrough Offerings: Identification of at least one new breakthrough product/service that fits within identified platforms • Go-to-Market / Product and Market Strategy: Description of service offerings, pricing, channel and sales model • Financial and Human Investment Decisions: Outline of investments that will be made to support growth initiatives • Growth Goals/Value Proposition: Articulation of the bold goals that Client expects based on the expected value proposition from growth initiatives • Barrier Removal Plan: Outline of necessary changes to existing organization processes that would serve to ―incubate‖ overall growth • Opportunity scans for M&A and pre-deal strategy formulation Some project deliverables could include… Growth Strategy Project – Deliverables