June 14, 2019
Growth Opportunities: Identifying the Right New Opportunities for Sustainable Growth
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Swing for the fences or hit for average? When it comes to investing in new opportunities, such as developing new products, entering new markets, or even making business acquisitions, which makes more sense for small business owners?
Most small businesses don’t have huge budgets to invest in potential “home runs”: high risk-reward growth opportunities. With tighter budgets, they need to be very selective, investing in opportunities with a higher probability of success.
The good news is that a smart, structured, strategic approach to identifying growth opportunities is the surest way to drive long-term, sustainable growth.
It’s a chilly mid-October evening at the ballpark. Bottom of the ninth. Down by a run. Runner on second. Crowd on its feet.
Up to the plate steps the team’s leading slugger. He digs in. Takes the first pitch for a strike. Next pitch, a 90 mile an hour fastball. Crack!
He drills a towering home run into the second deck, driving in two runs to win the game. And the crowd goes wild.
The home run is one of the most exciting plays in baseball. It’s a display of raw power. It brings the crowd to its feet. Kids dream of becoming the home run king.
But for every home run, there are far more strikeouts. And, most runs aren’t scored off home runs. In fact, less than a third of all runs come off home runs. Most come from singles and doubles. Winning teams methodically work each at bat. Get on base, advance the runner, drive in a run. Execute.
So, what does this have to do with business? Specifically, finding new growth opportunities for your business?
Business leaders often look for the home run to take their business to new levels. Find the next iPod, or TiVo, or Windows OS, or even Rubik’s Cube (it’s sold over 350 million units). But for every iPhone, there are countless Apple Newtons, DeLoreans, and XFLs. Remember any of those…?
Sustainable business growth generally comes from a smart, disciplined, strategic approach to developing new opportunities. It comes from taking calculated risks, often capitalizing on the company’s existing assets, like core customer base, proven products, or established distribution channels. Building off existing strengths increases the probability of success and doesn’t create a shock to the system like an entirely new “home run” idea might that requires radically new infrastructure, branding, sales and marketing, or technology.
This approach may not be as sexy, but it works. The following describes how to identify and capitalize on new growth opportunities for your business, improving your probability of success by using a focused, disciplined, repeatable process.
Assess your core “Assets”
The first step is to identify your key strengths or assets. “Assets” are the core elements of your business that drive value. This may include specific products, customer segments, distribution channels, core competencies, patents, infrastructure, or others. List each of your assets, along with a brief description of how this is differentiated from your competition and how it drives value. Determine which assets drive the greatest value for your organization. These offer the greatest potential for building new opportunities.
Identify new applications for your Assets
Next, identify new applications for each asset. Some may be simple and fairly obvious: listing additional products or services you can deliver to existing customer segments. Other ideas may be more revolutionary, such as leveraging an existing patent to penetrate an entirely new market. Don’t screen the ideas too critically at this point. That will come later. For now, the intent is to generate as many ideas as possible and expand your thinking. While the objective of this more structured approach is to “hit for average”, you still might connect and knock one out of the park, so don’t just think small.
Prioritize the Opportunities
Now that you have an extensive list of new opportunities, you’ll need to rank them.
First, establish ranking criteria. This will help you determine which opportunities to pursue. Logical criteria may include projected ROI, probability of success, ease of execution, consistency with your mission, competitive advantage, and other variables important to your business. This is a critical step, so make sure you’ve identified the most important criteria for your business.
Next, score each new opportunity on a scale of 1-5 for each criterion you’ve defined (see example below). If you have 5 criteria for each opportunity, the highest possible score is 25. (If you feel some criteria are more important than others, you can weight these.)
Once you’ve scored each opportunity, rank them. You might be surprised at some of the results. The opportunity you loved when you wrote it on the whiteboard might fall in the bottom section of your list. And a sleeper or two may emerge toward the top.
While this list ranking should not be the ultimate determinant of which opportunities you do or do not pursue, it will be instructive. A final test for each idea is this: will pursuing this opportunity help or hurt our existing business? If it may hurt the business, consider eliminating it.
Next, group the opportunities in “buckets”, such as:
The number of opportunities that fall in each bucket will be based on your budget and available resources. For example, you may have only 1-3 opportunities in the “Advance” bucket, but 5-15 in “Hold”.
Define Development Requirements
Finally, evaluate each planned opportunity and determine the specific development requirements. Does it require new or expanded production capabilities? Marketing or Sales? Infrastructure and processes? Will this place a strain on your existing resources? Do you need a partner to develop or distribute it?
Conduct a thorough assessment of each opportunity and how each one fits within the broader context of your overall business. Define the launch and roll-out plan with specific budgets, resource requirements, necessary roles and personnel, and key milestones and metrics. By following this strategic, structured process, you will drive in more runs - capitalize on more new growth opportunities - while significantly reducing the number of new venture strikeouts. Play ball!
One More Consideration...
Building an innovation engine
While your first time through this process will be a one-time event, you can create a culture that identifies continual new growth opportunities. By training your team to think about new opportunities in the strategic, disciplined way described in this article, employees will become a reliable source of smart, executable ideas.
The key is to establish specific criteria for the ideas. Rather than inviting employees to come up with blue sky ideas – which often aren’t feasible and can lead to frustration for both you and your employees when you need to constantly reject them – challenge employees to generate ideas that meet your criteria. For example, each new idea must: leverage an existing asset in a new way; give us a competitive advantage; generate incremental revenue greater than x, or reduce expenses by $x annually. Also, provide employees with access to senior managers to help refine and champion the ideas at the executive level. And implement a reward and recognition system to motivate this behavior.
The result will be an engine that generates a steady stream of strong new ideas. Plus, this will energize your culture, engaging people throughout your organization in ways that drive future growth.
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