Nils Koch Jensen, Partner
At a time when digitalisation is redefining industry dynamics and “unicorns” are the new normal, well-established companies frequently become fearful of keeping up and missing out. To counteract concerns, they begin to pursue growth by trying to mimic these startups, chasing the latest shiny object or running in every direction to unlock new customer segments. This unfocused, fear-based response is what we call “growth panic” – and we believe that avoiding it is the first step to securing sustainable growth.
Much is written about growth success stories and companies that have reinvented themselves. The popular talk is that one needs to reinvent, disrupt and grow exponentially to survive. Unfortunately, this leaves many unsure and confused about such fundamental concepts as which business they are in, who their core customers are and what their brand represents.
The predominant strategy has become a game of saying “yes” to everything, instead of saying “no” to most things. In our experience, companies that are caught in this state of flux are more inclined to make panic-driven growth decisions. Ill-considered decisions aren’t just a waste of resources; they can harm business. This dark side of unfocused growth is not widely addressed, but we believe that balancing the upsides – and downsides – is exactly what it takes to make growth successful and sustainable.
The symptoms of growth panic
So, what is growth panic? The hunt for growth is nothing new and companies need growth to push forward.
Yet growth panic is something else. It manifests itself when companies succumb to fear and hype instead being driven by vision and insight.
Growth panic is a situation that occurs when companies are led instead of leading. It is a short-term vision, lacking direction and usually caused by three interlinked fears:
- THE FEAR OF LEAVING OUT occurs when some C-suites discover their products are not being bought by the entire market, and they experience a subsequent urge to close this gap. The course of action is to try and enter new markets or penetrate new segments where the company has historically been weak. What we hear much of these days is the term “millennials” – the magical 18-to-35-year-old segment where (supposedly) large potential revenue exists. But the problem is that this may not be your target segment. You want to get in early and bind customers to your brand, but you could well be better off focusing on the 40+ segment. This group is the one that has the money, wants convenience and, more importantly, might be the one that buys into your core value for all the above reasons.
- THE FEAR OF MISSING OUT is the direct result of hot topics like sharing economy, virtual reality and digitalisation being used across industries. It’s the fear of making the wrong call and missing an opportunity. New technology and processes might seem like no-brainers, even though they don’t always materialise into marketable products or services that work for the customer – instead of against them.
- THE FEAR OF STANDING STILL comes about because of the drive we all have to create something new, do something more – and our aversion to doing the same thing, looking the same and saying the same things over and over again. Revitalising your company’s positioning is a concern for established companies. When you go to work day after day, sit in endless meetings and are exposed to the same material over and over again, you grow tired of it. You want to change. To do something more. Something powerful. Something memorable. We see market leaders who start hunting niche positions that jeopardise their current customer base because they feel they have grown weary. They give up all the quality and professionalism they stand for and have built over the years to obtain an edge and stand out.
How growth panic leads to employee confusion and brand dilution
What we see is that management implements initiatives across the organisation in relation to new market assessments, product development, current touchpoints and target group definitions.
In a rush, they reallocate large amounts of resources towards these initiatives push right them into the corporate centre stage, framing them as do-or-die scenarios.
Underfunding core activities is only one of the drawbacks. As you initiate new exciting projects, the core team supporting the core functions might start to doubt their importance. What gets measured gets done. As the core team switches to autopilot, it will drift into the day-to-day inertia that kills motivation, engagement and, in the end, the bottom line. Problems arise when a focus on relentless innovation and expansion results in your forgetting both your core customers and your innate philosophy. There is not much point in building something new if it comes at the cost of a unified company where everybody moves in the same direction and delivers the brand consistently across all touchpoints.
The logic is that when we try new things in the market, we not only affect new segments, but also existing clientele and potential customers. Initially, new initiatives, communication and product launches may confuse existing clientele, as the new agenda and focus no longer align with their existing understanding of the company and its value positioning.
At first, the effects might be minor, but as these initiatives progress, you start to attract a different group of customers, as you are no longer communicating your original core values. Suddenly, existing customers can no longer see themselves reflected in the brand, or in your newly-gained customers. This diluting of the brand will eventually lead to a crowding-out effect where you lose existing customers even as you gain new ones. These two effects – the internal misalignment and confusion, as well as the external brand dilution and crowding out – cause a negative spiral that is hard to escape:
Growing the right way: Mitigating risk and reaping the rewards
So, what do we suggest? Keep doing what we were doing before? Settle for existing growth rates? Become easy prey for disruptors and unicorns?
Over the years, experience has shown us that the solution is often more obvious than one would think, as the core of the company is usually unexploited and uncultivated. The continuous search for growth opportunities outside the core generally occurs as a result of a lack of understanding – or knowledge – of market potential and the company’s uniqueness. We see six themes that can help you mitigate growth panic and foster sustainable growth:
- USE YOUR CORE AS A PLATFORM FOR GROWTH: Nowadays, the core is often perceived as what we earn money on – the cash cows. But this outlook is both defensive and restrictive. Understanding your core concerns the philosophical aspects of your business – your vision, the value you bring to customers and the role you play in their lives. Understanding and acting from the core should not be seen as regressive, but as a platform for growth that informs you when to say “yes” and when to say “no.”
- DELIVER ON THE FUNDAMENTALS:
Understand your core customers instead of hunting for new ones. It can be easy to forget that it’s the simpler matters, such as convenience, ease of use and quality/durability/reliability that are key buying criteria. This is why fundamentals are so important – if you sacrifice these for “fun,” “creative” or the like, your longevity will suffer.
- KNOW YOUR CUSTOMERS – OR YOU CANNOT MOVE THEM: Just because you know where your company should go (with regard to digital strategies or trends) – make the right choice and listen to the market. If you are ambitious, you need to be smart and you are only smart if you find the easiest way to lead the market where you want it to go instead of trying to force it there. Understanding key concepts like digital readiness and the adoption of concepts - such as sharing economy, artificial Intelligence and virtual reality – are key to knowing what to do and when to do it.
- THE POWER OF "NO!": Companies need alignment, purpose and a clear strategy. Combined with limited resources, strategic decision-making is just as much an exercise in saying “no” as saying “yes.” With the right insight, we should dare to cut away the clutter, and be bold enough to go against the hype and hearsay. This can be a difficult decision for management because it’s always easier to include more and more to make sure you don’t miss out on anything. It takes far more effort to leave things out and create a clear, focused strategy…but this is often what is needed, so don’t be led astray by growth panic – identify the value-customers and the appropriate positioning, and work from there.
- IF FUNDAMENTALS ARE KING, CONSISTENCY IS QUEEN:
We regularly come across lines like “the CMO over 40 is dead,” “how to growth-hack your company” or “what to learn from the greatest startups.” Startups have the luxury of being able to experiment because they have very little to lose. They can afford to dare a little more and be excused from certain marketing practices and stunts. The reality is that large, well-established companies have much more to lose. Every time you implement a new initiative outside of the core, you must evaluate the potential harm caused to your existing brand, organisation and customers. Growth will always have an experimental component, but when taken too far, it can compromise brand perception.
- BRAND PORTFOLIO MANAGEMENT: A crucial aspect of growth is to understand how the specific initiative could add or subtract value from existing brands. Based on this, new initiatives can either be launched as independent brands, sub-brands or under the master brand, depending on a range of factors such as brand synergies, the closeness of the value proposition to the master brand, the nature of the service delivered and more. What we often see is that growth panic leads to multiple sub-brands and products where preference is driven to the unique, single parts of the company – rather than the company as a whole. We also often see different teams running different initiatives and brands, which means that insights become scattered, and no one has the full picture of how brands or products are stacking up against each other.
Growing from your core
It is important to note that we’re not suggesting companies shouldn’t chase growth, or even be less opportunistic. But growth is a balancing act, and there is little focus on the downsides of reckless growth. These are downsides that we often - and quite consistently - experience first-hand working with companies across sectors, sizes and geographies.
An interesting adverse effect of growth panic could actually be that you become more susceptible to disruption – instead of preventing it. The things that buy you time when new players enter the market are loyalty, customer satisfaction, good will and your performance track record. Every decision comes with an opportunity-cost. In strategic marketing, consistency is key, so it is a matter of achieving your position and building a stronger brand that can weather any storm of incumbents and disruptors – or even absorb them. Don’t focus on the upside of doing new things as you risk distorting what already works and stealing energy from your fundamentals. Find your core, nurture it and build from there – that is growth done right.
Read more about how Falck – a Danish company – went back to the core, conceptualised its offering and boosted sales here.
Want to know more about how to understand your core and how to grow from it? Talk to Nils.
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