There are many vectors for growth, and only some of these are in the area of business development (see box). These are not mutually exclusive – entering a new market will often require product changes and the development of a new channel.
I would say that broadly the numbering on the right is in order of decreasing complexity and so increasing believability and likelihood.
If someone tells me they are going to keep extracting more money from an existing customer, as they have done with customers in the past, I am more likely to believe them than someone who is telling me they can make a positive return on entering into a new market which might require localisation or translation, a local entity and compliance, new product features and a new sales team and approach.
These options will have different costs, benefits and risks. They must be weighed sensibly by management to determine the best use of their limited growth capital.
Investors will spend a lot of time understanding what the underlying drivers of growth are for a business and whether they believe that management will deploy capital efficiently.
Some organisations have a track record of success with these various strategies – for example bringing their business model to new geographies – and a different order of complexity will apply.
The effectiveness of these growth strategies can be a competitive advantage that gives leverage to the underlying business model. For example, Google’s and Apple’s app stores now allow each to offer new products – their own but mainly third-party apps – through a new channel they built initially in their domestic market but then scaled globally.
Any organisation would do well to assess its ambitions and perceived strengths in these areas against their historical track record. The experience can be sobering, or reveal a lack of expertise, but should expose key factors that will be critical to address for the venture’s success.
The views expressed in this article, first published in LinkedIn and republished with the author’s permission, are his own and do not necessarily reflect the views of Telstra or Telstra Ventures.