Top line revenue growth is a priority for every company. Some of the best books on business growth ask you to identify your core business and adjacent growth markets as a way to focus your resources, energy, and investments to grow your business. In addition, business management consultants typically ask the following: who are your customers, who are the leading customers in a given industry, what is your customer’s core business, what is your core business, and how can you better align for growth with your customer.
Customer intimacy, staying close to the innovation of one’s customers, is also a frequent path to revenue growth. Helping your customer be innovative, highly differentiated and competitive is critical to market leadership and revenue growth. “Leaders grow with leaders” is a typical company growth pattern, such as the suppliers to Apple are growing, as Apple is successful with its numerous consumer electronic products.
How does revenue grow? Growth can result from different geographies, more customers in a given market and more markets (especially those adjacent to your core or as a substitute in a divergent market). Remember, growth is almost never linear and takes patience; not to mention, it usually depends on fuel such as research and development (R&D). More specifically, R&D in products that meet customer needs or that are co-created with customers you are closely working with during product definition.
Growth in the Core: For years, Texas Instruments (TI) invested in the R&D of digital light processing (DLP) semiconductors. This included the basic technology creation period and beyond, as they tested different products in markets with customers in applications. Business hit a growth inflection point when the product definition team focused on the business projector market and closely partnered with InFocus Corporation to define next-generation, lightweight business projectors. The breakthrough in value and light projection performance allowed TI’s business to grow with their customer’s success. InFocus was growing due to the trend of computers used in conference rooms attached to light projectors for presentations in business meetings. The cycle of product development and revenue growth repeated generation over generation. The R&D investment fueled innovation in DLP microelectronics technology. Business grew both in geographies with InFocus and also with new projector customers.
Adjacent Growth: Adjacent market growth occurred intentionally with digital television displays, digital cinema projectors and eventually, in this decade when the mobile phone market added imbedded projectors. Each adjacent market opportunity was carefully selected and target customers identified. Business also grew with InFocus when their customers entered the 3D display market. These are just some of the ways an adjacent growth market can be opened up to you by your customer.
Questions to ask about Adjacent Growth:
- Can we divest a low growth or low margin business unit to fuel adjacent growth? Can we pull the plug and stop something?
- Is our customer investing in a new area that we are not investing in today? For example, retailers are moving more of their revenue generation to on-line sales and less brick-and-mortar stores. Therefore, if you are a supplier to a retailer, how can you grow your business adding value to the on-line sales trend experienced by your customer?
- Is there a convergence of technologies that you can leverage and build on your strengths? For instance, as more functions can be combined within semiconductor electronics, can you offer your customers the combination(s) of solutions to satisfy market sub segments? Looking at the mobile phone market, this approach was well executed as many functions including cameras and mobile payments were adopted into a smart phone.
- What markets exist next to the one you primarily serve? How can you leverage your strength (technology, distribution model, product benefits, or services) in an adjacent market with relatively low incremental R&D effort?
- Are you in the lock and safe product business or the security peace of mind business? Take another look at the definition of your core business and what adjacent markets you could serve.
Test your hypothesis with customers in that adjacent market segment. Field trial incremental new products with them and get feedback before making a major investment. Repeat this virtuous cycle of feedback.
Put your toe in the water with trials in the marketplace. Make a commitment of a small team of resources, say 4-6 people, who focus on the new adjacent growth area. Map out a preliminary business and marketing plan and revisit it regularly, adjusting the plans based on feedback from customers in the field. Before ramping up the investing, prepare to give your team a strategic horizon of 18-24 months to turn your white sheet of paper idea into a full-fledged business plan.