Diversification? Strengthening your core offering? Divestitures? What strategies are you seeing, or if you lead an organization, what steps are you taking to grow your top line?
Coming out of the recession, the pundits are talking about an alphabet soup of recoveries including “U”, “W”, and even “L.” Regardless of the recovery’s form, what I’m interested in discovering are examples that move beyond belt tightening to drive revenue and profits.
What’s a better revenue growth strategy: fees for checking your bag at the airport, in-flight internet access or an in-flight masseuse in the galley? What about the decision to only sell the iPhone on AT&T’s network? Or repatriating off-shore call centers as a “differentiator?”
Friday, October 2, 2009
Where Are You Looking to Grow?
Posted by Seth Rosenbloom at 12:46 PM
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8 comments:
Tom Murray's previous comments re: focus on the customer definitely still fit, although I have to be honest and say that I feel like I'm getting deluged with fees for service everywhere I turn. It's not customer-focused, but how can I draw her in and milk every penny out of her. I went to Las Vegas a few weeks ago and was pretty excited to stay at the Mandalay Bay (sweet hotel!) for a really low rate. But then, I got charged for EVERYTHING. $14.95 for internet per day, $8 for Pringles, baggage charges both directions...they even attempted to charge me $30 for MOVING the margarita shaker (fought that one because I did not use it...although the thought did cross my mind). Didn't feel real customer-friendly and I'll be trying a different hotel next time...Maybe I'm not the customer they care about?
I buy a lot of iPhone apps and songs from iTunes, and for some reason it doesn't feel like I'm spending money. I am (my monthly charges are often $10-15), but I don't realize it. I REALLY notice paying an extra $15 to check my bag on a flight, because its a surprise. One important difference is with HOW the services are offered. In most cases I'd be willing to pay my service providers more, for more services. Most of the time, though, the (poor) delivery (timing, presentation, options, decision support, etc.) are what prevent the extra spend, not the services themselves.
Consumers are more interested in value today, and spending smarter if not less. There is money in the consumer’s pocket but we are looking for the best bang for the buck. It’s easy to justify paying for a song, or better yet, 12 songs for the price of a CD without any of the duds included. We might pay extra for services never offered before, but will complain about a fee for something we used to get for free. Organizations that will thrive in this environment will be nimble, responsive to fickle consumer tastes, and provide quality at a great price. We need a reason to purchase today rather than waiting until tomorrow, for tomorrow it may be cheaper and better. This would include things to make our lives easier or more enjoyable, or both. Bundling a great product like the iPhone with a lousy service provider like AT&T may work in the short run but prove unwise later as better service providers come up with a phone that’s just as good. Challenge breeds innovation.
My immediate reaction is (perhaps with a bit of naiveté): why top line growth? Wasn’t it a relentless search for more revenue and more profit that got us into this economy to begin with? Hasn’t the drive for growth, and the eventual burst bubble, been the reason for every economic downturn as far back as anyone can remember? From a macro perspective, growth (wealth or land and its resources) has caused immeasurable pain throughout human history. Wars are still fought today for the same reasons they’ve been fought over the millennia and it’s pretty much always about growth. Business growth clearly doesn’t have the same extreme human toll as a real war, but the parallels are pretty obvious.
Instead, maybe we should be talking about growth as evolution, as expanded abilities and sustainability, instead of just size. Consider increased corporate responsibility, community involvement, service excellence and quality of life for the people in a business. I think it’s possible that by growing these things, a company can differentiate itself and still achieve financial growth. I think consumers and partners are interested in doing business with responsible, enlightened organizations since it was the thoughtless greed of traditional business thinking that’s created today’s Great Recession. The opportunity presented by this economy and current public opinion for businesses to change their practices in these areas is unprecedented. People want to do good works as they do their job. And even if changing doesn’t yield increased financial success, many businesses can still do these things, be profitable, employ people, sustain and give back to the societies that allow the corporation to exist to begin with.
Adam Smith said: “What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?” I say the same applies to a corporation.
I like David's emphasis on rethinking the concept of growth on a macro level. Unfortunately, I think the window of opportunity may be closing rather quickly. I was struck by two recent articles. The first described how the Obama administration was having increasing difficulty pushing for tighter regulation of the financial industry, because political will was dissipating. People are already losing interest.
The second described how the financial industry is working on securitizing life insurance policies that they can sell to investors, in much the same way they did with mortgages. I guess I'm starting to feel that this notion of a "new normal" may be bogus. We may just be in the bust portion of the business cycle, soon to emerge with the same incentive structures that got us here in the first place.
If we still reward or punish public companies based on quarterly earnings (vs. sustainable performance), what has changed? I'll quote Roger Daltrey here instead of Adam Smith: "Meet the new boss, same as the old boss."
Reminds me of when you outsource facilities and new management comes in and hires the same people that just got fired.
While I, too, have enjoyed the sort of intellectual flirtation associated with imagining what an alternative “growth paradigm” might look like, I have also come to believe that there is a tough prequalifying question that must be answered before asserting any conclusions: namely, what is it about the present state of human nature that has thus far kept society from evolving naturally to the conclusions of my new paradigm? Until we really understand the forces that have compelled traditional views of growth to be the accepted measurement of good, I don't personally see the basis for a more "just" approach to defining business success, nor the ability to sustainably reconcile our strategies accordingly.
In light of this discussion, however, it is interesting to note that the Nobel Prize for Economics just went to two professors who have concluded (and I simplify to the extreme) that people with a commonality of interest and motive tend to overcome barriers to trust and work together in a relatively more efficient way than has been given credit in the past. The researchers focused on company/firm behavior as well as less traditional common property arrangements. What is interesting is what this seems to suggest for those who would regulate or privatize common property or activities. People working in compatible areas actually seem more inclined than not to do the right thing because, apparently, it is in their best interest.
I've spent time interviewing Seattle-area CEO's for a radio series about how they are coping with this slowdown. As I listened, I heard a "return-to-basics" theme over & over (e.g.Costco closing their Home Store and re-focusing on roast chickens and necessities such as paper products).
Growth for the near-term is focused on retaining current customers. It's a hyper-risk-averse climate right now for leaders. They're taking a "Fire Fast...Hire Slow" attitude and it's slowing down the recovery.
Net, the supply chains have been squeezed pretty hard and there are very modest efficiencies remaining to be found.
We now need to turn to stimulating real demand to spur growth. That involves innovation, segmentation, smart prod. development, customer-centric marketing and inspired leadership.
Those muscles have atrophied.
The next round of winners are strengthening those capacities in their orgnanizations now
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