Unlocking Growth - Overused Tactics
Why common levers are limited for sustainable growth.
In this issue #103:
The 2nd in a series on generating growth from existing markets and products in materials, a topic on executive minds as sustainability investments disappoint.
Posts in the Series:
Post 1 - Beyond the Standard Playbook
Post 2 - Overused Growth Tactics
Post 3 - A New Approach
Post 4 - Changing Behavior
Post 5 - Business Impact
Common Tactics Employed for Growth
As materials executives find their sustainability growth investments yielding less than expected, they are likely to refocus on core markets to make up the difference. We look at the common levers that are employed to generate more revenue, and why they aren’t ideal choices.
Lever #1: Sales Activity
A typical approach to driving growth is increasing sales activity, such as:
Offering sales incentives and blitzes'
Setting activity targets such as call volume, and closes
Enhancing tracking of activities aided by CRM logging
If sales is a "numbers game" the logic goes, then more activity should yield results. However, this rarely leads to sustained growth, and your sales team is well aware of this.
While increasing activity can yield short-term results and improve the management of commercial operations, these are efficiency levers, not growth levers. They maximize the return on every dollar spent, potentially boosting profitability, but sustained growth often requires a different strategy.
Here’s Bob Lurie’s experience with companies trying to grow by pulling this lever.
Why Doesn't This Work?
Opportunity pools are often marginal, offering only incremental benefits. For instance:
New Prospects: Most industrial markets are not wide-open fields; the customer base is already known, and while there are always new customers at the margins, large volume customers are often fully known.
Deeper Penetration: Increasing activity may result in a more calls per account, and calls to new buying influences and some additional conversions. However, reps often struggle to continue the conversation if they don’t feel they have anything new to say, and call rates return to baseline.
This incremental benefit leads to short-lived changes in results, as the same people call the same customers, delivering the same messages. Eventually, they reach a saturation point and revert to the original close rate.
To achieve sustained growth, you must substantially change the conversion or "close" rate. This cannot be done by merely doing more of the same. You need to introduce something new.
Enter the 2nd lever.
Lever #2 - New Products
When increasing sales activity isn't yielding desired returns, companies often turn to emphasizing new products. If sales teams need to capture customer attention, new products can fulfill that need. However, this approach poses several challenges:
Long Lead Time: Unlike sales activities that can provide an immediate, albeit temporary, boost, new products require ongoing R&D and launch investments. They often don't deliver expected returns quickly. Relying on single product bets is particularly risky, necessitating multiple options to ensure some succeed.
High Switching Barriers: Companies often underestimate the level of novelty needed in new products to entice customers to switch, especially in industrial markets where switching costs are high. Only significant improvements encourage customer adoption. In materials industries, understanding required improvements is complex due to multi-layered value chains, often necessitating involvement from multiple customer levels for product adoption.
Can new products drive growth? Absolutely! But they work primarily in the long-term, with sufficient investment in organizational capabilities. Growth based on new products should be viewed as a strategic, long-term choice rather than a tactical lever.
Here’s Bob on the New Product lever.
What Now?
If traditional levers like increased sales activity or new products aren't ideal for sustainable growth, what's the alternative?
Just as I discussed in the last post on market planning, a key characteristic of these tactical levers is that they are limited to a focus on:
WHAT the customer buys.
Sales might increase their activity, but their focus is still on what they’re selling.
And if new products are launched, the sales conversation is still focused on the new product.
The Solution:
Incorporate an approach that emphasizes not just
what customers buy, but
also how customers buy.
Next: The method to focus on how customers buy.
Growth Arc Advisors specializes in the implementation of the methods described in this series. We are former materials industry executives who understand the uniqueness of materials companies and have generated growth as industry operators.
If you would like to discuss your organizational needs, feel free to contact us or set up a complimentary consultation.