The primal instinct of any business owner is successful business growth. The reality is few business expansions ever reach regional, national and international levels. Why? How can you grow your business?
The combination of focus on the value proposition, target customer and a sustainable business model is not sufficient nor considered enough to produce the outcome of really serious growth in a reasonable timeframe. The extensive experience of DC Strategy provides an insight into a few straightforward ideas considering Pandora Jewelry, PoolWerx and Gizmo, who have all achieved really serious growth.
Pandora Jewelry, a Denmark-based jewelry manufacturer, has established a retail distribution network around the globe via a combination of company and licensed business models. Pandora Australia was founded by Karen Adcock in 2005 and in the space of three years has grown from one to more than 550 points of retail presence.
PoolWerx , a pool and spa service and retail company, is the dominant brand in the Australian marketplace. Founded by John O’Brien in 1992, the group has grown to include more than 230 mobile operators and 50 retail stores, making it one of the largest in its industry globally.
Gizmo, an information technology (IT) service business, is an Australia-wide industry leader, providing service to the customers of major telecommunications companies, manufactures and retailers, and to the broader IT consumer market. Founded by Brett Chenoweth and Danny Gilligan in 2006, Gizmo provides installation, support and training on-site and over the phone via an expansive nationwide mobile technician network and phone support crew, seven days a week.
Value Proposition
The value proposition is the core basis of the product or service offering to the market. In most instances, the familiar 80:20 rule applies to the source of profit and the breadth of the product or service offering. Consequently, one hallmark of serious growth is finding scale in the core of the business rather than wasting time, money and effort on growth in marginal or poor return areas of the business. Park the emotional rationale as to why the business needs a broader offering. If you want serious growth it will be built on the back of a simple and very focused value proposition.
*Lessons from Pandora
-Specialist value jewelry product
-Strong brand presence and high quality of representation and service standards.
*Lessons from Gizmo
-Simple and understandable service offering
-Focused on key areas within information, communication and technology .
Targeting Customers
The target market is about understanding the core customer that requires your product or service to derive some form of benefit. The customer will likely be diverse but there is a clear need to understand the type of customer, their decision-making process for acquiring your value proposition and how the distribution strategy will reach the customer. It is not an exact science and need not be overcomplicated. Take a hard look at your most profitable existing customers and, by understanding the attributes and measuring certain criteria, you will have a road map for further growth.
*Lessons from Poolwerx
-Even when customers self select with a pool they need to understand and place a value on the product or service
-A customer can be a competitor if they do not place enough value on their own time or resource when cleaning a pool or spa
-The strength of the PoolWerx value proposition was the catalyst for growing the total size of customer spend in the market across mobile and retail operations.
*Lessons from Gizmo
-A national network created a scale and unparalleled expertise to align with large referrers of customers
-The simplicity of the pricing model and clear definition of product and service offering ensures a total focus and understanding of who the customer is and what they are seeking.
Sustainable Business Model
The sustainable business model is the area that consistently suffers from a lack of focus and understanding. It canvasses the choice of distribution method, revenue and pricing structures, governance structures and people, to name a few areas. There is a complex interaction between each of the areas, which needs constant management and leadership.
Any choice of business model is not forever and in the experience of DC Strategy, the business model life is five-to-seven years before it needs a significant adjustment. As a business grows, the pressure from increased growth often leads to the underlying business model becoming a restraint to growth. The choice of business model has contributed to the demise of many successful businesses such as Encyclopaedia of Britannica, the Pan Am collapse, and Commodore computers to name a few.
A sustainable business model must provide an adequate return on investment and cash flow to enable the business to continue to evolve. A 20-to-30 percent increase in price is achievable by adjusting three simple areas of the business by one percent each. Those businesses that respect the role and importance of a sustainable and profitable business model create opportunities for serious growth.
*Lessons from Poolwerx
-The evolution of the business model from single mobile operators to multi-van operators to retail and mobile vans was the core foundation of PoolWerx’s success
-The utilisation of a franchise business model delivered the commitment and service focus to become a market leader across Australia in a comparatively short space of time
*Lessons from Pandora
-As a quality product and service offering it was imperative that Pandora select, screen and lead the appropriate quality of distribution points and operators to deliver the desired customer experience
-The commitment to quality and the simplicity of the in-store business model enabled a pace of growth in a short space of time that built a significant brand and loyal customer base
Increase Your Profit
Achieving serious growth is not for the faint-hearted but management or business owners need to ask the really hard questions around the value proposition, target market and sustainable business model. In any small and medium-sized business there is seldom enough financial or time resource.
Every business starts from humble beginnings at some point but, irrespective of prior success or financial resource, time is the most significant restraint. If this is correct it highlights the need for greater and clearer focus. Consider the following :
*Features of Serious Growth
-Ambitious & detailed plans
-Strong governance
-Manage ‘Founder’ effect
-Ability to scale with growth
-Maintain understanding of front end of business
-Compelling product/service offering
-Continual & considered change in the business
-Strong brand
-Ongoing intellectual property development
-Strong financial & working capital management
-Focus ‘on’ & ‘in’ business
*Features of No Real Growth
-‘Founder’ effect
-Insufficient time on the structure & business model
-Poor working capital management
-Team skills
-Initial success creates stagnation
-All plan no action
-Poor advice
-Lack of respect for core growth issues in business
-Wrong people
-Wrong business model
—Adrian McFedries is managing director of DC Strategy (www.dcstrategy.com.au), New South Wales’ leading specialist consulting and legal firm. Its specialist strategy, franchising, international and legal teams have developed the networks and brands of many of the region’s most successful businesses.
