If you want to grow your business by 15% to 20% per year, where do you begin? Do you ask what new business you should be in? Do you adopt a novel strategic framework, make a big acquisition, seize a new market opportunity? Not if you’re a midsize company. You don’t yet have the resources to do everything simultaneously. Pursuing risky new businesses, markets, and strategic frameworks too hastily can take your eyes off the ball— with disastrous consequences. Instead, ask what more you can make of the business you’re in right now.
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BEST PRACTICE
Double-digit growth without a single new product? You bet. Uncovering Hidden Simply focus on making the most of the business you're in. Value in a Midsize
Manufacturing
Company
by James E. Ashton, Frank X. Cook, Jr.,
and Paul Schmitz.
Included with this full-text Harvard Business Review article:
1 Article SummaryThe Idea in Brief-the core ideaThe Idea in Practice-putting the idea to work
2 Uncovering Hidden Value in a Midsize Manufacturing Company
11 Further ReadingA list of related materials, with annotations to guide furtherexploration of the article's ideas and applications
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B E S T P R A C T I C E
Uncovering Hidden Value in a Midsize
Manufacturing Company
The Idea in Brief The Idea in PracticeIf you want to grow your business by 15% The strategic pathway comprises four steps. 2. PENETRATE EXISTING MARKET SEGMENTS to 20% per year, where do you begin? Do Step 1 builds a base for riskier moves later. FURTHER.you ask what new business you should be Start at the business-unit level. Increase share in market segments you al-in? Do you adopt a novel strategic frame- ready serve with products you already have-work, make a big acquisition, seize a new 1. PROTECT WHAT YOU HAVE. including upgrades and customizations. Con-market opportunity? Understand what you have, why you have it, centrate your strengths against rivals' weak-Not if you're a midsize company. You don't who's after it, and how to keep it. Have busi- nesses.yet have the resources to do everything si- ness unit managers: Example:multaneously. Pursuing risky new busi- . Create a competitor/segment matrix. Map Fiberite's Tempe, Arizona division set a new nesses, markets, and strategic frameworks rows of competitors against columns of mar- industry standard for order fulfillment: two too hastily can take your eyes off the ball- ket segments, estimating competitors' an- weeks with defect-free products-three with disastrous consequences. nual sales in each segment. Determine who's times faster than competitors. Customers Instead, ask what more you can make of the gaining and losing share. Include historical began turning to Fiberite for other prod-business you're in right now. By focusing on and expected growth rates and your com- ucts they'd previously purchased from mature activities, you reinforce your foun- pany's current margins in each segment. competitors. Division sales doubled in 18 dation of operational excellence-high months.Watch for surprises: a market bigger than performance in all areas contributing to you thought, rivals encroaching on unex-customer satisfaction: product quality, lead 3. EXTEND YOUR BUSINESS.pected segments. Discern threats to your time, on-time delivery, technical support. base-and opportunities for growth within Consider new products for existing custom-existing businesses. ers, or new customers for existing products.From this foundation, you take more ad-venturous steps in the strategic pathway. . Determine why your company's success- Example:This simple but disciplined sequence of pri- ful. Ask those closest to your customers- Fiberite's molding-compounds business orities starts with protecting your existing salespeople, engineers, technical sup- pursued a product extension-a new com-.D business. Then it proceeds to further pene- port-what customers appreciate most pound it didn't already make-for its exist-EVRE trating existing markets, extending into new S about your company. Is it good technical ing automotive market. It acquired a manu-ER markets, and finally diversifying with new support? Impressive lead times? Different facturer with proprietary technology for STH products.GI customers may value different things, sug- manufacturing that product and trans-R L ferred the technology to the United States, LA The strategic pathway isn't new. But follow- gesting market segmentation..N introducing this new product to its domes-OI ing it rigorously can help you resist the siren T . Decide what's most worth protecting. A tic market.R song of new products and markets-until O Identify busin... [download for more]
