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Strategic Execution Part 3.4: Product / Market Growth



Strategic Execution Part 3.4: Product / Market Growth


This blog is part of a series of blog posts on the 6 stages of corporate development with the overview here. In previous blog posts, I explained what strategy is, why it is needed, and how it is developed and executed. In this post, I will outline the fourth of six stages of strategic corporate development for growth from inception to Exit; mastering the highly differing and even contradictory demands and focuses of each of these independent stages is the key to successfully navigating the entire journey.




The purpose of the Product / Market Growth stage is to scale the company and business model associated with a product / service within the overall product portfolio. This is the stage that most people associate with scaling, and the methods of strategic planning and execution outlined in my blog post now become entirely appropriate. This stage will serve as the primary stage of growth and operations of the company from which to launch New Product / Market Extensions or transition into Exit.

Product / Market Growth Objectives:

  • Leveraging and building the sales force, sales channels, and revenue growth paths; continued growth and servicing of the customer base, development of the product and sustainment or improvement of pricing and churn rates.

  • Continue maturation of customer acquisition and value delivery processes for greater efficacy, efficiency, and value creation.

  • Continued maturation of the product management processes to ensure the product / service line being grown continues to evolve and meet the needs of the targeted market as well as to identify extension opportunities that will be addressed in New Product / Market Extensions.

  • Continue maturation of corporate processes such as HR, finance, compliance, and governance.

Product / Market Growth Key Metrics:

The metrics of each stage build on previous stages. Runway, through cash and time management of the team remain a key metric as do the traction metrics of revenue as well the metrics associated with the uptake step model shown in Figure 2. The metrics added in Product / Market Validation remain important including Product Cohort / Complete Customer base churn, Customer Value versus Pricing, Gross Margin and unit economics for the company, Customer Acquisition Cost (CAC) and Life-Time Value (LTV) along with their ratios. The company should now start tracking over to top line KPIs (Key Performance Indicators) at a top level with flow down through the organization to PIs (Performance Indicators). These KPIs and PIs should be tuned to the investment horizon, growth, and Exit horizon and culture objectives. These metric are best developed for each company based on the focus on revenue growth or profit growth, along with other top line objectives the company may have.

Product / Market Growth Areas of Consideration:

Cyclical strategic planning with purposeful development of the sales, marketing, and delivery functions, purposeful strategic projects along with continued product experimentation are the focus. The company can and should now be run in a much more managed and mature way with a gradual expansion of the management team to cover more and more functions with specialists rather than the 3 to 10 hat / single executive approach before this stage. Coherency of thought and action in the executive and management team will become more challenging and become more critical. Projects across the enterprise should be performed primarily in concert with continued product elaboration, process refinement and automation, and market and channel expansion. Six (6) key focus areas that start to become important during this stage:

  • Continued Product / Market refinement

  • Customer Acquisition Process scale growth, refinement, and market / channel expansion

  • Value Delivery Processes growth and refinement

  • Talent development and retention

  • Management and Governance

  • Triggering the New Product / Market Extension Stages

Many of these focus areas are the same as during the Business Model Validation stage, with a shifted strategic set of objectives related to growth KPIs. It should be noted that many companies shift their focus to revenue and possibly EBITDA growth during this stage as their top KPI. There are strong benefits to the kind of focus that comes from 1-2 KPI management focus. However, a key assumption should always be understood and expressed. Which is that the other performance indicators, such as churn, customer satisfaction, employee satisfaction, Gross Margin, and many others once brought to the growth level of maturity are to be retained during this focus. Any substantial changes in these metrics, even while hitting top-line revenue objectives can be as detrimental, perhaps even more so, than missing the top line objectives.

The primary focus on customer acquisition process is in making the process bigger, faster, and more effective. This includes the challenge of building the marketing footprint and effectivity, growing sales teams, expanding territories, identifying new sales channels, and refining ideal customer targeting, collateral resources, proof of performance, customer onboarding, and other tools and resources required to drive customer acquisition. As a result, the organizations performing these tasks must become larger, more distributed, and require a greater formality of management.

The Management and Governance processes need to evolve significantly during this stage; this should be an iterative process. The team will get larger and then much larger making communication, values coherency, and coherency of action more challenging. Further, for institutionally backed companies, this stage will often see the introduction of multiple new rounds of investors focused on later stage investments who may each demand a higher degree of rigor in governance. The board should have committees during this stage for audit and compensation at minimum; many will have additional committees that may be focused on talent pipeline, succession planning, acquisition identification and vetting, or to address special risks or opportunities. During this stage, identifying Exit timing, market conditions, and potential Exit paths should become an additional focus area of the board.

Product / Market pruning is an important part of product portfolio management during the Product / Market Growth stage. Pruning is the act of recognizing industry evolution, competitive landscape changes, and shifts in preferences that should result in the purposeful retirement of products and services either in the form of transition to another product or service or through end-of-life termination. This could be confused with the need to manage the product/service deployment versioning footprint to reign in support costs, prevent compatibility issues, and retain high customer satisfaction; I view that as part of both stages 3 and 4. Pruning refers to purposeful product / service / market retirement to avoid financial loss and/or reputational damage.

Triggering the New Product / Market Extension stages is a critical focus area for achieving true rapid growth. A strong product management function, well integrated into the revenue, operations, and finance organizations, and tightly tied to corporate strategy creation and execution is critical to performing this task. There are four fundamental levers for growth of the company that should be routinely assessed and prioritized as part of the strategic planning and execution process:

  • Market Penetration

  • Value Penetration

  • Adjacent and Peripheral Markets and Value Extensions

  • Product / Market Pivots

Market Penetration is fundamentally sales growth; this is the core focus of the growth stage from the customer acquisition and value delivery arms of the company. Value penetration is the systematic identification of product / service features and facets that can be introduced that enhance the customer perception of the value of the product / service, throw up barriers to entry of competitors, and that may also enhance value capture through pricing and other fundamental business terms.

Adjacent and Peripheral Markets and Value Extensions are opportunities the product management team should be developing to introduce new product / service lines, adjacent products or services, and potentially new markets. This process should be looking at product / market as a coherent set. Product / Market Pivots are entirely new product / service lines not tied to existing products and services or Market extensions for existing products that require product extension. In general, companies should not consider introducing completely unrelated products and services to completely unrelated markets; the resulting market and internal confusion can be substantial. How tightly tied new should be to old is a function of the company’s market identity, internal capabilities, and state of affairs. In general, it is best to drive New Product / Market Extensions based on their correlation with the existing portfolio of products, services, and markets for a wide variety of reasons.

Most initiatives triggered in this focus area will be for products and services that have some adjacency to the existing products and services. An example might help: A company finds that their system management software for industrial processes is, with some customers, managing a component that requires faster cycle times, no manual intervention, and custom-programmed responses; they identify a product at a different level of abstraction in their customer’s system and then identify a different and larger market that requires this new software. Their technical teams can produce it and the product can be delivered at reasonable profit; the new product opens a larger market to evaluate for their system management software. The new adjacent product is a go.

Another example might be the pursuit of an adjacent market. During Product / Market Validation, the product feature/market mapping exercise identified a large higher-end market segment that can only be addressed with the addition of expensive features that would not be appealing to the originally addressed lower-end market. These new features justify a new pricing point and entirely new product, marketing, sales, and delivery processes that have some overlap with the existing processes. This great market extension drives an entirely new product or a new level of the product with unique pricing and positioning. The possibility of expanding into new geographic markets is also an obvious extension.

Product / Market Pivots can be the most challenging to identify; these are entirely distinct product / market entries whose only relation may be that they address market disruption from technology advancements, new entrants, regulatory or other environmental changes, or a wide variety of other causes. They are usually, but now always, for the same market the company has been addressing. Such pivots tend to be existential bets for the company; the great challenge is that in the Growth stage, efficiency and predictability must be gained by a degree of process bureaucratization that focuses thinking away from disruption. For this reason, the executive team and board must take the time to build a scan of the environment and maintain awareness of trends into their strategic planning processes. For many companies, even this additional set of steps can be insufficient due to perceptive normalization biases of key employees and executives. This is one reason among many that objective outside facilitators can be critical to a successful strategic planning process. In times of industry turmoil and rapid transition, some companies will additionally create an outside “skunk works” to identify, evaluate, and respond to create the effect of the company disrupting themselves before a competitor does. The structure, culture, and incentives associated with such efforts are critical to their serving their core purpose rather than being a tremendous boondoggle.

All New Product / Market Extensions identified and vetted as appropriate to pursue should trigger an entry into an adjacent New Product / Market Extension Stage and cycle while the Growth stage continues forward. Once this new cycle reaches Growth Stage, it is commonly melded back into the mainstream growth stage with any unique facets of ongoing product management, customer acquisition, and value delivery spurring unique processes within the company; with recognition of the efficiencies and potential downsides of reintegration vs. not.

As previously noted, I will defer to a future blog post the details of product and product portfolio management including appropriate vetting processes and culture to spur and vet innovation.

In the next blog post, New Product / Market Extension.

What stage of corporate development are you currently in and what challenges are you facing?

For most companies, the usage of external parties to facilitate the strategic planning and execution process produces superior results. The process typically involves a great deal of information processing that isn’t core to running the business on a daily basis and a facilitator in planning sessions frees up the team to focus on the critical questions rather than the process and can inject highly productive objectivity into the discussion and decisions. If you would like to discuss where your company is in the evolution of strategic planning and execution or would like some assistance in setting up or performing this critical process or just have a question please contact us.

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