Developing Effective Data-Driven Business Growth Strategies

There are some universal truths about business growth strategies:

1. Almost all businesses have a desire to grow (revenue, profit, market share, scale, etc.)

2. Most businesses have ideas on how they can grow

3. Few businesses know which of their ideas have the greatest chance of success

In this article, we explore why growth is so important to businesses, what the common approaches are to selecting growth options, and an alternative approach to help de-risk this choice.

There are a number of really good reasons businesses want and actually need to grow.

Profitability and Financial Success: Growth can lead to increased revenues and profitability. As a company expands its customer base, product offerings, and market presence, it can generate more sales and revenue, which in turn can lead to higher profits. This is especially important as expenses increase for raw materials, energy, labor, and employee wages and benefits.

Economies of Scale: As companies grow, they can achieve economies of scale, which means that their costs per unit of production decrease as they produce more goods or services. This can lead to higher efficiency, lower production costs, increased sales, and improved profit margins.

Attracting Investors and Funding: Companies that demonstrate growth potential are often more attractive to investors and lenders. A growing company's increased valuation and potential for higher returns can make it easier to secure funding for further expansion.

Talent Acquisition and Retention: Growth can provide opportunities for career advancement and professional development, making the company more appealing to top talent and helping to retain existing employees.

Enhanced Brand Recognition: Growth can lead to increased brand recognition and a larger customer base. A well-known and respected brand can attract more customers and create a positive reputation, leading to further growth opportunities.

Maintaining Market Share: In growing markets it is important that companies grow in order to maintain their market share. It is about staying relevant, competitive, and profitable in the market landscape.

Growth is important and desired and most companies have "ideas" on how they can grow but lack the ability to quantify the merit of each idea. This leads companies to commonly implement one of the following approaches:

Pick One: This approach involves the business leader(s) picking the idea that they think is best based on their experience, intuition, and knowledge of the industry. This makes the decision quick and easy but can be based on a gut feeling vs. quantifiable data making the outcome more uncertain.

Test All: When a company is unsure which growth idea is best they often hedge their bet by pursuing multiple ideas at once. In most cases, they don't resource any of the ideas fully which doesn't make for a fair test and may cause them to abandon good ideas prematurely.

Do Nothing: Implementing growth ideas takes resources, often time and money. It is not uncommon for businesses to reject all growth options for fear of failing and wasting valuable resources in the process.

An alternative approach involves using market research to analyze each idea to determine which has the greatest probability of success. This Market Focused Insights process starts by documenting all hypotheses a company has around the growth idea. This is called their "reason to believe" statement and typically includes views on market dynamics, competition, customer needs, and how the company can leverage its core competencies.

This process reveals the "key hypothesis" that can make or break the story such as: "The U.S. market is going to grow 10% annually over the next five years" "The cost of raw materials is going to remain steady over the next three years" "The competition is not going to launch a competitive solution in the next 18 months"

"We will maintain our low-cost manufacturing advantage"

A research plan involving both secondary and primary research methods is devised and executed to prove or disprove these key hypotheses. The end result is a data-driven view of the probability of success for each growth idea giving the company more confidence in making the appropriate resource allocations.

At Voss Consulting Group we are committed to providing information to help our clients build effective data-driven business growth strategies to achieve their growth goals. To learn more please contact us today.

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