How To Discover Your Organization's Next Big Growth Opportunities
Today’s corporate leaders are under intense pressure to deliver continuous business growth. But where exactly is this growth supposed to come from? What most companies understand now is that the only way to drive profitable growth and wealth creation over the longer term is to innovate.
In my new book “The 4 Lenses of Innovation”, I outline four proven ways to generate the new strategic opportunities that will power your company’s future growth. One of them is the ability to look at your organization not as a collection of business units but as a portfolio of embedded competencies and assets that can potentially be repurposed, redeployed, or recombined to create new value.
By viewing your business through this particular lens, it’s possible to spot and exploit important new opportunities for expanding the boundaries of your business that you otherwise may have missed.
Let’s start with a simple question: how would you define your company? Most senior executives respond to this question by describing what the company is or what it does. For example, they might say, “We’re a bank,” or “We make office furniture,” or “We’re in the pharmaceutical business.”
This is quite understandable. It’s the most simple and straightforward reply to the question. But that’s not the way radical innovators envisage their organizations.
For example, if you asked Larry Page, CEO of Google, to define his company, do you think his answer would be, “We’re a search engine”? Not very likely. That may have been the way Google started out, and search is undoubtedly still at the core of Google’s business model, but judging from the company’s diverse and rapidly widening portfolio of products, services, and interests, Page would appear to view Google much more broadly.
This is the essential point. Innovators think of a company not in terms of what it is or what it does, but in terms of what it knows—its skills and unique capabilities—and what it owns—such as infrastructure, proprietary technologies, standards, patents, brands, customer data, and so on.
Rather than developing a narrow self-image that pigeonholes a firm in a particular market sector, or locks it up in a certain product or service category, radical innovators are able to stretch the way they define their business based on its collection of core competencies and strategic assets.
In other words, Larry Page sees Google as a broad portfolio of science, technology, and Internet-related resources that can be leveraged into almost any meaningful new venture. As he put it in an interview in 2014, “I always thought it was kind of stupid if you have this big company, and you can only do, like, five things.”
Steve Jobs also understood this principle very well. In January 2007, he announced that the name “Apple Computer” was a thing of the past. Henceforth, the company would simply be known as “Apple.” This was not merely a cosmetic change; it was about a change of mindset.
If Apple had continued to think of itself solely as a computer company, it would never have considered stretching into seemingly “out of scope” domains like consumer electronics, online digital media distribution, mobile telephony, home entertainment, downloadable software apps, consumer retail stores, and so forth.
But the ability to define Apple based on its competencies (creating user joy through cool, hyper-friendly design) and its assets (cutting-edge technologies and a cult-status brand), rather than on its “core business,” allowed the company to expand into wider arenas and build enormous new sources of profit.
Jeff Bezos gets this, too. Amazon could have stuck to its roots and simply focused on being “the world’s largest bookstore.” Instead, Bezos and his team exploited the company’s unique strengths (comprehensive and customer-obsessed online retail) and its valuable assets (infrastructure, logistics, and an Internet brand people trust) to relentlessly stretch Amazon’s offerings into almost every conceivable product category—from CDs and DVDs to electronics, computers, toys, games, clothes, shoes, beauty products, jewelry, groceries, wine, sportswear, garden tools, pet supplies, 3D Printing, and even automotive parts. If you want it, whatever it is, chances are you’ll find it in the “Everything Store.”
Or consider Richard Branson, who has managed to transform a London record store into a global conglomerate with over 400 different companies in a multitude of diverse market sectors that generates $25 billion in annual revenues. In the process, he has built not one but a total of eight billion-dollar companies from the ground up in several different industries and countries.
Where would Branson and Virgin be today if he had decided not to diversify, but rather to focus his efforts solely on running the world’s best record stores? He recognizes better than anyone else that he would no longer be in business at all, because the music retail industry was eventually upended by the rapid and relentless rise of digital distribution.
“It is easy to think there will be record shops forever,” says Branson about the company he originally started, “but if we hadn’t moved on we would have been dead as a business, because music retailing was our principal business.” His advice to other companies? “You shouldn’t be afraid to diversify if you are in a position to do so, especially because nothing ever stays exactly the same . . . Whenever Virgin has money I always renew my search for new opportunities.”
Many other companies have followed a similar growth strategy, including ESPN, Disney, Tesco (the UK-based retail titan), P&G, Nestle, and the list goes on. But does this mean that a company needs to look far outside its core business to create profitable new opportunities for growth and innovation? Absolutely not. There are always closer adjacencies that represent a logical extension of a company’s competencies and strategic assets.
Canon, for example, began life in 1937 as a Tokyo-based optical instruments company, but was able to stretch its core competency into cameras, photocopiers (now the company’s largest division in terms of revenue), printers and scanners. Each of these adjacent moves has been built solidly on Canon’s existing expertise and assets, increasing the potential for its success.
Of course, a company’s most important competencies and assets are usually embedded in its workforce. So to make this kind of growth strategy happen, leaders are going to have to learn how to redeploy their people so that they are continually stretching themselves into new domains, reinventing the company, and creating these new opportunities.
Here are some questions to ask yourself:
- What special skills, know-how, and experience does our company (or our value network) possess? How could we deploy these competencies in completely new ways or new contexts to expand the boundaries of our business model?
- What strategic assets—i.e., technology, infrastructure, data—does our company (or our value network) currently own? Can we imagine alternative uses or industry settings for these assets that would create significant new value for customers?
Usually, it’s difficult to see things like skills, processes, technologies, assets, and values as distinct, stand-alone entities because they are so embedded in a company’s current business model. But leaders must learn how to decouple particular skills and assets from the existing business and then leverage them in their own right to generate new growth opportunities.