As a fast-growth company, what worked to get you to one level of revenue, probably won’t work to get you to the next level. Companies need to do new and innovative things to maintain rapid growth consistently over time. Markets are dynamic and not infinite in size, competition can enter in, and customer needs can change quickly. The companies that sustain fast growth over the long-term are the ones constantly searching for new growth initiatives and levers to accelerate growth. As the last of the series, 5 Reasons Your Company is Not Growing Faster, this blog will explore why a growth strategy that worked well can suddenly stop working, and what you can do to sustain high growth at your company.
It worked until it didn’t
Why do some go-to-market strategies work for a while and then suddenly run out of gas? Because what worked to get you to one stage of growth, rarely continues working long enough to get you to the next stage of growth.
Market segments are not infinite. When you are having success selling your product to a certain market segment, know that at some point, that market segment will become tapped out for any number of reasons. Whether it’s a geography, an industry vertical or a product category, at some point, that market of “low-hanging fruit” will be taken and continued revenue growth from it will stall. It could happen because the competition moved in, the needs of the market changed or maybe it’s just saturated in that it purchased all the product it needs right now.
All good things must come to an end
You’ll know you are in trouble when you start to see your conversions going south – leads become more expensive to generate, they convert to opportunities at lower rates, and they close at lower rates. Your top sales reps start complaining about their territories being too small, or their list of target accounts too short. Your biggest customers who drove previous growth are not interested in buying any more upsells.
You are about to hit the wall and if you haven’t figured out how to achieve your next stage of growth, it’s already too late.
The foresight to develop growth strategies before growth slows is what separates companies that consistently grow fast over many years from those that have spurts of high growth (100%+ YOY) then hit the wall and have to regroup to reignite the growth engine, if they can. And many never do.
How did we get here?
Some companies get stuck into doing the same thing over and over again, and even when it stops working, they can’t break out of old habits to pursue a new market opportunity. They wind up doing the same thing and expect different results. A former CEO of mine who used to race bicycles would characterize this as the “pedal harder” strategy – meaning do the same thing but just do it faster. That rarely works in business and is the sign of a myopic executive team can’t break out of a formerly successful strategy that isn’t working anymore.
Many times, these companies don’t have the domain experience or skill-sets to launch a new initiative into a new market segment like the enterprise, or a new industry vertical, or a new international geography. Most times, this domain needs to be hired into the company from outside to bring in new perspectives and experience.
And other times, some companies are like kids in a candy story in that they want to do everything at the same time. Ever meet an entrepreneur who has a new idea every minute? New products, new verticals, new geographies – let’s do everything at once! I call this the “shot-gun” approach in trying to do everything at the same time without making the hard decisions to focus on the most promising areas.
Both strategies are well-worn paths to failure.
A good growth strategy will build on the successes the company has already achieved. The further you get from what made you successful, the more likely the new strategy will fail. So if you are having success selling a product to a certain geography or vertical, try another market segment that shows similar characteristics. If you sell to the enterprise in the US thru a direct sales team, try the same approach in a similar international market, or sell a related product to the same market that can leverage existing channels. Expansion GTM strategies are all about leveraging what made you successful in the first place. The more degrees of change you try at the same time, the higher likelihood it will crash and burn. And you won’t know which degree of change was the culprit.
Amazon is an intriguing example of this with their Amazon Web Services (AWS) initiative. As an early e-commerce company that started in books, Amazon.com then successfully moved into as many product categories as they could sell on-line to become the dominant e-commerce player. Then, in search for more growth and higher profits, they decided to leverage the massive cloud-based infrastructure they built for the e-commerce business, and sell it to corporate America as cloud-based CPU, storage, databases, development tools and other cloud services. This solved a huge problem for corporations that wanted to move to the cloud but didn’t have the resources or expertise to move fast enough. Now AWS is a $17B business growing over 40% a year that provides the lion’s share of Amazon’s profits.
Plan ahead when times are good
The time to start thinking about the end of the road is before you reach it. Plan for the next phases of growth before you run out of gas. Because when your growth hits the wall, it is really tough to get it going again. And focus on things that can really move the needle. Many initiatives are good but will have limited impact on the growth of your company.
Business growth is made up of a collection of product-market fits: certain products fitting into certain market segments within certain windows of time. The key to sustaining growth is to continually find the next product-market fit, whether its new market segments with the same products, new products into the same market segments, or new products into new segments. Larger companies make acquisitions for exactly this reason: to acquire new products they can sell to their current customers and/or new customers they can sell their current products
New markets and new customers may require selling a different value proposition to a new customer title or new department, requiring a different GTM strategy. And new territories might require a channel or distributor approach rather than a direct sales approach. Try to understand all the challenges before jumping in. But be prepared to learn fast.
Moving into a new product category, a new market segment, a new vertical or a new geography is much easier said than done. Plan on struggling for a year or two before it really starts to take off. That is typical as things rarely go as planned and you’ll do a lot of learning along the way, in spite of your success in other markets. Unfortunately, success in one area does not guarantee success in another. But the faster you learn, the faster you will figure out the right path to high growth, and the faster you’ll be on your way to that next level.