How do you focus on the right growth strategies?

Scale-up leaders look at industry giants like Apple and Amazon and think, “How can we become them?” And so begins the journey of turning big ideas into profitable realities.

Some win, but most do not.

And we believe that the failure to get it right in this area lies not in pursuing lofty goals, but in pursuing big ideas that do not align with the company’s overall strategy or completely meet a market’s pain point.

The key to unbridled growth is knowing which big idea to pursue using hard data instead of luck.

In this article, we give 2 foolproof ways that help scale-ups focus on what will maximise their limited budget and drive more growth.

Let’s begin.

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1) Understand where your growth comes from

We believe that your growth strategy should be focused and simple.

We are pointing this out because we are seeing a growing trend in the scale-up landscape: Everyone wants to grow fast but ends up lagging behind by pursuing overcomplicated strategies.

To clear the confusion, we list down 6 avenues where scale-ups can drive growth using Aldi as an example:

• Processes: How can you drive more growth through this area? Cut costs where you can. The best places to start are production, labour, delivery, processes, supply chains, and manufacturing — avenues that will allow you to sell your current offerings at higher profit margins. Aldi is known worldwide for selling grocery goods at extremely low prices without compromising on quality. They are able to do so by ruthlessly and efficiently stripping down the shopping experience (reducing supply costs by offering smaller, private-label selections, saving on labour costs by employing fewer but highly competent workers per shift, keeping real estate costs to a minimum, etc.).
• Experiences: How do you increase core customer retention and market share? Remain closely connected to your existing customers. Keep selling them the same high-quality offerings and ensure they are consistently delighted. When its competitors were bowing down to demands from multiple markets, Aldi stayed true to what their core market needed. Aldi’s customers repaid them through loyalty that spans decades.
• Features: How do you keep your customers delighted? By adding necessary improvements to your offerings. Aldi was able to entice their customers to stay loyal by slowly improving their offerings (more produce, meat, and dairy selections), which gradually drove up purchases year by year.
• Customers: How do you successfully tap into new markets? By making your core offerings more enticing to new people in adjacent markets. Aldi’s core customers are people who are looking for a good bargain. But they are now successfully marketing to people in higher income brackets by investing in more Instagram-worthy store remodels and providing organic veggies and fruits, imported European selections, private-label versions of trendy food items, etc.
• Offerings: How do you keep your offerings fresh and relevant? By producing new products, not just enhancements. Aldi veers away from major name brands and sells mostly private-label “dupes”, like Burman’s ketchup, Simply Nature organic products, Specially Selected bread, and Millville cereals. This allows them to increase their profits while maintaining low prices since these private-label brands are not subject to high marketing costs. 
• Business models: How do you generate new revenue flows and mechanisms? By finding ways to create more value. One way Aldi does this strategically is by carefully choosing where they place their stores. In the UK, most Aldi stores are located next to Marks & Spencer stores. This way, people can easily buy affordable grocery staples at Aldi and then make their way to Marks & Spencer for their luxury items.

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2) Create a robust innovation budget plan

As a scale-up, your financial resources are limited.

This means that your innovation strategy should be intentional in order to drive growth. You need to allocate your scarce resources to your best bets and balance them to create maximum returns at reduced risks.

To do this, you need to create a robust innovation budget plan that aligns with most of the 6 avenues for growth mentioned above. However, how you go about it depends on what your scale-up and market need at any given time.

As a guide, here is how we categorise 4 of the 6 avenues in our innovation budget plan:

• Evolutionary: This is where Experiences, Features, and Business Models go and should take most of your innovation budget
• Differentiation: This is where Offerings and Business Models go and should take the second largest chunk of your budget
• Fast-Fail: This is where Customers and Business Models go and should take the third largest piece of your budget
• Revolutionary: This is where Customers, Offerings, and Business Models go and should take the smallest part of your budget

You may have noticed that Processes is not included in the list. 

This is because while your business processes can create incremental growth and continuous improvement for your company, they do not necessarily create direct value for your markets.

Now that we have that sorted, there are a few things you need to take note of to make your budget plan work:

• Stay relevant to your target markets through iterative enhancements in your offerings’ Features or the Experiences that carry them: This is the easy part since this deals with products or services you already specialise in, and markets you already know and have cultivated strong connections with. 
• Entice new Customers with what you are great at using lean and agile experimentations: Lower investment in this area empowers you to fail fast as you test new ways how to reach new markets. The key is to make many small, smart bets and not linger on to ventures that do not make enough traction.
• If you know your markets want certain products, do not be afraid to pursue them: Differentiating yourself from the competition means creating new products or services before they do. Even if you have no idea how to make it happen, being first-to-market can be well worth it despite the significant risk.
• Leave the lowest part of your budget for your big “reinvent-the-wheel” ideas: These high-risk opportunities can be a game-changer for your Offerings and Customers, but allocating most of your budget to them can sink your ship if it fails. Instead, testing and experimenting fast in this area with a limited budget can help your scale-up deep dive into exactly which parts of these big ideas can fill any unmet needs.
• Like product development, partnership, and acquisition decisions, Business Models can fall anywhere in the budget plan: What kind of innovation should we go for, and how can we make it happen? Start with figuring out what your growth goals are and where they fall into your strategy. Pay attention to the data you uncover about what unmet needs there are in the market.

Your ability to grow as a scale-up hinges on where your viable growth streams are and how well you allocate resources for the innovation of each area. Just as long as you dutifully weigh the risks and rewards to maximise your returns and avoid any mishaps that will compromise your company’s future. But we know that this can be easier said than done.

Through the years, our team of scale-up specialists have built robust growth plans with multiple clients across industries. With our help, they are able to launch highly successful go-to-market strategies that not just increased their profit margins but also allowed them to cement their place in their respective markets.

Partner with us today if you want us to do the same for you.