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Follow the money, grow outside of comfort zone

Martin Guo

Editor-in-Chief, Kantar China Insights

Brands 06.03.2018 / 14:00

Growth shift cover

Growth has shifted. Companies have to make this pivot. The task at hand is to relearn growth, especially the elements of scale, value and influence.

Growth is simple because the complete answer to the question of growth is to follow the money, or to paraphrase management guru Peter Drucker, keep connected with demand. It isn’t easy because going forward, following the money means doing business outside of their comfort zones.

It is true that growth has slowed for many companies, but despite the concern evidenced by organizations appointing Chief Growth Officers, growth hasn't gone away. Rather, growth has shifted. Growth is occurring but it is no longer found in the traditional pockets of demand. To grow, companies must shift with demand, or follow the money to create their own waves of growth—not hold off in the hope that external circumstances will bail them out—even as doing so takes them to outside of their comfort zones.

Outside of your comfort zone means shopping and/or demand spaces, occasions, outlets, channels, moments and/or missions in which companies must operate with business models of scale, value and/or influence that are unconventional or different—often radically so—for the category or a company, and that require the acquisition and deployment of novel, often unfamiliar, assets, talent, organizational structures, decision rules, production processes, payment systems, retail channels and/or marketing vehicles.

In short, these are places that require whole new ways of working.

Big established companies must remake themselves from top to bottom, transforming the work they are doing, not just tweaking it. Traditional silos, structures, mindsets and ways of working no longer suffice. Smaller companies face these realities, too, but with an additional challenge when big competitors finally start to move.

What has driven us out of our comfort zones?

Change is taking a toll. Big established companies are under increasing pressure because they are heavily invested where demand used to be. This makes it difficult and uncomfortable for them to follow the money to the new sources of demand.

Indeed, some big companies seem to be hoping that they can just wait it out until things return to ‘normal’ and their position in the marketplace starts to improve. A 2016 Deloitte/Board Network survey found that a mere 6 percent of directors at both public and private companies worldwide say their companies are “willing to take big bets.”11 Only 35 percent report that “radical innovation” is “formally” on their board agenda.

Shifts in demand are not new. Companies have dealt with them successfully before. But this time around, shifts in demand are part of an historic pivot in the marketplace.12 Today’s shifts are more fundamental and are occurring much faster. Failure is less forgiving and harder to recover from.

In particular, digital has flooded the commercial ecosystem with a tsunami of zeroes and ones. Most established firms have been engulfed by it, much less able to channel it into scalable growth. Accenture Chairman and CEO Peter Nanterme has written that “new digital business models are the principal reason why just over half of the names of companies on the Fortune 500 have disappeared since the year 2000.”

When the marketplace changes, successful, established companies often find that growth has moved away from them. These companies have mastered a particular confluence of macro forces, consumer lifestyles and competitive situations. They have entrenched themselves in this environment in order to monetize it at scale.

But over time, macro forces shift, which is then followed by changes in lifestyles and market demand as consumers adapt to new conditions. New kinds of competitors move into this evolving, shifting marketplace. When this transition takes hold, growth is found outside the boundaries of the previous environment in which established companies have embedded their outlook and operations.

This sort of changing situation is playing out at lightspeed in today’s fragmented and transformative digital marketplace.

The mass market is dissolving into a proliferation of small niches outside the comfort zone of established businesses, ultimately headed to digitally enabled personalization that is the outgrowth of shifts in macro forces, lifestyles and demand, and new competitors.

EN Growth Shift

 

When change is contained and uncomplicated, established companies can migrate in measured ways that sustain their dominance through the barriers to entry they have erected. But change doesn’t look like that anymore.

Incumbents find themselves a step behind new lightweight competitors. The advantages of size have been lost to outsourced production, expanded retail options and digital marketing channels.

The scale of big companies is giving way to the skill of smaller competitors as the kernel of growth. A company’s know-how, not its market size, is what makes the difference.

No surprise, then, that the typical response of big established companies is to double down in their comfort zones. Innosight surveyed 91 executives at US$1 billion-plus companies from 20 industries around the world and found only 15% said they were confident that their company could achieve a transformation over the next 5 to 10 years.

Relearn growth

Uncomfortable places can seem daunting. So change needs to be put into proper perspective. That begins with a whole picture of the market landscape, which reveals not a loss of potential but a pivot of potential. Growth has shifted. Companies have to make this pivot. The task at hand is to relearn growth, especially the elements of scale, value and influence.

* SCALE

Companies will have to master reverse segmentation—in other words, putting lots of small things together rather than breaking one big thing apart. In the past, mass markets were segmented from the top down into smaller pieces. Going forward, small niches will have to be aggregated from the bottom up into bigger pieces that give companies a sizeable enough platform on which to scale small niches into big brands. Many of these segmentations will be problem-specific, and all of them will require rich, integrated data sources.

* VALUE

Companies will have to put first priority on the experience—in other words, reframe brand and category management as experience management. This will require more emphasis on ensuring the integrity of how a brand is consumed, not just the efficiency with which a brand is sold. It puts experience at the centre and recognizes that the product or service is but one element, albeit critical, in delivering a compelling customer experience.

* INFLUENCE

Companies will have to get outside of the data to influence predictive systems—in other words, the paradox of digital is that it makes analog more important. Algorithmic decision rules will control choices unless otherwise directed by consumers. A brand wants consumers asking for it, particularly with the next generation of voice-controlled technologies that will utilize algorithms for generic requests, but will act exactly in accordance with branded requests.

To be ready to grow where demand has shifted, there are three questions that every company must be able to answer with a yes. These are the fundamental requirements for finding growth outside of their comfort zones.

Question 1: Is my company designed for agility?

Question 2: Is my business deeply grounded in a sophisticated data spine?

Question 3: Is my organization resolutely breaking down silos?

When you are ready, please contact us.

Source: Kantar Consulting

Editor's notes

* This article is a condensed version of Kantar Consulting's white paper: Follow the Money;

* To reach the author, to know more information about Kantar Consulting, or request a full copy of Follow the Money, please contact us.

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