Growth Staircase
In the last two posts, we discussed the seven ways of growing your business alongside the Nike case.
Following this, another critical element is the order of those different growth components. Whether startup or enterprise, you can’t follow all steps at once. Scarcity in financial investments, availability of qualified staff or absorptive capacity would probably be the main reasons. That’s why you need to prioritize and plan the order of your steps.
Again, looking at the Nike case, they used the steps in a consistent way, with a repeatable formula. This is the primary reason for their success.
Their repeatable formula normally started with offering shoes to a specific sports market segment. Each time, the market entry was accompanied by an endorsement of a famous sporter (e.g. Tiger Woods) which led to attention and interest. Combined with multi-distribution and clever marketing campaigns, Nike achieved high revenue.
As next step, Nike offered soft goods (sport clothes, accessories) and hard goods (balls, golf clubs) to strengthen their brand position. Once their market reached a certain level of coverage, only then Nike started operations for adjacent markets (see visual below by Chris Zook).
So, what are my learnings for tech startups and scale-ups?
- Growing your business is a step-by-step approach, prioritization and planning is key.
- Each new step will increase your risk significantly, more new variables will increase your risk multiple times.
- Selling a revised or new offer to existing customers is usually easier than selling the same product to new customers.
- Market adoption cannot be influenced by small(er) companies. Choose adjacent markets or segments with a faster adoption rate as an alternative.
- Companies underestimate the time, investment and risk it takes entering foreign markets, different positions in the value chain and creating other applications with current technology.