This edition of the Agile Innovating ^TM Newsletter is for Entrepreneurs and Business Leaders who recognize growth must be a business priority.

Growth, like innovation, is another ambiguous concept that everyone wants more of but have difficulty realizing.  What kind of growth, in what context, where, when, how fast, and how much are often poorly defined or understood by the organization whose job it is to deliver it.  Without a clear understanding of what the growth targets are it is difficult for the organization to align with how the growth is going to be achieved.

In this edition of the newsletter we explore how to achieve the clarity and specificity of goals that changes growth from a possibility to a probability.

I’m going to state the obvious.  People start, buy, and manage businesses to make money.  Making money means generating positive net income.  The simplest financial conception is:

Dynamic economic forces cause continual upward pressure on all costs.  To maintain positive net income, a business must either continually reduce specific costs at least equal to the total dynamic cost increases, or increase revenue, or both. 

If a business cannot offset the dynamic cost increases by cost reductions and revenue increases, net income will eventually become negative.  The business will cease to have a reason to exist.  Since cost reduction opportunities suffer from diminishing impact (e.g. you can’t produce at “zero” cost), revenue growth over time is a business imperative.

There are three primary sources of revenue growth.  But each source embodies a risk of not sustaining growth over time.

1. Increase prices for current products and services

The easiest way to increase revenues in the short term is to increase prices.  But the longer term effect of normal competitive pressure is a downward pressure on price.  At some point, later in the product / service Market Life Cycle, price increases cease to be a viable mechanism for increasing revenue.

2. Increase unit volumes sold of current products and services offered 

Increasing unit volumes sold will remain a viable methodology for increasing revenues as long as you have the scope to reach new customers, the scale to satisfy the volume needs of all customers, and the Basis of Competition for your product or service is in your favor.  As revenues increase, investments in scope and scale must ensure product and service availability and price remain favorable to growth.  

Eventually, the Basis of Competition becomes growth limiting.  Early in the Market Life Cycle, the Basis of Competition is driven by functionality.  Over time, the Basis of Competition shifts to reliability and durability, then to User Experience, and finally towards the end of the life cycle, to price.  At some point, the original Basis of Competition will change to the extent that your product or service will become obsolete and will be replaced by a new product or service with a different Basis of Competition.

3. Introduce new products and services

Growth through the introduction of new products and services is the most challenging approach to achieving growth.  This is because:

However, also because of competitive and market dynamics, introducing new products and services is the most productive growth generator in the long term.  In fact, it is the only way to ensure long term growth and business viability.

New Solutions Drive Business Growth by Changing the Status Quos

Price maintenance based upon costs, cost reductions based upon continuous improvement initiatives, and Sales / Distribution channel enhancements to increase product and service volumes sold, are key elements of every business’s annual operating plans.  These activities must be done, and done well, but the net effect is usually maintaining the status quo in the Market, Business, and Solution environments.  If business growth occurs without a new product or service introduction initiative, it is either because of market expansion (i.e. “a rising tide raises all boats”) or because a competitor has left the market and its volume is redistributed among remaining competitors.  

The goal of new product and service solution introduction is to achieve growth by changing the Market, Business, and Solution status quo in your favor.  Changing these status quos requires quantifying the User Experience, the Business Experience, and the Market Experience associated with available product and service solutions.  By purposefully changing these experiences to make them better, new solutions become more desirable, feasible, viable, and sustainable than the solutions they replace, resulting in growth.

Many business leaders consider the challenge of changing the status quos a daunting task, to be undertaken only under duress.  But if you understand the factors involved, and know what levers to pull under specific circumstances, new product and service introduction can become a reliable and repeatable business growth generator.

The factors involved require making sense of the following regarding available solutions:

• the Jobs-Being-Done versus the Solution Specifications defining the User Experience
• the Basis of Competition versus Business Capabilities defining the Business Experience
• the Customer Segments versus the Competitive Positioning defining the Market Experience
• the Market, Technology, Technology Adoption, and Customer Adoption Life Cycles states

Each of the factors becomes a lever for change in the associated experience.  Changing a factor to create a better experience will change the status quo, setting the stage for growth.

Conclusion

There are three sources of revenue and business growth that must be leveraged in every business.  The first, Price Increases, can be effective in the short term.  The second, seeking Unit Volume Increases, can be effective in the mid-term.  The third, New Solution Development, is necessary for the long term.  Because competitive and market pressures render current solutions obsolete in the long term, it is only New Solution Development that can ensure the long term growth and viability of the business.  

🌱
Businesses at risk
New solutions drive sales growth
An imperative
-Innovation Haiku, Kevin A Fee, March 20,2024