Great Small Business Ideas to Start: Achieving breakthrough growth
Established businesses often struggle to achieve industry-leading growth rates because their sector is mature or highly competitive, or because they become stuck in the rut of incrementalism. Firms become convinced that they need to compete in the same way as their rivals: minimizing risk, maximizing resources, and making acceptable returns. There is another way: fundamentally reconceive what drives your profits, build a better business model, and achieve breakthrough growth.
The idea
Research by business school professors Rita Gunther McGrath and Ian C. MacMillan highlights how companies in a range of industries achieve exceptional growth (see Marketbusters: 40 Strategic Moves That Drive Exceptional Business Growth, published by Harvard Business School Press). The key is to revise your business, taking a new, different, and radical approach from that of your competitors and finding better ways to drive profits. It is essential to be flexible and creative, and to understand what customers value.
Cemex transformed its small commodity business in Monterey, Mexico, into one of the largest cement companies in the world through a radical reassessment of what would drive profits. It has outperformed its international rivals, Holcim and Lafarge, in share price, operating margins, and return on assets. Cemex moved from selling concrete as a product by the yard, to selling timely delivery of a commodity. Delivery was what mattered to customers: getting the right amount, in the right place at the right time, without workers waiting or the concrete spoiling. Using methods employed by Federal Express and ambulance crews, Cemex developed digital technology to manage the location and dispatch of its trucks. Now, Cemex uses GPS technology to guarantee delivery of ready- mix cement within a 20-minute window.
In practice
For Cemex, success was based on a cultural change across the business. This required a proactive approach to meeting commitments, developing new ways of serving customers, and ensuring efficient operations.
Using the following techniques can achieve breakthrough growth:
- Transform the customer’s experience and find new ways to meet their needs—eg Microsoft developed Office software, and whatever you think of their business it’s definitely got the edge over typewriting!
- Transform the product or service offered to customers so it reflects what they value. One approach is to compare your offer with competitors’ by sorting product attributes into three categories: basic, differentiated, and exceptional. Then consider how to develop new advantages and strengthen existing ones to make your product exceptional.
- Change your performance metrics so you can monitor and improve your customer offer. Redefine your business, possibly by altering the fundamental unit that customers are charged for, or by revising key metrics used to measure how well you are selling. For example, some lawyers departed from the traditional method of selling their time to selling services on a “no win, no fee” basis.
- Capitalize on changes in your sector. For example, Amazon.com recognized the potential for the internet to redefine retailing. Also, HSBC bank was the first to recognize that immigrants in Britain had specific banking needs (eg to repatriate funds from overseas) and circumstances (no banking history in Britain), and offered products tailored to suit this market.