In my ebook, the Growth Zone, I detail the four major strategic directions available to companies that are seeking growth.
- Quadrant 1: the Optimization Zone – This is where a company improves effectiveness and efficiency of its core offerings. In other words, the existing uses of your product by existing customers.
- Quadrant 2: the Growth Zone – This is the quadrant where companies find lead customers that pull them out of their niche and into new untapped areas — giving their existing customers new ways to use their products.
- Quadrant 3: the Red Zone – This zone is the toughest to win, as it involves finding new customers to buy the existing offerings.
- Quadrant 4: the New-New Zone – The new-new quadrant is the area of breakthrough, in which you are inventing both the product and the market.
I’ve already written about how the end of the first quarter is a critical time from the point of view of calibrating your group’s internal strategy. Now, I want to look at what kind of results companies that use Growth Zone (quadrant two) concepts are getting based on their earnings reports. Let’s look at how customer-oriented strategy and focus have paid off in a great first quarter.
Note: This is a post to highlight strategic approaches and any comments about future financial performance are made as illustrations only and should not be taken as investment advice.
3M: A Titan of the Growth Zone
One of the most consistent innovators on our list is 3M, which has one of the strongest internal systems for consistently looking to quadrant two projects. 3M has had very good customer-centered innovation processes and measurements in place for years. One of these that’s worth emulating is a tool that measures the freshness of sales from new products, called NPVI = new product vitality index. This tool measures products introduced within the past five years, divided by the company’s total sales.
Notice this graph (page 14), which shows seven years of history and three years of forecasts according to their NPVI measurement. This shows that they are not only keeping very specific data, but also using it as a core planning tool.
Whether in products as diverse as automotive, medical or safety, when you dig deeper you find the customer-focused methodologies of a true Growth Zone approach within the 3M corporation. This is amazing agility for a firm with a market cap of more than $60B.
Ford: A Stealth Player in the Growth Zone
Ford as a company has been on a real multi quarter growth arc. As you study their comeback, you might be tempted to associate them with optimization and supply chain work, and no doubt those are factors. As you go deeper, though, you’ll see that they made some very shrewd investments in getting customer-focused. Key examples of this are their early commitment to the voice-activated cockpit using SYNC™, their sustainability initiative — including hybrid power — and a pervasive use of higher-efficiency, more compact engines through their eco-boost efforts.
These investments in quadrant two have been well rewarded, and by taking them across all the platforms, they have simplified their marketing approach, sales tools and multiplied their advertising spending. The actions have resulted in consistent top tier sales performance on a global basis.
Apple: Starting in the Growth Zone, Then Running the Table
Lastly, let’s look at the press’ favorite story: Apple. Every key breakthrough from our friends at Apple has intense quadrant two customer focus. The iPhone took the negative experiences of integrated device users and built it into a very smoothly integrated user experience across voice and data. The iPad was a very well-executed rendering device that was born of early advances in touchscreen technology married to the mobile iOS platform — a beautiful quadrant two play that gave existing customers new uses for their technology that was customizable with “apps.”
The ecosystem of these devices, all tied together with the iTunes platform, has found a sweet spot in the market, and continues to drive way above-average financial results that have had real sustainability.
It’s easy to forget in this time of success that each of these positions involved a step function improvement over what the early entrants placed in the market. This uncanny ability to integrate the customer view has allowed Apple to repeatedly take the top position in each category it has entered with its iOS-based iPod, iPhone, and iPad. Well-positioned iterative growth with a platform approach creates a very vibrant enterprise. We’re all awaiting the next part of this story.
The Moral of the Story: Follow the Customer
These are firms lead using long-wave thinking and intense tactical focus. They took their learnings and put them back into their planning process to retarget their innovation. They each took courageous steps in betting early on investments in hardware (Apple with gorilla glass), software (Ford’s SYNC™) and sustainability (Ford’s investment with Ecoboost and Hybrid technology).
Each spent hours and hours of sweat and behind-the-scenes work in setting strategy, trendspotting, lead customer identification, surveys and testing. Hardware and software was designed and honed. Partnership agreements were negotiated. Fulfillment systems were set up to deliver on the promise.
Customer-centered innovation is hard work, but we’re seeing real numbers that back it up. Turning your group into a need-seeking missile is the key to a vitality breakthrough.
When it all works together, the outcomes are profitable for stakeholders and provide vital, interesting places to work and invest.
If your company or group is stuck, there is no better starting point than finding the unarticulated needs of your leading edge customers and delivering to them.
I would love to hear your thoughts. Please feel free to drop me an email or tweet me.
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