Finding New Growth

Growth is not easy, particularly in slow and stagnating markets. Yet profitable, sustainable growth is the lifeblood of business. Peter Fisk explores how to see things differently, and think different things, offering 12 sources of new growth.

Jamie Salter sits in his New York office looking for old brands into which he can breathe new life, turn declining sales into fast and futuristic growth.

Canadian-born Salter is a seasoned entrepreneur and investor. At 30 he co-founded the snowboarding company Ride, which launched on the Nasdaq two years later. He then worked for various sports brands, before joining Hilco, where he launched their venture capital business. He was convinced that most brands are poorly managed, and missed many opportunities for growth.

In 2010 he founded Authentic Brands Group, a brand licensing and management company. And while you may not know his company, you know his brands – from Reebok to Ted Baker, Juicy Couture to Forever 21, and Sports Illustrated. He even owns the brand rights of many iconic celebrities, including Elvis Presley and Muhammad Ali.

ABG specializes in acquiring and revitalizing iconic and well-known brands across various industries, including fashion, sports, entertainment, and lifestyle. The company focuses on building long-term value for its brands through strategic partnerships, licensing agreements, and collaborations.

Salter has an ability to breathe new life into established brands, leveraging their heritage and popularity to create diverse and innovative product, services, events, business models and more. Under his leadership, ABG now owns more than 50 brands, also including Aeropostale, Barney’s New York, Brooks Brothers, Eddie Bauer, Hervé Léger, Hunter Boots, Izod, Nautica, Nine West, Prince, Quiksilver, Rockport, Van Huesen and many more.

As examples of their most recent deals, in 2022, ABG bought a majority stake in David Beckham’s brand management company DB Ventures for $269m (£200m) to drive growth in the EMEA and Asia-Pacific regions. ABG opened a European HQ in London. In March 2023, ABG finalised its largest acquisition since 2010, buying Reebok from Adidas for $2.5bn (£2.2bn) and expanded its share in the sportswear market.

William Gibson, the sci-fi author said, “the future is here – it’s just not very evenly distributed.” Much of what will create the future therefore is already in front of our ideas. Our challenge is to make sense of it, to see how it fits together, to imagine how it can be more.

Newness occurs in the margins not the mainstream. We need to look to the outliers, the early adopters and extreme users, for emergent behaviour in markets. We need to look to the smaller, specialist innovators for the new solutions. Finding newness is less about waiting for a completely new technology, such as quantum computing, more about connecting the dots of what is already here, then using imaginative fusions to understand how they will be shaped into a new reality for many.

As new ideas gradually catch on, they begin to spread more rapidly, a bit like how ice melts from the edges almost imperceptibly slowly, and then much more perceptibly faster. Sometimes they can seem cool to the geeks, but then get shunned by the mainstream, because they are not practical or desired. Geoffrey Moore calls this “the chasm”, which new ideas need to leap to reach most people.

How can you see the megatrends, and how they will affect your business and customers, before they arrive?

“Seeing around corners” by Rita McGrath focuses on the inflection points in our changing markets.  If we think of market evolution as a series of “s-curves” then a market takes off slowly but then accelerates, where it inflects. Malcolm Gladwell termed it the tipping point. The inflection is typically caused by external factors, such as new capabilities or attitudes, economic or regulatory change.

The challenge is to be ready for these inflections. Indeed, much of future thinking is less about predicting with any certainty, but about being prepared for uncertainty. We can search for clues that an inflection is close or upon us. We can look to adjacent markets for parallel behaviours. Food trends tend to lead drinks trends, sportswear trends lead couture, gaming leads entertainment.

McGrath observes that inflection points don’t happen instantly. They take a long time. The original title for her book was taken from Ernest Hemingway’s novel “The Sun Also Rises”. One of the characters asks another: “Well, how did you go bankrupt?” And the response was: “Oh well, gradually and then suddenly.” Which is how inflection points feel. When they are upon you, they feel as though they’ve emerged from nowhere and they’re just disruptive and difficult. But if you really look at the roots of them, they’ve been coming on for a really long time.

Nike’s shift to direct to consumer channels has been evolving for some time, but now it has become the norm. Perhaps by watching start-ups who have created direct relationships with consumers, like Casper mattresses or Harry’s shaving products, Nike gained the confidence to switch away from traditional channels and create a better shopping experience of their own, both in their flagship stores and online. By using the consumer relationships built up through Nike+ fitness trackers and membership, the brand can have a one to one dialogue, offer personal incentives, and a truly individualised experience directly with consumers. Competitors don’t get a look in. Nike acquired new capabilities such as data analytics company Zodiac to support it, and Invertex to create Nike Fit, 3D remote scanning of shoes enabling consumers to ensure they get the perfect fit. $21bn of sales flowed through Nike’s direct channels in 2023.

However too many leaders resist change. Too many leaders have grown to love their status quo. Stability brings more certainty and efficiency. Constant change requires more effort and turbulence. Carefully made plans need to be written, production lines adapted, new products and packaging developed, new talents recruited, and partners forged, new ads created.

As McGrath says, “Leaders turn a blind eye quite deliberately because it is just more convenient not to take in news that things might be changing.”

Airlines are one of the worst industries to work in. Every time an economic downturn comes around, their businesses are hit worse than most. I remember working for British Airways through economic downturns. Within days, bookings would have evaporated, and planes would be grounded. The problem was that they saw themselves as an operator of aircraft, and little more.

An alternative frame of thinking would be that they are in the business of connecting people. For travellers on vacation, they help them to explore the world, to meet up with family and friends. For business travellers, they are in the business of facilitating trade, finding new partners, reaching new markets, doing new deals. If they framed their business around the customer, and what they seek to achieve, there could be many alternative options to sustain their business, even in a downturn.

Similarly, Adrian Slywotzky, author of “How to Grow When Markets Don’t”, says that too many companies over the last decade have stagnated because they have forgotten how to grow.

Whilst their businesses grew rapidly in their entrepreneurial years, they then become fixated on their existing products and services, framing themselves in these ways, and thereby in markets which have matured and stagnated. He says that most companies have relied on traditional “product-centred” strategies for growth.

“Reframing” therefore becomes an incredibly powerful way in which to see your opportunities differently. By redefining the boundaries of what market you are in, you immediately escape the limitations of the old thinking, you jump to uncontested spaces which are no longer fought over by the same competitors, and you potentially engage customers in new, more inspiring and valuable ways.

CVS famously reframed their pharmacy business into a health business. Whilst a pharmacy is seen as a slightly negative place, a store to go to when you are sick, in search of a specific product transaction, health is a more positive idea, where you might go more often for a wider range of wellness-based products and services, and even pay more for. In other cases, you might even find that you see a significant change in stock prices, as analysts apply different p/e ratios, for example in shifting from a communications to media business.

Whilst one way is to reframe your market, another is to understand what else is inside your business that could add value to customers and differentiate your proposition.

Chris Zook worked with Slywotzky on another book, “Unstoppable”, which encourages companies to understand what their “hidden assets” are and find ways to leverage them to generate new opportunities for profitable growth. Hidden assets include undervalued business platforms, unexploited customer assets, or underused capabilities.

Growth remains the overarching pursuit of a business, even when it embraces a more socially engaged economic model where value is shared more equally between all stakeholders. Growth creates a bigger “pie” which can be shared amongst everyone, and that growth can be driven in a way that is efficient and has more positive impact as it is created, not just as a result. Positive growth, if you like.

You could argue that Igor Ansoff still has the answer to growth. His “product/market expansion grid” from the 1950s explores the opportunities and risks of growth – a simple 2×2 matrix that explores new and existing markets, and new and existing products and services. The limitation of course, is that it encourages thinking based around products, and the existing frames of markets.

Finding growth is an increasingly creative and multi-dimensional process, that combines the ideas of searching for new opportunities based around changing attitudes and behaviours, new capabilities and aspirations, and creative ways to frame, connect and define them.

This gives us at least 12 sources to explore:

• New audiences … reaching new customer segments, or those which have not been explicitly addressed in the past, through same or adapted products and propositions. Example: Nivea’s skincare for men. 
• New propositions … exploring the new or different needs and aspirations of customers, or new price points, such as line extensions, or a low end or luxury version. Example: Mini, Mini Cooper, Mini Clubman, Mini Countryman.
• New channels … reaching underserved or inaccessible audiences, either with direct channels, or through new types of intermediaries. Example: Bolthouse Farms selling carrots as snacks through vending machines.
• New geographies … taking the existing business to new geographies – new locations, cities, nations – in the same or adapted forms. Example: Hershey’s have five different chocolate formulae for different parts of the world.
• New products … this is largely driven by new capabilities, that are embraced to better meet new and existing needs and aspirations, new varieties and formats, and new applications. Example: Innocent’s smoothies, juices, snacks, water.
• New services … adding chargeable services, such as support to enhance the use of the product, or shifting from products to charging for access, like SaaS, software as a service. Example: Eataly’s cookery classes, beyond stores and restaurants.
• New experiences … combining products and services of your own, and potentially partners, into a richer added-value experience for customers. Example: Airbnb Trips, adding flights, car rental and activities to accommodation.
• New categories … creating new market spaces, that emerge from new needs, or fusions of existing needs, with distinctive products and services to address them. Example: Red Bull’s energy drinks.
• New partners … collaborating with partners who enhance the offer, from affinity brands to competitors and complementors. Example: Clothing brand Supreme partnering with Louis Vuitton to enhance brand reputation.
• New business models … developing new operational or commercial models for businesses – subscriptions, freemium, one for one, and more. Example: Microsoft 365 cloud-based subscription.
• New acquisitions … enhancing your portfolio, your capabilities or reach by acquiring new businesses that complement your existing. Example: Facebook acquiring Instagram to reach people more actively and intimately.
• New possibilities … developing entirely new markets based around novel capabilities and solutions which have no precedence. Example: Virgin Galactic developing its space tourism business.

Growth of course is easy if only measured by sales – any fool can discount a product. The challenge is to find sustainable, profitable growth. This list is not exhaustive, nor the approaches mutually exclusive. Many growth initiatives will use a combination of these approaches, and will focus as much on accelerating existing sources, as finding new. Growth accelerators range from new brands and propositions to exploiting network effects, such as social media and distribution platforms, that multiply reach.

© Peter Fisk 2024