In prior posts I’ve discussed two common contexts for mobility initiatives: business model disruption (uh oh, how do I make money anymore?), and software subsuming hardware (no more pesky boxes). The third, today’s topic, is growth vectors for mature firms (I’m already really big – how do I get bigger?) – using mobility to generate accretive growth (of the top line, bottom line, or both).
In the last decade plentiful, cheap capital has allowed leaders in mature markets to consolidate both vertically and horizontally. For these businesses improving financial performance requires greater operational efficiency and/or increased revenue from new customer segments. Simultaneously, they must re-evaluate their customer-facing application portfolio to assess vulnerability to new, mobile-focused market entrants.
One such business that Modus Create is working with is one of the most successful companies you’ve probably never heard of (and still won’t because of NDA). Name aside, this is a Fortune 500 company that distributes maintenance and repair parts to over 150,000 customers with 550 locations including over a dozen distribution hubs and 50 service centers. Since their industry is highly consolidated with a very gentle growth slope, substantial growth requires opening new markets. However acquisitions of this type aren’t always feasible and are always risky – with a far higher risk profile when expanding outside of core markets.
For this firm, mobile provides the opportunity to layer in a direct B2C channel at a tiny fraction of what an acquisition would cost. When a 1% sales increase translates to $50 million in revenue, this is an easy investment to justify as long as the risk is managed. This is where establishing healthy constraints via a structured methodology, like Modus Create’s Product Kickstart, is a key enabler by:
- Ensuring goal alignment,
- Analyzing the existing portfolio and competitive landscape,
- Documenting assumptions, priorities and constraints,
- Establishing objective measures for success
For a multi-billion dollar firm, the desire to avoid risk is powerful, sometimes all consuming. Entering unfamiliar new market segments is by definition a risky proposition; a lean approach substantially mitigates this risk by clarifying assumptions and validating via metrics.
Recently we did a webinar with Eric Ries, author of The Lean Startup, discussing ways to get innovation off the whiteboard and into reality. For those who missed it, you can still see the recording.