Conceptually, simplest growth strategy is scaling. Simply, it is doing what you are currently do more. It’s not easy to execute strategy but the idea is very simple. Assessment is the most important part of the scaling strategy. We need to understand our options and opportunities and find the optimum strategy.
Scaling: Increasing revenue by doing more of the same business the company is already doing without significantly increasing resources or costs
Consulting approach, requires problem identification, hypothesis development, test and recommendation steps. We will use those steps to develop our scaling strategy.
Identify A High Growth Potential Market Segment
Identification process may include following analysis:
Competitor Analysis
Environmental Analysis
Analysis of Industry Structure and Competitive Dynamics
Competitive Lifecycle Analysis
Analysis of Competitive Position
Competitor analysis is basically analysis of your most significant rivals in the market. Environmental analysis includes demographic, social, and all the information of the market segment. In the environmental it’s wise to use tools like 5 forces analysis. Competitive life cycle analysis will tell us the stage of the market segment like mature or not. All of those analysis will create our problem identification and increase our market knowledge. In the end we will be able to identify competitive position of the market.
Formulate A Plan That Is Robust To Different Scenarios
Then we should formulate a plan. In this part we can create several different analysis approaches like:
Capabilities Analysis
Stakeholder Analysis
Internationalization Analysis
Diversification (Portfolio Planning) Analysis
Scenario Planning
Capabilities analysis is all about current capabilities and resources of the company. It will be our sign about whether the company is ready to compete in the high level or not or what type of capabilities should company invest in for the healthy scaling strategy execution. We can use the stakeholder analysis to identify key stakeholders for the scaling strategy. Also this analysis may lead us to look for new investment. More importantly, stakeholder analysis will tell us the expectation of stakeholders about scaling and growth. Internationalization analysis is all about new geographic locations. Scaling may happen through the new market entries. In such analysis, market understanding and go-to-market strategies are significantly important and please note that, this is a very broad area to talk about. In the later posts, I like to create a post about Internationalization Strategy. Lastly, diversification. In the first section, we talk about scaling like doing more what you are currently doing. You may think that, diversification (which is the entering new product/service line) and internationalization strategies are not quite fit to our definition. However, scaling can be happen through increasing the company’s capabilities. In this post we will broadly review scenario planning, which is helps a company plan a robust strategy for different scenarios.
Scenario Planning
Scenario Planing is a planning stage of a robust strategy for different scenarios. It’s a part of largest strategical analysis. There are different features of the scenario planning:
Identifies future factors as trends and uncertainties: In this element, trends refer to possible certain things that we can make a plan like increase in computing power. On the other hand, uncertainties will have a larger impact on our strategy. Uncertainties are things that we do not sure about what is gonna happen about it. There can be macro or micro level uncertainties and we have to asses them before we start our strategy selection.
Uncertainties employed to generate multiple scenarios of the future: As the uncertainties increase, possible scenarios will increase with it too. In a good scenario planning, we should create scenarios for each uncertainties.
Contingency planning for multiple possible futures: Each developed scenario needs a contingency planning for multiple possible futures. In this part, we need to develop our handling strategies for each possible future.
Structures our analytical thinking about these uncertain futures: Scenario planning is all about analytical thinking approach for handling uncertainties.
Stress test for our strategy: All of those steps are the kind of stress test for our future scaling strategy.
First Step: Identify Key Strategic Issue
It starts with identification of important strategic decisions with large potential impact. It may includes many questions according to your business and industry like how consumers will buy our products in the short, mid and long term? How technology will impact our manufacturing capabilities? etc. Those type of questions will help us the understand key points of the strategic issues.
While dealing with identification of uncertainties, it is very important to understand appropriate time horizon. In that part, I like to talk about Goldilocks Principle. Here is a great video:
Goldilocks principle has many use cases like in Machine Learning, economy, cognitive science, medicine and more. In scenario planning perspective, it is all about finding the right size and the right moment. We never want to explore very long future or just the other day, finding the right time horizon is very important in scenario planning.
In this process, we should seek input inside and outside the organization. We can talk with internal experts and stakeholders and also our consultants. Doing that will allow us the take contextual, competitive and organizational issues into account.
Step Two: Identify Key Trends and Uncertainties
Those are the features that impact in the future to our operations and financials. In the scenario planning process, we should focus on big issues — which factors will have the most impact on our business? In the first paragraph of this section, we defined the trends and uncertainties. Please remember, trends are the things that happen in high probability. We can identify trends via reports, experts, etc. Note that, trends will impact to all scenarios.
In scenario planning, main focus is uncertainties. Uncertainties are events that we are not sure about which way it will go. During the process, again, we should seek a variety of perspectives (experts, stakeholders, etc.). We will look for most dramatic and uncertain impacts on our business.
Step Three: Construct Scenarios
After the first two step, now we are ready to construct our scenario. In the construction part, plot some of the different scenarios to help you visualize the differences. Then select two of the most important uncertainties, plot on axes. Two different outcomes arising from each of the two uncertainties.. Here is the example matrix for Uncertainty WX and Uncertainty YZ.
Video Game Consoles Industry Segment Example
In this simple example, we will review the video game consoles industry segment (XBOX, PS, etc.). In this example, let’s focus on uncertainties instead of trends (computing power, power of social media, etc.).
First uncertainty is revenue model. It can be happen in different ways like subscription and license. Second uncertainty is about features of the device. Should it have only video game playing purpose or multiple purpose like streaming Netflix, etc. Let’s visualize it:
Step 4: Writing Scenarios
It is time to fill your quadrants. While we are doing it, we should use vivid descriptions and focus on plausibility, but embrace the scenarios we’ve created.
We should imagine the evolution of each scenario (%20, %250, %100 into the time horizon). It is all about generating details about the future.
Step 5: Reflect On Current Strategy
Finally, last step! In this step, we will use these possible futures to reconsider our strategic decisions. How do current resource allocation decision hold up across scenarios? We will seek to identify opportunities for more robust strategic moves. Then we will repeat the process with different combinations of uncertainties (generating different scenarios).
So, this step is all about finding out how to we get there. All we need to is identify opportunities make our strategy more robust. In this post we focus on 2 uncertainties but in real world we can create combination of many uncertainties to see the insight.