In detail: Growth by Diversification
This article builds on my recent blog post "Looking for growth? It's in your hands!" and provides the detail on information you might like to consider gathering when looking to enter new markets.
The key to success is gathering the right information and intelligence that will help you choose the way forward; this article suggests which information you might like to gather.
How will we do this?
Define and understand new customers needs. Having understood customers’ existing and their situations, we can then look for new customers with the same or similar situations. With finite resources, it is essential to narrow the field of potential new customers into a manageable quantity for further exploration and qualification.
Define and understand potential offerings. Building on the insights gained regarding existing offerings, you are then able to assess how those capabilities might be applied to new customers and situations. Your in depth understanding of the existing portfolio is vital intelligence when identifying new customer opportunities.
Define and understand new customers’ view of new offerings. Gaining meaningful feedback from people your company doesn’t yet have a relationship with, about products they're not familiar with, is a challenge and is usually a deterrent to attempting new customer/new product sales. Gathering any available information enables a view on whether the market might be worth addressing, either by first promoting the new offerings and then addressing the new customers/market or vice versa. This information may also identify potential merger and acquisition targets.
Define and understand sales and marketing capabilities for winning new customers with new offerings. Addressing completely new markets is more often the function of company management than that of sales people. Typically, a redirection of focus, investment and a strategic decision is required to enter new markets. Many companies consider the risk and expense of new offerings and new customers too great and would instead consider acquisition or merger (e.g. acquire or merge with a company for whom these are existing offerings and existing customers).
Ash Madden is Founder and Director of Madden Associates Limited, the Specialist Channel Sales & Partnering Consultancy
Example questions to help define potential new customers
The point of these questions is not that you should understand every last piece of detail but to illustrate how an in-depth understanding of pertinent information (that most likely already exists in your business) can help shape your future plans. Without information you’re left with guesswork, assumption and intuition. Sometimes these produce results; sometimes not. Decision making is always better when armed with the facts.
1. Define and understand new customers.
Who does your company already have contact with who isn’t a customer but could become one? Why aren’t they customers? What would it take to interest them? Contacts from previous sales engagements? Contacts from existing customers that have moved company? Contacts from channel partners and other third parties? Colleagues from previous employments? Customers from previous employers? Social media contacts, in particular LinkedIn? Alumni from previous education?
Which of your existing customers could make introductions to potential new customers? Who could they recommend your company to? Who could they introduce your company to? What would motivate or encourage them to do so?
Who else could introduce your company to potential new customers and what would motivate them to do so? Industry influencers? Consultants? Service Providers? Service Integrators? Other software Providers? Partners and other third parties? Trade bodies? Social media contacts? Contacts of contacts (for example, introductions to 2nd level LinkedIn contacts)?
Which potential new customers is your company already aware of? Where did this information come from? Who can introduce your company to them? What would motivate them to do so? How valuable would the introduction be? How else could your company be referenced to the customer? (for example, who is a mutual contact that could be referenced)? Where could your company meet the customer on “neutral ground” (for example, a trade or networking event)? How else could the customer become aware of your company (for example, trade press, trade body)?
Which companies have something in common with your existing customers? Share the same industry? Share the same locations? Are of similar size? Share the same customers? Attend the same events? Are members of the same trade body? Share the same suppliers? Follow the same commentators? Read the same press?
Who are the other customers of your channel partners? Why don’t they purchase your offerings? What would motivate them to do so? What would motivate the channel partners to introduce your company?
How similar are all these potential new customers to your existing customers? What do they have in common? How relevant is this to your company and offerings? How relevant is this to the potential customer?
Where do potential customers find information on products and suppliers? From the supplier directly, and if so, by what means? From channel partners, and if so, which? From colleagues; if so who? From marketing; if so what? From their own research; if so where do they look? From social media; if so which? From industry groups; if so which? From industry publications; if so which? From industry events; if so which? From partners and other third parties; if so who? From friends and family? From other press; if so which?
What activities could your company undertake to identify new potential customers? Marketing campaigns? Social media activity? Channel partner activity? Trade events? Trade publications? Networking events? Market research? (for example, LinkedIn Sales Navigator)
2. Define and understand potential offerings.
In comparison to your existing offerings, which does your company consider to be … Complementary? Adjacent? Coincidental? (that is, often purchased at the same time but not directly related). Alternatives? Competitive?
Which offerings do others (suppliers, third parties, commentators, analysts, competitors etc.) consider to be …Complementary? Adjacent? Coincidental? Alternatives? Competitive? Now and in the future?
How closely related are these to your existing offerings? What are the differentiators/Unique Selling Propositions for these offerings? What are their Strengths, Weaknesses, Opportunities and Threats?
What resources (time, people, money) are needed to evaluate these offerings? Management? Sales? Technical? Operations? Marketing? Finance? Consultants?
What resources are required to specify, develop, test, document, deliver and support these offerings? How long will it take? What are the risks?
What resources are available to help with each of these?
How will the market have moved on during the time it takes to bring this offering to market?
How are the potential offerings evaluated and prioritised? What is the qualification process and criteria? What are the criteria? What is the evaluation process and criteria? What is the decision-making process and criteria?
How are potential offerings documented? How is the product roadmap created, managed, prioritised and costed? Who owns the roadmap and how often is it reviewed? How are roadmap decisions taken? What input do others have?
3. Define and understand new customers’ view of new offerings.
To what extent do customers believe their needs are being addressed? By the offerings they are already using? By the suppliers they are currently buying from?
What is their view of their current suppliers/offerings? What are their differentiators/Unique Selling Propositions? What are their Strengths, Opportunities, Weaknesses and Threats?
To what extent does the customer believe their needs couldbe addressed more effectively? By existing suppliers? By other offerings from existing suppliers? By other suppliers?
What could be done to help address customers’ needs more effectively? Improved use of the products they already have? Improved relationship with existing suppliers? Improved organisation? Improved training?
What could the existing suppliers do to improve? What areas of the business require improvement? How would this help? What would be the financial implications for the customer and supplier?
Could the existing suppliers utilise their assets more effectively? Could they address more customers/markets? Could they improve their organisation to improve efficiency? Could they do more with the same resource? Could they do the same with less resource?
What benefit could a new entrant (such as your company) offer to the market? What would the customer expect that is different to the current position? What could be offered that is different to the current position? What would be the benefit to the customer? What would be the benefit to the new entrant? What value could your company contribute that existing suppliers cannot? What would be the value to your company? Over what timescale would this happen/need to happen? What would be the barriers for a new entrant to the market?
What is the value of the new market? Revenue? Initially and on-going? Margin? Initially and on-going? Cash flow implications? Timescale / sales cycle? Potential for complementary offerings? What probability is associated with each?
What is the market value of existing suppliers in the market? What are their financials? Are they likely to be undervalued? And if so, by how much? What are their future plans and strategy? Who are the owners? Who are their channel partners? What are the shareholders expectations for the business (e.g. growth, income, acquisition, merger, retirement)?
Would they be interested in selling the company? For how much, when and on what terms? What do their customer contracts look like? How much risk is associated with their future income? What can be done to mitigate that risk? Are they looking at other potential acquirers? If so, who and what’s their interest? Would they be a good fit culturally, logistically, geographically or financially?
What could your company gain from an acquisition? Economies of scale? De-duplication of core functions (for example, finance and admin)? Shared expenses? Operational / organisational efficiencies? Business and technical skills? Customer relationships? Supplier relationships?
4. Define and understand capabilities for winning new customers with new offerings?
Who from your company will be involved with evaluation of new markets and/or merger/acquisition opportunities? Management? Sales? Technical? Operations? Marketing? Finance? Consultants?
How will they be rewarded? Commission? Bonus? Recognition? Awards? Shares/share options?
How does this relate to your existing activities? Time / effort allocation? (how much time /effort should be expended on new markets/merger and acquisition activities compared to existing)? Reward allocation? (what proportion of rewards will depend on new markets)? Recognition / awards? (will there be extra recognition or awards for new market activity)?
What resources are needed to be successful? Marketing? Events? Collateral? Website / web content? Introductions and referrals? Market analysts? External consultants and advisers?
How are new opportunities evaluated? New markets? Merger / acquisition opportunities? What is the process? How are opportunities rated and prioritised? How is a decision made and by whom?
What is your view of winning new markets and mergers / acquisitions? Confidence in your company’s ability to engage in these activities? Value of new markets / revenue opportunity?
What is your strategy? (for example, is the strategy to win new markets and engage merger / acquisition targets understood)? Unique Sales Proposition/differentiators? (for example, are they sufficient to engage in these activities)? Company proposition? (is it good enough)? Strengths, Weaknesses, Opportunities and Threats? (are they understood and are they effective for new markets)? Marketing? (is it sufficient; will it work, is it relevant)? Channel partners and other third parties (for example, would they be involved and what value would they contribute?) Social media? (what is the relevance, what should be done with it)? Competitors? (for example, are they understood; are the competitive differentiators understood)?
Does your company have the processes to enter new markets and pursue merger/acquisition activities? Management process? Evaluation process? Due diligence process? Onboarding process? Integration process? Other processes?
How could your company be more successful? How could your company be more successful in identifying and addressing new markets? How could your company be more successful in identifying and addressing merger and acquisition opportunities?
What lessons have been learned? From previous successes? From previous failures? What lessons shouldhave been learned?
To what extent does this change the view of your company as: Visionary? (leads the market)? Adaptable? (follows the market)?
How are potential merger/acquisition targets documented? Who is in the market? Who would be interested in what and when? What happens with this information? Who decides?
How is the list of potential acquisition opportunities maintained? What is the process? How often are they updated? Who is involved? How often are they reviewed?