B2B Growth Insights: Jan 2021

Written By Bryan Elanko

MINI “GROWTH CASE STUDIES” OF THE MONTH

[1] Uncovering huge markets by “serving the underserved”  

Several startups are uncovering large markets by serving working-class consumers. Few examples: Honey turned into a $4B acquisition for PayPal by solving online coupon shopping. Wish is an e-commerce site that targets bargain shoppers who don’t care about delivery times. Cityblock offers tech-driven healthcare services for underserved urban populations. Watch this space closely for future unicorns.  

[2] Compressing a shopping experience to attract a newer generation of customers 

Tesla faced a lot of backlash from dealership associations by adopting a direct-to-consumer sales model for its cars. Interestingly, the pandemic has forced other car manufacturers to adopt a version of this model as part of their omnichannel strategy. The supplementary benefit comes from attracting a newer generation of customers who prefer a 15-minute online purchase over a multi-hour showroom visit.  

For further reading: Nissan to roll out its Nissan@home online buying experience nationwide. 

[3] Can growing fast really hurt your exit strategy?  

Harry’s became a prominent DTC disruptor like Dollar Shave Club in the shaving market within a few years. When it came time to exit by selling to Edgewell Personal Care (Schick’s parent company); the FTC blocked the entire deal citing antitrust laws. Harry’s gained a sizable market share that an IPO might be the only exit option left in the future.  

Related note: Ben Horowitz’s suggestion on selling your business – “So, the judgment that you have to make is (a) is this market really much bigger (more than an order of magnitude) than has been exploited to date? And (b) are we going to be number one? If the answer to either (a) or (b) is no, then you should consider selling. If the answers to both are yes, then selling would mean selling yourself and your employees short.” 

[4] Adopting novel ways to grow or evolve may be easier for an incumbent vs. a newcomer  

The champagne industry provides an interesting insight into the power of incumbents over newcomers or disruptors. The existing relationships within an ecosystem can allow established players to initiate structural change much more easily compared to newcomers. The key partners are likely to be much more open to the established firms to move outside the boundaries of their traditional roles.   

[5] Owning the entire ecosystem to dominate a growing market   

Spotify is a recurring example of a company wanting to dominate a growing market (podcasts) by either building or acquiring solutions that solve everything from producing to distributing to consuming the product. In a similar vein, GM is launching a new business unit to provide an "ecosystem of electric first-to-last-mile products, software and services" for delivery and logistics companies.  

[6] An ad-supported growth model to build out much-needed infrastructure  

Volta builds and operates a network of electric vehicle charging stations using advertising! “The charge is free for vehicle owners and is supported by the retailers and consumer goods companies that want to reach the EV audience”. 

[7] Setting up creator funds to attract talent to maintain or grow user engagement   

Social media platforms quickly regress to the mean after the initial attraction of new features that bring in new users. Since these platforms get better at copying each other; the focus shifts from feature-led platform experience to creator-led experience. No surprise to see companies set up new funds or provide cash incentives for creators (talent).  

For further reading: (a) Snapchat’s effort with Spotlight, (b) Cash incentives for talent from Clubhouse.  

[8] Privacy policies to improve customer loyalty or lose customers  

What’s the customer data management strategy within your company? An eagerness to monetize every customer data point might sometimes force you to skip the premium that customers (rightfully) place on privacy. The mass exodus of users from WhatsApp is a cautionary tale in this growing privacy saga.  

For further reading: WhatsApp vs. Signal vs. Telegram vs. Facebook: What data do they have about you?

INTERESTING READS OF THE MONTH

[9] “Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business” by Tiffani Bova 

Key Takeaways:

  • Growth (in this book) refers to top-line sales organic growth, not cost-cutting, mergers and acquisitions (M&A), or other means to grow profitability or the bottom line.

  • Choosing the right growth path depends on the context (market, social, product, etc.), combination (selecting key actions), and sequence (act of establishing a priority).

  • You can categorize most growth paths taken by a business into one of 10 paths. Deciding which path(s) are liable to have the greatest (positive) consequence will – and in fact, should – change over time.  

  1. Customer Experience (CX): inspire additional purchases and advocacy

  2. Customer Base Penetration: sell more existing products to existing customers

  3. Market Acceleration: expand into new markets with existing products

  4. Product Expansion: sell new products to existing markets

  5. Customer and Product Diversification: sell new products to new customers

  6. Optimize Sales: streamline sales efforts to increase productivity

  7. Churn (Minimize Defection): retain more customers

  8. Partnerships: leverage third-party alliances, channels, and ecosystems (sales, go-to-market)

  9. Co-opetition: cooperate with market or industry competitor (product development, IP sharing)

  10. Unconventional Strategies: disrupt current thinking

  • Engaging in “conscience capitalism”, pursuing this as both a “social and an economic boost”

  • “It is possible to take a different direction – one congruent to your beliefs and passions – and turn it into the ultimate competitive differentiator – and in the process make the world a better place”.

  • Examples: TOMS Shoes, Warby Parker, Bombas, Lemonade Insurance  

[10] “The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers” by Ben Horowitz  

Key Takeaways: Ben Horowitz, the cofounder of Andreessen Horowitz, offers a field manual for founder-led companies building on his own entrepreneurial experience and years spent advising successful companies as a prominent VC. Following are my top 5 picks for best insights (in no order) from this highly recommended book,

  1. A tip for your staff meetings – “Insert an agenda item titled ‘What are we not doing?’ Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all the things that you do: build products, sell products, support customers, hire employees, and the like. Sometimes, however, the things you’re not doing are the things you should actually be focused on.”

  2. “To get things right, you must recognize that anything you measure automatically creates a set of employee behaviors. Once you determine the result you want, you need to test the description of the result against the employee behaviors that the description will likely create. Otherwise, the side-effect behaviors may be worse than the situation you were trying to fix.”

  3. “The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title. The rationale behind the law is that the other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level. For example, if Jasper is the worst vice president in the company, then all of the directors will benchmark themselves against Jasper and demand promotions as soon as they reach his low level of competency.”

  4. “Bill Campbell developed an excellent methodology for measuring executives in a balanced way. He breaks performance into four distinct areas: (1) results against objectives, (2) management (building a strong and loyal team), (3) innovation (not ignoring the future), (4) working with peers.”

  5. “If the company doesn’t expand, then it will never be much of a company, so the challenge is to grow but degrade as slowly as possible.”

BONUS GENERAL BUSINESS READS

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Bryan Elanko
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B2B Growth Insights: Feb 2021