If you’re serious about both growing a business….and maintaining work-life balance, then I have something important to share with you. It is a growth model built upon my philosophy that a business has three fundamental purposes:
- To create and grow profitable customers
- To help its owners develop and maintain work-life control and balance
- To build assets
Yes, indeed. In my view business is not just about making money. Work-life balance is just as important. And it is also crucial to use your business as a vehicle for building and diversifying assets. How to successfully do all three? Apply my Growth Strategies Model, which comprises the following:
A brand differentiation strategy that drives organic growth and focuses on creating and developing profitable customers.
A brand multiplication strategy that has a core objective to build scale by multiplying your brand.
A strategy for building and diversifying assets.
In my view, the Growth Strategies Model is the perfect model for helping you to achieve the threefold purpose of a business. Here is a visual of the model, after which I give an overview of each of the strategies:
Brand differentiation – or simply differentiation – is your core strategy in that it forms the foundation for growth.
In his iconic Harvard Business Review article titled What is Strategy, Professor Michael Porter stated, “Competitive Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” (Harvard Business Review, Nov-Dec 1996)
Furthermore, investment genius Warren Buffet likens a business with a strong differentiation strategy to a consumer monopoly or brand franchise. In other words, the business is so unique that it has little or no competition.
Yes, you’ve got to be different. You’ve got to have stuff and do stuff that your competitors either can’t, or have difficulty, offering and doing. This is the basis of the brand differentiation strategy.
The brand differentiation strategy is about establishing a leadership or monopoly position in the market. It could be that you have a one-of-a-kind product. Or you may be the only or the first firm serving a particular target market. Whatever position you choose, you need to be seen as the leader.
The polar opposite of the differentiation strategy is the “me-too” or commoditization strategy. This is where your business shares a mountain of similarities to your competitors and competes head-to-head with them. The result? Competition is price-driven and customers most often go with the business that can offer the best deal. Unless you have deep pockets and cost advantages, the “me-too” strategy is a losing one.
Now, just because you have stuff and do stuff better than your competitors, it doesn’t guarantee that your strategy will be successful. The brand differentiation strategy must pass this checklist to be worth executing:
Dictionary.Com defines a multiplier as a person or thing that multiplies. With this particular strategy, the thing that multiplies is your brand.
In a nutshell, the Brand Multiplication strategy involves taking your differentiated brand assets and systems and then multiplying them into new markets, channels and businesses. This can be done in a number of ways including:
Owner-funded expansion into new markets and territories.
Franchising and licensing. You can franchise/license either the entire business or components of it. With franchising and licensing the franchisee/licensee takes on much of the financial risk associated with expansion.
Channel expansion. This strategic option involves adding new sales channels to your marketing mix. For instance, a retailer adding an e-commerce sales channel.
Strategic alliances and partnerships. This option allows you to enter new markets by tapping into the resources and assets of your strategic partners, such as their customers. Co-branding with your strategic partners is another option.
Brand takeovers. This is where you takeover or acquire existing businesses and bring them under your brand umbrella. Or you can licence a part of your brand and systems within an existing business.
In the early to late 1990s I did quite a bit of consulting work in the New Zealand financial planning industry with some of the country’s top financial and investment advisors. One advisor I worked closely with was industry pioneer David Greenslade, and together we developed a number of strategies that were successful in building his firm and the industry as a whole.
One thing I learned from David was the philosophy that a key to running a business is to grow it to a level so that can you take money out of the business and invest it elsewhere. Let me repeat the philosophy again because it’s so important:
A key to running a business is to grow it to a level so that can you take money out of the business and invest it elsewhere.
Traditionally, when most people think of business growth they think primarily about organic growth. That is, develop a strategy, then go out and get customers and make a profit using internal resources.
To grow even further the traditional approach is to invest back into the business – from reinvesting profits, financing from other sources or acquiring investors – in order to create scale, get even more customers and build more equity. Or, some of the growth can be financed via options such as franchising and licensing.
Then you continue down the differentiation and brand multiplication paths.
Asset diversification is the 3rd growth strategy. Quite simply, instead of ploughing money back into your own business you invest it into other assets such as other businesses and real estate.
On the business investing front, this option involves taking minority shareholdings in other businesses, either publicly listed or private firms. For this to work you must have a good understanding of business valuation – or know someone who does.
Real estate is a proven investment and diversifying into this asset is a common strategy even with global corporates. An example? McDonald’s is the world’s largest franchise company with more than 35,000 outlets in over 100 countries. What you may not know however is that McDonald’s has a property portfolio worth more than US$20 billion. And it earns around US$6 billion annually in rental income. Diversification.
Asset diversification is a winning strategy for many business owners, but especially owners of small or micro businesses who don’t want to deal with the complexity and challenges that come with scaling a business. In fact, according to results from the 2015 Westpac Grow NZ survey, the desire to maintain lifestyle is a significant reason why most business owners are reluctant to grow their businesses via traditional means. Put simply, they don’t want the hassle that comes with traditional growth.
The solution for these owners is to focus just on the differentiation and asset diversification strategies. They can grow their businesses at a pace and level that doesn’t mess up their lifestyle, and then re-invest into other assets. This is the essence of David Greenslade’s recommendation and I have a number of clients who have been successful with this approach.
Look closely at my model and consider how it applies to you. And then ask yourself some serious questions such as:
How strongly differentiated is my business compared to competitors?
How well am I taking advantage of the competitive position I own in the marketplace?
Is brand multiplication a viable option for me? How do I go about it?
Should I just focus on base differentiation and diversify my profits into other assets?
How can I use this model to build better work-life balance?
All in all, my Growth Strategies model will help you to answer these questions and develop the best solutions.