How to Develop The Right Growth Strategy For Your Business

Want to get notified when we post new content? Click here.

A phrase you’ll hear over and over again in the business world is: if you’re not growing, you’re dying. While pithy one-liners are all well and good, how do you actually achieve business growth?

I’m not talking about “growth hacks” to net you a few thousand extra leads, or to increase your number of conversions, but an actual strategy that allows for continuous and sustainable long-term business growth.

While many companies are able to achieve a period of fast growth in their early years, the vast majority will find themselves stalling once they mature. Once a business hits that point, there’s generally only two outcomes: they either become a victim of their own success and shut down soon after, or they remain comfortably in that range, and never achieve any significant growth thereafter.

But if you want to continue scaling, you need a growth strategy.

Successful growth strategies are what drive companies like Nike, Facebook and Starbucks to not only dominate their markets and become worldwide brands, but to actually continue growing.

In today’s article, we’ll be breaking down the growth strategies behind some of the world’s greatest successes and failures in business. We will deep dive on what we can learn from them and most importantly – how we can apply those lessons to our own businesses.

  1. What is a Growth Strategy?
  2. Levers of Business Growth
  3. The Right Growth Strategy For Your Business
  4. How to Invest in Business Growth
  5. AirBnB Expands its Offerings With Experiences
  6. Evernote Acquires and Diversifies Too Much
  7. GrowthHackers and High Tempo Testing
  8. Hotjar Absolutely Nails Product Development
  9. Fab Succeeds – and Fails – at Developing the Market
  10. Convertkit Develops the Market with Affiliates
  11. Lessons for Your Own Growth Strategy

Free Bonus Download: Want the cheat codes to 5x your business in the next year? Grab your free digital copy of “Accelerant”, the new book by Insane Growth founder and 8x entrepreneur Mitchell Harper.

What is a Growth Strategy?

A growth strategy is a plan of action designed to help businesses capture a larger share of the market, even if it comes at the expense of short-term profit. The type of growth strategy a company implements will depend heavily on factors such as their finances, target market, and the industry they occupy.

Levers of Business Growth

When it comes to driving business growth, there are hundreds, if not thousands of different tactics out there that you can use to increase your sales and revenue. However, it’s important to remember that these are all just tactics – tools that we use to achieve our strategic goals.

When it comes to building a growth strategy, on the other hand, we first need to take a step back to look at the bigger picture, and identify what the larger strategic sources of growth are before we start implementing our tactics.

To do this, we’ll be turning to the work of the “Father of Strategic Management” himself – Igor Ansoff. Ansoff determined that there are four main strategies a business can apply for achieving sustainable business growth:

  • Market Penetration – The most straightforward growth strategy, and one most founders will be familiar with. The goal of Market Penetration is to sell more products to its target customers. Broadly speaking, the majority of growth and marketing “hacks” you come across will fall under this category.
  • Market Development – In contrast, Market Development is all about finding new markets and customer segments that you can serve with your products. This can include things like opening new retail locations, developing new marketing messages to target different demographics, or even adopting a different pricing structure.
  • Product Development – As the name implies, the goal of Product Development is to increase your market share by developing more products for your target market. This can be as simple as adding new features to an existing product, or developing entirely new products.
  • Diversification – The last and most risky growth strategy, Diversification aims to develop entirely new products for entirely new markets. Businesses typically achieve this by acquiring or partnering with pre-existing companies to offer a greater range of services.

The Right Growth Strategy for Your Business

To help you figure out what kind of growth strategy is right for your business, Ansoff also developed a handy chart to help businesses evaluate potential opportunities for growth. Initially published in the pages of Harvard Business Review, The ‘Ansoff Matrix’, sometimes known as the ‘Product-Market Matrix’, is one of the most widely-used marketing models in the world.

Image via Business to You

As you can see from the graph, Market Penetration stands out as the growth strategy with the lowest risk. This is understandable, as it involves selling an existing product to a well-defined target audience. This is typically the core growth strategy for most businesses, and where they will invest the majority of their resources.

However, as any experienced entrepreneur will tell you, there will come a time where relying entirely on market penetration for business growth will no longer work. Eventually, you will reach a point where the market is saturated, and there just aren’t enough customers to sell to.

At this point, to continue growing their business, founders will need to start adopting different growth strategies, such as Product Development or Market Development. But, as you can see from the graph above, any time you move into a new quadrant, the amount of risk naturally increases.

So where does that leave you?

Well, as you’ll be learning shortly, there are a variety of methods and tactics you can apply to achieve your strategic growth goals. By using the Ansoff Matrix you’ll be able to figure out which areas have the highest potential for growth and the best ways to take advantage of those opportunities.

How to Invest in Business Growth

As you’ve probably realized by this point in the article, achieving growth is not about relying on any single growth strategy, but rather, a combination of several. While investing all your resources into Market Penetration will only get you so far, focusing your efforts solely on diversification would be far too risky.

The real question is: how do you know what growth strategies you should be investing in?

Well, I have great news for you. Right off the bat, you’ve got Harvard Business Review’s Innovation Ambition Matrix – a framework designed to help businesses understand how much they should be investing into their various growth initiatives.

Image via Harvard Business Review

At the bottom left of the matrix, you have your Core Initiatives, which are tactics that primarily focus on the improvement and optimization of your current product and customers.

At the other end of the spectrum, you have your Transformational Initiatives – the real blue-ocean kind of stuff that revolves around entering new markets, or producing entirely new products.

In the middle, you’ll find your adjacent initiatives; strategies and tactics that aim to expand your current business model, and to bridge the gap between your Core and Transformational Initiatives.

While there are no hard and fast rules on how much you should be investing in each area, you generally want to adhere to the 70/20/10 rule:

  • 70% of your growth strategy should focus on your Core Initiatives,
  • 20% on testing and running experiments with your Adjacent Initiatives,
  • And finally, 10% of your efforts should be devoted to researching and experimenting with something entirely new.

Now, without further ado, let’s take a look at the growth strategies that drove some of the world’s greatest startup success – and its greatest failures.

Free Bonus Download: Want the cheat codes to 5x your business in the next year? Grab your free digital copy of “Accelerant”, the new book by Insane Growth founder and 8x entrepreneur Mitchell Harper.

AirBnb Expands its Offerings With Experiences

Ever since its founding in 2008, AirBnB’s meteoric rise to becoming one of the most well-known brands in the world is a masterclass in and of itself. Much has already been said about the growth strategy of their early years, and how they managed to aggressively corner the hospitality and tourism market.

But those were the early days. In the 11 years since, AirBnB has defied all odds and continues to grow as a business, with a staggering growth rate of 100% year on year.

Like most fast-growth startups, AirBnB faced a huge challenge to their continued growth – namely, competitors like TravelFreak and FlipKey were starting to saturate the market. Plus, the continued regulatory issues with local and international governments weren’t helping either. What this meant was that AirBnB couldn’t continue relying on their core product as their primary driver for growth.

Enter AirBnB Experiences – a service that allows users to take part in local experiences like tours and art classes, hosted by locals.

Ever since debuting in 2016, AirBnB Experiences has been largely successful for the company, reportedly gaining over 1 million guest bookings in 2018, and the service expanding to at least 58 major cities around the world.

While this venture is far from being as innovative as their original service, it does demonstrate a clear understanding of their target audience and the trends in their industry. According to Eventbrite, 72% of millennials would prefer to spend their money on experiences over material goods. AirBnB already knew that guided tours were popular, so it was a natural progression for them to start offering a service that met that need.

This is a perfect example of Product Development and Diversification as a growth strategy in action. Understanding that their audience primarily consisted of people keen on experiencing new cultures, AirBnB was able to successfully identify an opportunity to meet this need. In doing so they were able to expand their product range and enter into an entirely new market, while still remaining true to their core values and brand.

The office is the laboratory and meeting your users is like going into the field. You can’t just stay in the lab. And it’s not just asking users what they want, it’s about seeing what they’re doing.

Brian Chesky, CEO of AirBnB

Evernote Acquires and Diversifies too much

When you examine the history of Evernote, you’re going to find a long and somewhat battered story of a brand that has somehow managed to grow in all the right and wrong ways simultaneously.

For Evernote – at least in the years between 2011 and 2015 – their plan for growth was clear: diversify as much as possible.

Going far beyond their core product of being a note-taking app, Evernote began launching everything from an app that allowed people to keep track of meals and recipes, to physical products like notebooks, backpacks and more.

Image via UseFYI

According to Business Insider, in their aggressive pursuit of new markets, Evernote had neglected to conduct any significant market research or product testing before releasing each new product.

The end result was disastrous, to say the least – many of Evernote’s new products were heavily criticized, and wound up being shut down shortly after their release. To make matters worse, their prioritization on diversification over everything else caused the company to lose sight of their core business, eventually releasing a version of their product that garnered widespread criticism.

More than anything, Evernote committed the classic mistake of believing that the only way to continue growing is to focus solely on developing new products or services. While Diversification as an engine of growth is already a risky investment, making it your primary strategy for growth is almost certainly a recipe for disaster.

When you take a step back and look at the data, you’ll find that only a quarter of high-growth companies consider the creation of new products to be a core part of their growth strategy.
The majority of high-growth companies prefer to focus their efforts on investing in initiatives proven to drive growth, or optimizing their core business functions like sales, marketing and customer experience.

Image via McKinsey

Unlike most companies, Evernote was large – and lucky – enough to absorb the costs of their misadventures in product diversification. They have since returned to their roots as an organizational and productivity app for teams, and Evernote still maintains a strong and loyal base of users.

If anything else, their case study is a textbook-perfect lesson in caution, warning of the risks of pursuing diversification as a primary growth engine.

GrowthHackers and High Tempo Testing

When writing an article about growth strategies, it would practically a sin to not talk about GrowthHackers.

Entering 2015, GrowthHackers had been experiencing three months of drought stagnancy in their growth. Their initial strategy of acquiring users through Twitter was no longer producing significant results, and it was time to look towards a different driver for growth.

This led to the creation of the process dubbed ‘High Tempo Testing’; a methodology that’s all about continuous refinement through constant testing and experimentation. Setting themselves a goal of “launching at least three new experiments per week,” the team at GrowthHackers began testing everything from product features to simple A/B test.

Despite the apparent simplicity of the process, adopting this straightforward mindset of continuous testing allowed GrowthHackers to grow from 50,000 monthly active users to a whopping 152,000 in just 11 weeks – and all without spending a single dollar.

By adopting high tempo testing, we eliminated the bottlenecks at the ideation and experimentation steps to unlock more growth.

Sean Ellis, CEO of Growth Hackers.

 

More than anything, what this tells us is that the secret to achieving growth lies not so much in investing in new technologies and markets, but rather, by simply adopting a mindset of continuous experimentation.

To help you achieve this, let’s take a look at the Focus-Expand-Redefine framework by Bain & Company.

This model illustrates how businesses can ensure sustained and profitable growth by constantly testing and refining their core business model.

In the Focus phase, businesses should zero in on ensuring that their core business achieves its full potential. This is the most crucial part of the process as, according to Bain & Company, most growth strategies fail because they diversify too much from their core business.

It’s in the Expand phase that companies can let their hair down and party through their experimental teenage years. Start looking into different markets, develop some crazy new products, explore different drivers for growth, and what have you.

When this growth inevitably begins to grow stagnant, however, it’s time to move into the Redefine phase. This is when businesses need to take a step back, reflect, and potentially rethink their core strategy.

By following this simple framework and mentality of continuous testing, businesses of any size will be able to ensure constant growth within their business.

Hotjar Absolutely Nails Product Development

Like GrowthHackers, Hotjar is no stranger when it comes to experiencing explosive growth.

Within its first 6 months of launching, Hotjar went from 0 to 80,000 customers, and $1 million in annual recurring revenue. One year later, Hotjar was still effortlessly maintaining their streak, tripling their ARR to $3 million by mid-2016.

And the hits kept coming. In the four years since they’ve launched, the SaaS company has reportedly reached a new milestone of generating over $16 million in ARR!

Image via Hotjar

It’s one thing to experience a year or two of fast growth, but it’s another thing entirely to maintain the momentum for over four years. This begs the million dollar question: how did they do it?

For one thing, Hotjar has made it abundantly clear that one of their main avenues for business growth has always been product development. But, more than just building new products for the sake of building new products, the plucky company has made acquiring user and customer feedback a core part of their product development process.

One of the main metrics that Hotjar keeps track of is their Net Promoter Score (NPS), which gives them valuable insight into the kind of experience their customers are having.

To gather this data, Hotjar created a simple 3-step process that would automatically send users an NPS survey 30 days after signing up for a free trial, another survey 15 days after becoming a paying customer, and then dropping down to once a year after that.

Image via Hotjar

This incredibly simple process allowed Hotjar to keep their finger on the pulse, and ensured that they were always devoting the right amount of resources to improving and refining their product. This focus on user feedback eventually led them to start gathering other customer experience metrics such as Customer Experience Scores (CES) and Customer Satisfaction Surveys (CSAT). Effectively using the information they gathered to inform, and ultimately define, their approach to building new products and features.

Out of the three proactive touch points—Point-of-conversion, Customer Effort Score, or NPS—if there’s only one you can do, it’s NPS. It’s the most qualified, with the people who have stuck around, and it really helps you understand what to improve to increase your referrals. This is really, truly the most interesting one.

David Damanin, CEO at Hotjar

By making it their mission to be as customer-centric as possible, Hotjar has managed to achieve steady business growth by continuously introducing new features in response to their customer’s needs. But more than that, they’ve also created a community of fiercely loyal fans and brand advocates who are constantly promoting and introducing new leads into Hotjar’s sales funnel.

Fab Succeeds – and Fails – at Developing the Market

Image via Vox

Once touted as the “world’s fastest growing startup”, the eCommerce brand once known as Fab was once one of the brightest stars of the startup world, before it all came crashing down inside 3 years.

To give a little backstory, Fab was originally a gay social networking site that was, at best, a mediocre success. The brand, then known as Fabulis, had reached a point where growth had all but stalled, and the founders were left unsure of what to do next outside of shutting down the business entirely.

However – as luck would have it – they noticed that one feature of their business, at least, was doing very well. This was the retail aspect of their site, dubbed “Gay of the Day”, which operated on a daily flash sales model, offering a new and different item every single day.

And so they decided to take a bold risk, pivoting their entire business model and entering the retail market relaunched as Fab; a daily flash sales site for third-party designer goods like homeware, clothing and jewellery.

As it turns out, their risk paid off handsomely. Fab was a practically instantaneous success, generating $1 million in sales in just 18 days, and reaching 1 million users within a mere 5 months of launching. By the time 2013 rolled around, Fab was boasting 10 million members, $100 million in sales, and would receive a valuation of $1 billion a few months later.

Fab had managed to enter a new market by successfully identifying what their main driver of profitable growth was, and doubling down hard on it. It was – and still is – one of the most successful stories of a startup pivoting done right.

Alas, this seemingly happily-ever-after was not to last, as Fab, emboldened by their wild success, committed the classic mistake of attempting to expand before refining their core business.

In hindsight, the writing was all over the wall with the flash sales model having already proven to be too costly and awkward to maintain, let alone to scale.

However, Fab pressed on, and expanded into Europe by acquiring a German furniture company with plans to introduce their own designer products. When the flash sales model proved impossible to maintain at scale, they decided that their best bet was to pivot again. Confident of their success, they began putting together a plan to become the designer alternative to Amazon and Ikea.

Unsurprisingly, it was a spectacular failure.

Fab had committed the tri-cardinal sin of market development by (a) failing to consolidate their core business, (b) failing to consider the logistics and effects of entering a different market, and (c) growing way too fast.

By the time Fab was sold off at a mere fraction of its once $1 billion valuation, the company had burned through $250 million of investor money, cut 500 jobs, and lost $875 million in value.

The moral of the story? Don’t be like Fab.

Free Bonus Download: Want the cheat codes to 5x your business in the next year? Grab your free digital copy of “Accelerant”, the new book by Insane Growth founder and 8x entrepreneur Mitchell Harper.

ConvertKit Develops the Market with Affiliates

As ridiculous as it might sound, ConvertKit was created on a dare when founder Nathan Barry issued himself a public challenge to build a web application that would generate $5,000 in monthly recurring revenue within 6 months.

While Barry didn’t quite manage to hit that $5,000 goal, he did manage to start making just over $2,000 in MRR – so not a total loss. All in all, it was a fairly good start: he had a product, there was a definite market for it, and there were clear signs of further growth.

That is, of course, until growth not only stalled, but sales actually began to decline. If ConvertKit was to continue keeping on, something had to change.

First and foremost was a change in mindset. At that point, Barry was working on ConvertKit part-time, and it was only after an illuminating conversation with Hiten Shah of KissMetrics that he seriously asked himself whether or not he had been giving ConvertKit the best possible chance to succeed.

Realizing that he hadn’t, Barry refocused all his attention back onto ConvertKit, investing $50,000 of his own money and working on the company full-time again.

Image via Nathan Barry

Taking a step back, it was clear that ConvertKit’s current target market was too broad. They were trying to be everything to everyone at once, and it was costing them. ConvertKit’s growth strategy needed refinement and pruning, and it turned out that their biggest opportunity for growth lay in market development.

Realizing that their best customers were bloggers, ConvertKit changed their messaging to “Email Marketing for Professional Bloggers”, and began aggressively targeting this new niche. Barry started focusing on direct sales, personally reaching out to bloggers, and even developed a concierge service to help them painlessly migrate their email list to ConvertKit.

Image via WPCurve

But the best performing tactic in their growth strategy, by far, was working with affiliates to increase their brand’s awareness. While working with affiliates was nothing new, what separated ConvertKit (and really drove their overall growth) was offering to host a free webinar for all their affiliates, regardless of the size of their audience.

This tactic presented the first real scalable growth channel for ConvertKit, and seeing that it worked, they refined it even further. They made their webinars as high-value as possible, and even gave away free online courses, ebooks and t-shirts to their attendees.

We’ve done hundreds of webinars with an incredible number of affiliate partners. They are hard, time consuming, and exhausting. But they work.

Nathan Barry, CEO and founder of ConvertKit.

To say that this growth strategy worked is a bit of an understatement, as within 15 months, ConvertKit was generating $125,000 in monthly revenue. Fast-forward to today, and ConvertKit has increased that number to a jaw-dropping $1.4 million in monthly revenue and webinars are still one of their core tactics for growth.

Lessons for Your Own Growth Strategy

Growing a business is hard work, but it’s certainly a lot easier when you have a clearly-defined strategy for growth. Time and time again, we’ve seen how the narratives play out differently between brands that stall out after having a growth spurt, and brands that achieve sustainable success.

And the key difference between the two? That would be the ability to recognize and capitalize on the right opportunities for growth.

To help you identify the best growth strategy for you, here are 6 simple rules to keep in mind:

  1. Product development should always be a logical extension of your core product
  2. Always refine and optimize your core business before diversifying
  3. The more you test, the faster you’ll grow
  4. Let customers lead your product development
  5. Growing too fast can kill your business
  6. Examine what your drivers of growth are and double down on what’s working

What does your growth strategy look like? What tactics for growth have worked for you in the past? How do you find opportunities for growth in your business? Let us know in the comments below!

Want to get notified when we post new content? Click here.

2
Leave a Reply

avatar
1 Comment threads
1 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
2 Comment authors
Jonathan ChanMidasto Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Midasto
Guest

How can i know in which buisness growth lever am i? It depends on sales?