|
 Good Strategic Overview!
From 1990 - 2000, just 7% of publicly traded companies in the U.S. enjoyed at least 8 years of double-digit growth. Thus, growth multiples and promotion opportunities are falling. Slywotzky begins by explaining why the usual growth approaches have largely already been mined out.
Business design innovators (eg. Southwest Air, Nucor, Wal-Mart) have taken billions of dollars of shareholder value from leaders such as United Air, U.S. Steel, and Sears. For most, however, this no longer offers the desired growth. Product extensions (eg. Pepsi Blue) produce increasingly small returns in over-crowded markets. Product enhancement is another largely depleted avenue for new profit growth as they increasingly are rare, slender, and fleeting (Nintendo vs. Sony, Intel vs. AMD, Avis vs. Hertz). And because meaningful breakthroughs have become rare, customers are extending product replacement cycles - shrinking sales growth further. In the high-tech industries, the vast majority of companies and initiatives founded on breakthrough technologies fail to get off the ground - NeXT Computer, Wang, Data General, Digital, Palm are examples. International markets increasingly hold declining opportunity for significant new growth - emerging markets are mostly as mature, competitive, and saturated as the U.S., generally plagued by inefficient distribution channels, economic and political instability, and protectionist laws. Worse yet, they're increasingly producing world-class competitors (Samsung, Hyundai). Finally, M&A has already reduced the number of viable acquisition targets.
Cardinal Health found a way past these blocks by providing complete pharmacy management services - including staff and systems, and automated drug administration that also automated portions of ordering and inventory management, as well as hospital billing. Simultaneously it also implemented pre-packed surgery packs, sterilized and tailored to the individual surgeon and operation.
McKesson, a competitor, instead attempted to grow via buying HBOC, a major supplier of enterprise software to hospitals, though the business was already slowing. However, its pre-existing relationships and distribution expertise had little to contribute to this new area, and the result was a financial and strategic failure.
Customer value chain opportunities include follow-on services such as installation, maintenance, financing, training, and outsourced operations. G.E. is a leader in this tactic. Home Depot's providing financing and construction is another example.
Harley-Davidson takes another approach, sponsoring rider rallies, motorcycle magazines, high-margin accessories, as well as financing.
A prerequisite for demand innovation is great performance in the core business.
In most cases outsourcing is a pure cost-saving ploy operating largely as before (with less flexibility) and little profit.
The One for Me
After reading a number of books on business growth, this book turns out to be the one that resonates with me. While some argue that the content isn't original, it is well presented and that's what's important. The book offers a lot of value, regardless of the maturity of markets.
The book focuses specifically on an organization's offerings. It doesn't attempt to address growth avenues based on other business facets - like distribution, etc. It helps avoid the bells-and-whistles trap. By looking around an offering in multiple directions, it is possible to find new business opportunities. It is obvious, beyond the examples in the book, that many organizations have successfully applied this method.
I used this book more like a work book. It did two things: 1) affirmed existing ideas and 2) unearthed new ideas. I now have a concrete and viable plan for growth.
 A typical business book with a couple of good ideas and recommendations
Mr Slywotzky is a business consultant, who has written some books related to value creation and growth. In this case he gives alternative growth recipies.
According to the author after a certain time companies reach a limit of growth since they have exhausted all the obviuos moves: expand geographically, innovate products and make acquisitions. The solution is creating new offerings along the value chain of the existing customer base (the idea up to here not very innovative). To do so companies should concentrate in what Mr Slywotzky calls the hidden assets which is probably the best idea of the book. Hidden assets are not related to the accounting term but to things that a company does or owns during its normal business activity. An example are customer relationships that can be leveraged to create new growth if there are other companies that are interested in your existing customer base. The cooking list of hidden assets is quite comprehensive, you have to put some life in it. Later examples follow of companies using these concepts to create new growth are among others: GM, Air Liquide or John Deere.
The second part of the book deals with the hidden liabilities (all those things that impede growth) which sound more familiar, and how to implement new ideas in an existing organisation, probably the main reason for innovation failure. The author exposes some ideas on how a possible structure in the company might look like and showing the key role of the middle manager in implementation or a monday morning laundry list to make start easy.
As many business books it relies strongly in the personal experience of the author. Not the best, but the ideas of hidden assets and the how-to part have some value. Whether you think it might be workable in your organization is another issue.
Highly Recommended!
Leaders of established companies are now finding it harder to earn additional revenue. Authors Adrian Slywotzky and Richard Wise say managers must realize that the old reliable revenue sources - brand extensions, mergers, international growth - just aren't panaceas any more. The answer, they say, is "demand innovation." That means proactively making business more efficient for your suppliers upstream and your customers downstream. The authors bolster their argument with detailed, relevant case studies involving the likes of Cardinal Health, GM's OnStar, Virgin, Johnson Controls and many more. The case studies mostly manage to avoid the breathy, laudatory treatment that is virtually de rigueur when consultants write about their corporate subjects. The authors' "invisible balance sheet" concept is useful. They also provide seven immediate steps companies can take to improve earnings, even if they can't create fresh revenue streams. Because this book offers practical applications, as well as theoretical strategic insights, we recommends it to managers in established companies.
Grow by leveraging your HIDDEN ASSETS
I've read three of Adrian Slywotzky's books during the last twelve months and I'm deeply inspired by his bright ideas on the art of profitability. This book focuses on how to profit via growth.
The key chapters are those that lay out the concepts behind "hidden assets" (that can be exploited to create value in new markets) and "demand innovation" (how to explore new ways to solve unmet customer needs via external analysis).
This is the universe of HIDDEN ASSETS that may be leveraged in a growth strategy:
1) Traditional Intellectual assets (intellectual property, competency/skills, and brand).
2) Customer relationships (reach/many, interaction/deep or frequent contact, insight/knowledge, authority/reputation).
3) Strategic real estate (unique value chain position, competitive market position, portal/gateway).
4) Networks (third-party relationships/partners, installed base/post-sale owners, user community, and deal flow/preferential access to potential transactions/M&As).
5) Information (market window/superior insight, technical know-how, software and systems, by-product information).
I found many of the case stories very inspiring, although the well-explained out-of-the-box story of "Cardinal Health" stood out as the most exciting.
The book draws on Slywotzky's previous books. It pursues the eternal theme ... that the path to profitability lies in truly understanding your current and future customers.
Being a business development manager, I search for relevant tools to apply the growth ideas to my own business. The cases in the book are very good and on the website for this book - demandinnovation.com -, you'll find the core ideas in a graphical form as well as an excellent 32-page companion workbook on "Getting Started".
I also highly recommend Slywotzky's "Profit Zone" (1997/2002) and "Art of Profitability" (2002). Note that these books present the same 23 profit models, first as a standard business strategy book, then as an easy-to-read novel.
If you're interested in other strategy books on Growth, let me draw your attention to "Blue Ocean Strategy" by Kim & Mauborgne (2005), "Profitable Growth" by Charan (2004), and "Beyond the Core" by Zook (2004).
Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business
|
(based on 13 reviews)
