Growth By Plan: Business Planning (Part 7)

The Business Planning series will posted on Tuesdays, Wednesdays and Thursdays through the month of September 2011. A number of business planning issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

A company I had the opportunity to visit earlier this year is an excellent story of growth by plan. Their plan for growth has sought dominance in their industry specific niche.

They started out as software publishers at a time when they were one of many providing a single solution to an industry. In those early days there were many solutions for all industries, with few integrated software options within the budgets of most companies. If you were investing in technology, you probably had an accounting software package but it did not talk to anything that handled transactions or any of a number of functions in your company. There was little rhyme or reason to the array of solutions being offered by almost anyone who could write a few lines of code.

At that time, the company was somewhat of a purist, sticking to accounting and doing it without error. But growth by attending trade shows, offering the product in advertising venues meant pretty slow growth. The owner, a visionary who has always looked for what is next and loves challenges saw an opportunity to create solutions that were franchise friendly by handling some of their specific royalty and fee issues, with appropriate naming. This was a great idea as it now engaged the brands as a part of marketing being a preferred vendor with a product that was tailored and branded to the needs of the franchisor. The same idea could be replicated throughout many brands with little additional cost. In addition to being a preferred vendor, it opened up opportunities to meet with leadership franchise consultants and others in the industry. People who could either make a decision or influence a decision. Some brands now even required that new franchisees buy one of the approved products so that accounting and reporting requirements could be accomplished. The plan had created a strong foothold and enviable position in the market.

Now challenges started to appear on the horizon with software products that went beyond single solutions, the beginning of integration. The company saw the other companies spending lots of dollars, with limited return, to be everything anyone could want in a box. Their plans with rapid expansion brought some good ideas together but the speed of development meant code patches, errors and a very steep learning curve. Rather than jump on the band wagon, the company kept doing what it did best and provided a solid solution. That didn’t mean that they were not growing, they were but without the wild expenditure of dollars invested in other strategies.

Keep in mind that the company is operating in a specific industry where there is a somewhat limited customer base. Having achieved strong vertical growth, it was now time for horizontal growth. Remember all of those competitor companies investing heavily to integrate processes and functionality? Many with the changes occurring in the market were ripe for the picking. Owners had aged and were tired of driving hard for a piece of a very costly market. Some had exhausted their resources – both people and money. In some cases, the company and products had been sold from one parent company to another.

Rather than spend all of the money to develop another competitor product, why not simply buy up the competition? The price in many cases was pennies on the dollar. This was a brilliant move as it did not require a change in the core product but did take competitors out of the market retaining user income stream opportunities and brought the development that had been done to be used or discarded depending on the fitness to product and vision. Anyone shopping for solutions in the industry had few choices with most paths leading to one door.

Purchasing and assimilating users from competitors is not without headaches. Even if the goal is to have basically one product, there are legacy user issues to be taken care of, keeping the customer base and working to take the best from all to development and integration. Now as the industry leader with few other options for buyers it is also incumbent to stay ahead so that no one can catch up.

That brings us to the current phase of the growth plan which is horizontal growth, leveraging the customer base into expanded products and offerings. Rather than trying to expand into other industries which would have been costly and full of competitors ready to have lunch, the company seeks to not only maintain market dominance but additionally grow the dollars that each dollar invested returns.

When considering the growth of your company, does your plan feed your growth or consume you with the efforts required? Smart planning goes beyond the plan year and looks beyond the company’s own numbers.

1 comment:

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