Before jumping to any conclusions and the growth strategies, lets see what actions lead towards a tech business failing. Although many factors can contribute towards this, few fundamental pointers can be listed such as lack of product differentiation, consumer perception, price war, place and time utility.
Building your growth strategy
The world is increasingly digital. So the most fundamental question for business leaders is “how will digital technology deliver growth”?
Everyone has a different idea of what a growth strategy is and there are many ways to succeed.
There are typically 4 types of strategies that are used for a growth strategy which are:
- Product development
- Market penetration
- Market development
We are going to see how you can apply those growth strategies to your tech business.
Product development: New products in existing markets
Product development is a growth strategy that describes how the company is developing new products for your current market. It can include adding new features, changing the presentation, combining it with another product, or creating a new product entirely. In addition providing a better personalization that would match customer expectations and satisfaction can be a product development as well.
You can use as an example Apple’s product development strategy, as they keep launching a brand new iPhone every few years.
By listening to customers’ suggestions, you will learn from your target. To analyze people’s wants and needs you can make surveys or interviews for example.
Have a look at Slack, it is a simple product solving a simple, well-defined, and well-understood problem for a user who has specific needs.
So you can have two situations:
- The product evolution: when, as a tech company, you want to modify a product according to the new needs of a current market. This situation is usually used by companies that have the vision of how a product can evolve over time or by companies that only want to survive in a competitive marketplace.
- The creation of a new product: when you develop a new product by going outside of your existing model. It’s a call for new opportunities.
Market penetration: Existing products in existing markets
The market penetration strategy aims to offer the lowest prices rates, the best deals, or discounts to build loyalty.
If we take the example of Flexire LED, they are giving their clients 30 days to try their lights. If the colour temperature, brightness, or size does not work for their project, they can return the lights back to them. This is a great idea to build loyalty and a trust relationship!
Providing customers with a more personalized experience can increase your customer loyalty. You can do this by creating catchy content such as blogs, commercials, and social media posts that attract your target customers.
Think of the smartphone market. Most people already own smartphones and are quite loyal to their particular brands.
As you must know, Apple engages in a market penetration strategy via the effective application of marketing strategy.
In conclusion, you can apply the market penetration strategy in various ways such as:
- Decreasing prices to attract existing or new customers
- Increasing promotion and distribution efforts
- Acquiring a competitor in the same marketplace
Market development: Existing products in new markets
Market development is a growth strategy that consists of trying to market your existing products or services to a new market which is a great potential for new customers.
But first, do research to ensure that these areas are receptive to your technology and services.
For example, Freund seeks to raise its global position a step further as a research and development based company that leverages its unique drug formulation technologies to expand its overseas market share over the next several years.
There are many possible ways of approaching this strategy, including finding new geographic areas or new distribution channels.
- New geographic areas: the first thing you need to think about is where you want to cultivate new business. You can expand to other regions, nationally, or internationally. Many of the big businesses, including McDonald’s, Wal-Mart, and Home Depot, have exported their operations to other countries.
- New distribution channels: especially important in the tech industry as more and more traditional products and services are becoming digitized. For example, Ebooks transformed the book industry.
Market development is a more risky strategy than market penetration because of the targeting of new markets.
Diversification: New products in new markets
Diversification strategy is about entering new markets with new products that are either related or completely unrelated to a company’s existing offering.
Here are 2 types of diversification:
- The first one is concentric diversification which consists of entering a new market with a new product that is related to the company’s existing products. For example, you are a computer company that primarily produces computers and you start manufacturing laptops.
- Then we have conglomerate diversification which consists of entering a new market with a product that is completely different from the company’s existing offers. As an example, Samsung’s products vary from computers, phones to refrigerators, chemicals or insurance chains. Or Nokia successfully diversifies from paper products into cell phone manufacturing.
Mergers and Acquisitions
Many technology companies view Mergers and Acquisitions as a strategic tool for growth and more deals.
More deals mean expanding the scope, acquiring new capabilities and being able to access new markets.
M&A deals have increased between the years of 2013 and 2018.
Source: Dealogic (included pending deals)
A shift of deals from scale to scope has been noticed. Companies do not only look out for economies of scale. Moreover they want to gain in their business line and have more capabilities.
2020 for Tech companies was a good year compared to other businesses that suffered a lot from the global pandemic.
Following the lockdowns, tech companies had an increased revenue and customer base as people were mostly at home using such services.
Tech companies used the opportunity to grow their business with major M&As during the times of down markets which are considered to be the ideal time to consolidate.
According to EY’s Global Capital Confidence Barometer, tech executives expect a speedy recovery from the pandemic and are optimistic about M&A.
M&A in the insurance technology segment will be a key strategy.
Insurtechs (insurance technology) and fintechs (financial technology companies) have been one of the first to launch products focussed on COVID-19 and are one of the most responsive to consumers.
Benefits of M&A:
Economies of Scale
- Lower costs (because there is a higher volume)
- Better bargaining power
- More access to capital
Economies of Scope
- Access to data
- Access to customer base
- 1+1=3 mentality
- When two companies merge they will be higher in value than two individual companies
Opportunistic Value Creation
Most companies are acquired when they are in a financially bad situation so the company can still exist while the buyer benefits from adding immediate value as a direct consequence of the transaction
- Increased market share
- Higher levels of competition as the bigger the company the more competitive it is
- Access to talent (people with more know-how)
- Diversification of risk by having more revenue streams
- Faster Strategy Implementation by taking over the strategies of the other business
- Tax benefits
You just need to test different growth strategies to find the one that works best for you. Be creative if you want to grab the attention of new potential customers!
The Ansoff Matrix is a great framework to structure the options a company has in order to grow. In other words, don’t wait to apply it to your business and start growing.
Liked this article? Why not read “Transform your tech into simple marketing messages”
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