Many companies experience rapid initial growth and begin to ponder the old question of “where to invade next.” But then, they experience the unexpected, and their growth stalls.
There is no one answer as to why this is. But often, the list of referrals simply runs out, or perhaps the target market has been exhausted, and growth was always set to plateau.
These issues were under discussion at a recent Gartner webinar, the subject of which was “Top 5 Factors Impacting Growth and Market Expansion for APAC Tech providers.”
Go narrow to grow big
One of the hosts, Gartner vice president analyst Derry Finkeldey, says that many technology companies think they will expand through appealing to as wide an audience as possible by entering new geographies and industries and introducing new products.
“Our experience and data show that the opposite is true,” said Finkeldey. “Companies really need to narrow it down to go in big. Those companies which narrowly define what they are going to be famous for are the ones which will see a pick-up in growth.”
Finkeldey conducted an audience poll at the webinar, asking participants the type of expansion they were considering.
Around half responded they were planning to enter new geographic markets, with the rest evenly split between looking for growth among new geographic markets, industry segments, or product segments.
Finkeldey then outlined what she saw as the top five factors driving growth:
Reasons for failure
From there, the webinar moved to a discussion, not on how companies could succeed but an analysis of why growing companies ultimately fail.
The most common explanations include running out of capital, underestimating the competition, or overinvesting in the product.
“Many companies think ‘if I add in another feature I’ll grow,’ but companies which are more focused on the fit and how to address it to the buyer tend to do better,” said Finkeldey.
Other reasons to fail include incorrect go-to-market business models, a lack of business model fit, and poor marketing.
This last one was an interesting inclusion and was backed up with some Gartner research.
Often, marketing, brand building, and thought leadership can be seen as luxuries, but they are key to opening up new markets and achieving growth and success.
Finkeldey’s Gartner colleague Alastair Woolcock pointed out that around 47% of the operational spend could be on sales and marketing among successful companies in the SaaS space.
For those spending much less than that, say up to 15%, just increasing it by 5% or 10% was not the answer.
“Stepping in half the way only gets them half the way,” said Woolcock.
So, while the temptation is to “run and hire a bunch of sellers,” outsourcing this function was often misplaced investment in the current market.
A better approach was to invest in revenue operations — or RevOps strategy — along with the 75% of the world’s highest growth companies who plan to do this by 2025.
Woolcock presented research showing that 14% of organizations in the Asia Pacific were agnostic in terms of their procurement: they were prepared to look not only at suppliers on their existing and approved list but were open to considering new vendors.
Of these companies, those in the manufacturing industries were three times more likely to be open to new vendors.
But the fact that they were open to new vendors meant that new suppliers were facing a much more competitive field, and the procuring company had less time to evaluate and speak with each prospect.
In this environment, a solid RevOps strategy that might inform and educate the procurer before any meeting was a better plan than sending out newly hired salespeople with a limited understanding of the product.
Hindsight is always an excellent thing, particularly if you can benefit from the failure of others.
Top CEO matters
The webinar also presented Gartner's research on the top things tech company CEOs would do differently if they could start over in geo-expansion. Multiple answers were permitted.
Number one, nominated by 35% of respondents, was that they should have better optimized the product or service to the new market.
Next was to have a clearer project plan, cited by 32%, while 31% said they should have dedicated more financial resources.
At the bottom of the list was to seek advice from external partners, such as consultants, and seek out an eco-system or channel partners or have a local champion to lead the expansion.
Some of these might seem counterintuitive, but they come from often bitter experiences.
The world is full of tech companies wanting to scale their IP and become the next big thing.
That road is littered with many more failures than successful companies. So, it might pay to take the lessons of others’ failures and turn that into your success.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and DigitalWorkforceTrends, and the editor of NextGen Connectivity. His fascination is with how businesses are reinventing themselves through digital technology and collaborate with others to become completely new organizations. You can reach him at [email protected].
Image credit: iStockphoto/YiorgosGR