I was reading an article on Inc.’s website discussing how small businesses can become big businesses. I take issue with the article, because it advised small businesses to focus on their growth strategy. This misses the mark. If you want to build a big business, then you must innovate a business model before pursuing a growth strategy.
The advice from the article can be summed-up as follows: develop a growth strategy and make sure your risk-reward is favorable. Your business growth strategy will be based on one of the following five options:
- Market Penetration: Sell more of what you already provide/produce (ex. baking soda for baking and deodorizing)
- Market Development: Sell more to an adjacent market (ex. expand to a new location)
- Alternative Channels: Sell your product in a new way (ex. online versus in store)
- Product Development: Develop new products for existing customers
- New Product for New Customer: Diversify by developing products for new customers (ex. Polaris makes an atv as well as a snowmobile)
So, here is the problem. A small business owner, who wants a big business cannot start the process of creating sustainable growth and expand their company by selling, developing, or diversifying their products. Before any of these growth strategies are in place the business must develop a business model.
The business model will need to include at the very least an appropriately defined value proposition and revenue model. As well, there must be some sort of customer lock-in or barriers to entry. Otherwise, the growth from the above strategies may be very short-lived as competitors quickly mimic and take your customers.
This blog post on small business growth strategy is based on the article How to Develop a Business Growth Strategy by Darren Dahl and his review of Keith McFarland’s book The Breakthrough Company on Inc.com.