I was having a discussion with a friend today about product strategy and we were discussing how to evaluate expansion options in a product portfolio and why companies succeed or fail in transforming their businesses.
If you’re looking to increase your business, launch a new product, build a capability or better your business’ bottom line, heed the following advice:
Go for the next low-hanging fruit.
Searching for the biggest low-hanging fruit is a mistake.
Too often, in a quest to increase revenue or better a KPI, executives engage in a search for low-hanging fruit… opportunities that are ripe for the picking, theoretically are easy to capture, and promise to juice the next quarter’s numbers.
This search for these low hanging fruit usually emphasizes market sizing and opportunity scoring, probably includes a SWOT analysis, a reformulation of Porter’s Five Forces, definitely a two-by-two matrix, and can burn many, many consulting dollars. The search will always turn out something… and the headline number generally will be some multiplier of the consulting fee you are paying.
The problem is that the search for low-hanging fruit too often ignores the fact that you must move the ladder. Moving the ladder is expensive, introduces risk, and takes away resources that are supporting your existing business.
Put another way, don’t underestimate the risk of building a new machine within your business to pursue an opportunity that doesn’t share some commonalities with your existing business. Unless the new business you build is at least as efficient as your existing business, your margins will go down.
A moderate opportunity that requires very little change to your business will almost certainly have a greater impact on your business than a larger opportunity that requires you to move the ladder.
Where is that next low-hanging fruit?
So in the context of a business, where is the next low-hanging fruit?
If you running an established business, you already have a customer base. You have established a set of competencies – things that your business does well. And you have a portfolio of existing products or services that you are currently selling.
The next low hanging fruit exists in expanding either your customer base, your product offering, or your competencies, at the intersection of the other two.
Product – Your existing customers probably have needs that are not being met and your company has certain capabilities. What product or service exists at the intersection of your customers’ needs and your company’s capabilities that you could develop and sell?
Capability – Is there an opportunity to figure out how to do something better? Is there a way you can be closer to your customers? Can improving your processes improve your production efficiency?
Customers – You are almost certainly not selling to 100% of the customers who can use your company’s capabilities and products. Who are the other players in your customer’s industry? Can they be using your products? Can you sell to your existing customers suppliers or partners?
Keep it simple.
We know that our imperative is to constantly improve, to increase profits, and to make our businesses more efficient but too often in pursuit of growth, we take on unnecessary risks and complexity that puts our businesses at risk. I am as guilty as the next person of occasionally pursuing the large opportunity and missing the smaller one right beside me.
Often the right answer is to move the ladder a few inches and pick the next apple over.