How to Craft a Growth Strategy (9 Strategies Included)
The latest research suggests that within five years of initiation, more than 50% of startups fail. This of course can be attributed to a lot of reasons including inappropriate product-market fit, difficulty in communicating the value proposition or issues in penetrating the target segment, etc. But in cases where the initial success was easily achieved, the reason for failure lies in the growth strategy or the lack thereof.
When a startup achieves success, it is of course a moment of celebration. But during these celebratory moments, startup owners fail to realize that this success will be short-lived if they do not have a plan or strategy for business growth. Therefore, the importance and presence of a growth strategy as a part of your strategic business direction needs to be understood and executed. A market-based growth strategy developed in alignment with your business model and skill set is not only an asset in the long run but is also critical for taking a product or service to the pinnacle of its potential. Especially with the evolving market trends you cannot keep on doing the same thing and expect to succeed. Which of course emphasizes the importance of a growth strategy and how you need to keep on evolving with times to not only grow but survive as well.
Definition of Growth Strategy
Put in simple to understand words, a growth strategy or a business expansion strategy, is an organization’s game plan or framework to tackle different challenges to succeed in the current times as well as achieve greater success in the times ahead.
These are the growth tactics that a startup or any tech business in case, deploys to move closer to achieving its objectives for development and growth. In the terms of profit maximization, a product growth strategy is the set of actions and initiatives that an organization plans to execute to maximize a company’s value.
How to Craft a Growth Strategy for a Technology Startup
Now that you understand the importance and the inherent need of developing a growth strategy for your technology startup, we shall now look at a step-by-step approach to help you in achieving the same. This step-by-step guide will help you in aligning your growth business model with your progression objectives and targets as well.
Knowing Your Target Segment
First and foremost, the initial step of developing a growth strategy for any startup starts with knowing your customer that represents your target segment of the market. While getting to know your customers, you need to develop detailed buyer personas that are based on insightful market research and include both demographics and psychographics. Not only that you also need to segment the market and design your product’s positioning as well as product-market fit. This must be done in alignment with the needs of the market and the buyer personas that you have developed. Additionally, do ensure that you develop an ideal customer profile as well in this step. This profile will help you further when you are crafting your marketing growth strategy in later stages.
In the second step of developing your growth strategy, you will have to conduct a thorough competitor analysis based on market intelligence and other qualitative and quantitative dimensions. For survival and growth in any industry, you need to know what you are up against. Therefore, you need to conduct a SWOT analysis for all your competitors and understand where you fit in the maze. At this stage, you would also want to bring into account the industry dynamics, regulations, etc., and how they fit in the overall picture. You need to confirm that you are aware of your competitor’s value proposition, to ensure that your offering is not only better but also delivers a higher satisfaction rate.
Defining Your Value Proposition
This is a very crucial step as it will not only craft your growth strategy but will also play a role in directing your startup’s strategic direction. In this step, you need to define how your product or service will fulfill the needs of your target segment in a way that is more efficient and effective than your competitors. Once you’re able to do this, not only will you be able to appeal to your customer segment but would also garner interest from investors. Once the investors understand the true value proposition of your product, they would be able to reflect on its customer lifetime value as well and thus would be willing to invest further in your startup business.
Setting Long-Term Targets
Now is the time to set long-term goals and objectives for your startup to achieve. Among other reasons as to why you need to set long-term targets at this stage, the most important one is that these targets will act as your guiding light. Long-term objectives not only add to the organization’s mission but also align all the different stakeholders on one page. From employees to customers, each and everyone in the ecosystem is aware of where this startup journey must lead. Not only that, while making important decisions and going through a tough choice-making process, long-term objectives also actually help you in making the right choice or selection. One thing that you must ensure when developing your long-term goals and objectives is that they follow the SMART approach. Which means that they are specific, measurable, attainable, realistic, and time-specific.
Selecting Your Location
The step may sound very simple, but it carries great strategic importance. When developing your growth strategy, you need to select your establishment’s location. This selection must be done keeping in mind a lot of factors. In case you are opting for a brick and mortar model you would want to look at how close you want to be to your customer segment, or do you want to be in the vicinity of your competitors? Additionally, you would want to look at the cost of renting and leasing an office, etc. On the other hand, if you wish to go for a remote model, you would need to put extra focus on how and where you would retail your product or service and what kind of revenue model you would be following if you do not have a brick and mortar presence.
Building Your Team
When developing your startup’s growth strategy, you would also want to incorporate your employee and team needs. Staffing and onboarding relevant individuals with the required skill set is of critical importance to any business’ growth. Without the right people, you cannot succeed in today’s competitive environment. Therefore, do thorough research on your strategic direction and where would you want to see yourself in the next five or ten years per se. Based on that, develop relevant position profiles, year by year to help you project your hiring and recruiting needs. Also ensure that when developing position profiles, you list down the required skills and experience that you would want in an ideal candidate, to help achieve your long-term growth objectives.
Choose Your Growth Plan
This is a critical step. This is where you will be deciding a common ground on which your strategic direction, marketing plan, and product-market fit will align in relevance to your growth objective. Here you would choose the approach that you would take to grow. It could be anything from a diversification move to a product-led growth plan. But one thing that you must be sure of with any plan is that it aligns with your business model as well as with the derivations of all these steps that you have taken before this.
Set Measurable KPIs and Objectives
Now that you have chosen the most appropriate growth tactic to deploy as a part of your growth strategy, you need to develop measurable key performance indicators and objectives to gauge your performance in the achievement of your growth goals. Make sure that these KPIs and objectives also measure how well you are following this set growth plan and strategy, and of course measurement of the outcome as well.
Review and Revise
The last yet important step when crafting a growth strategy for your tech startup is devising a review and revision plan. Once you have deployed the growth strategy that you have developed using these steps mentioned above, you need to review the results and outcomes of the same. Develop a schedule for full performance reviews as well as discuss possible revisions in the plan, if a need arises for the same due to some unforeseen circumstances.
As you have understood the step-by-step approach that must be used when developing a growth strategy for a technology-based startup, we shall now look at the top 9 growth strategies that can help you scale your start-up in 2022.
Focus On Cost Agility
Some companies, especially tech startups, are too focused on hurdle rates and as quickly as they realize that a certain product line or project will not deliver on a set internal rate of return, they back out from the idea altogether. For 2022 experts recommend that you adopt a cost agile approach during the selection of projects to pursue. It is recommended that you choose projects based on the highest success rate and not limit the process based on a defined IRR or hurdle rates. To grow in this competitive environment always incorporate a certain risk factor in your IRR to avoid abandonment of projects and to ensure continued and sustainable growth.
Identify Cost Warnings
For 2022 invest in the development of cost warning systems. Put mechanisms into place that would help you in projecting and identifying possible cost increases long before they happen. This growth strategy will not only help you from the cost-saving end, but it will also ensure that in the future you incorporate a certain degree of uncertainty in your costing methodology, to help you cushion against sudden cost increases. Also, ensure that your financial projections and costing models account for changing industry dynamics as well as unforeseen risk factors.
Reallocation of Funds
When investing in a project and focusing on the growth of your tech startup, always put in place certain indicators and identification methods that will help you in knowing when to move out of a certain project, and reallocate the resources to a more profitable and sustainable opportunity. Early startups are fueled by passion and even when they see through numbers or qualitative data, that a certain product or service idea will not yield the results that they hoped for, they still don’t abandon the project. On the contrary, for them to survive and grow, they should pull out the funds and invest them in other opportunities that show promising outcomes.
Avoid Short-Term Vision and Risk Aversion
Risk aversion and red tape in any organization have led to missing out on exponential growth opportunities. As a growth strategy to adapt for 2022, get rid of your safety net that focuses on a short-term vision with quick results and does not believe in trying for higher rewards with a high risk. Categorize your projects as transformational or routine opportunities based on the potential for risk, the magnitude of reward, and your familiarity with the nature of the project. Once you can segment growth opportunities using this approach, you can then pursue them with customized caution and care and focus on end goals for the long run.
Diversify Your Portfolio
While focusing on growth and how you want to succeed in 2022 as a startup, it is recommended to put efforts towards portfolio diversification. This can be done in two ways; either you increase your product or service offering to reach out to newer markets and customers. Or you increase your reach by opening in more locations and expanding online as well to tap deeper into your target customer segment.
Get On the Creative Bandwagon
This may sound like a no-brainer but for 2022 invest in creative and content-based marketing efforts that align well with your business’s strategic direction. Tech startups usually steer clear of advertisements and other creative ways of reaching out to their target segment. But with the changing dynamics of the market segment and increased competition, you must focus on a customer-driven product launch and marketing campaign that appeals to the inherent needs of your target market.
Focus on Organizational Culture
Your organizational culture is what sets you apart from your competition. It is one thing that your competition can not replicate and thus it can become your strength as well as your key strategy for growth in 2022. Divert resources towards the development of an innovative and open culture within your tech startup. Ensure that ideas are discussed openly, and no idea is right or wrong. Such a culture combined with mutual respect helps in generating growth opportunities that are unseen and unheard of. Your culture should leverage your employees’ strengths and creativity and align them with your growth objectives for years to come.
Focusing on your role as a social entity within society is very important for any business, especially a tech startup. In 2022, allocate certain resources towards social responsibility and create a positive impact on society. Such initiatives do not only help in creating brand awareness and putting a word out there for your business’ values and customs, but it also helps in satisfying the innate human need to help and care for our fellow beings.
Educate Your Market
In previous years we have seen that startups invest heavily in ways to reach out to their target segment but are unsuccessful. Research has proven that this can be majorly attributed to the unaware nature of the target market. Therefore in 2022, develop initiatives and tactics to educate your target segment not only about your product’s value proposition but firstly to make your customer aware of the need that your product or service will satisfy. After all, if your customer is equipped enough to know about their pain point, then only will they be able to realize the true impact of your product offering.
Types of Growth Strategy and Examples of Companies that Executed Them Correctly
Let us now look at the different types of growth strategies that are available for a business to use alongside examples of companies that executed them most appropriately and enjoyed sustainable growth and tangible results.
Product Development Strategy
When using a product development strategy, a business aims to grow by increasing its product portfolio via the introduction of new products that cater to a new need or further resolve the pain point that their product or service is already resolving.
Apple follows a product development strategy for growth. Apple is known for developing products first and then looking for a relevant target market for their product. Their product development process is well aligned with their strategic goals and thus, Apple drives its growth exponentially with new product development.
Market Development Strategy
This is a sales-focused strategy for growth, where you as a startup or business owner pursue growth objectives by tapping into new market segments, expanding your customer base, or increasing sales within your current market segment.
Tesla is a leading example when it comes to market development strategy. Tesla is focused on developing newer market segments in countries around the globe like India. In 2021, three years after the initial interest, Tesla has set up a research and development center in India.
Market Penetration Strategy
Unlike market development strategy, this is a marketing-focused strategy that concentrates on lowering prices, creating bundles, and introducing attractive offers under different marketing tactics to further deepen the reach within a certain segment.
For growing markets, Samsung has adopted a market penetration strategy. Samsung is known for dropping its prices for certain models, sometimes before the launch of a newer model. Not only that for growing markets like Pakistan, it has also introduced bundle pricing where you get a smartphone along with a certain accessory, with an attractive price tag.
The riskiest strategy of all that promises huge results, diversification strategy focuses on growth via the introduction of new products or services in a new market segment.
One of the biggest examples of our living times of a diversification strategy is that of General Electric. Initially, the company was focused on electrical goods, but to grow under a diversification strategy they have expanded into rails, healthcare, automobiles, and power generation to name a few.
For any business let alone a tech-based startup, the importance of a growth strategy cannot be ignored. For a startup business to not only survive but grow as well, the formulation of a growth strategy right at the start of operations is an imperative move. Therefore, we recommend the development of the same. This process should be based on your market dynamics as well as the business model in combination with your market’s needs. As a tech startup owner, you should craft a comprehensive and driven growth strategy, with the help of examples and insights that we have explored here. Remember that your growth strategy dictates the direction of your business and without having a concrete direction, the survival chances of any business in today’s competitive market are bleak.