Five commercial strategy considerations for growth

Taking a fresh look at business models can help companies enter new or adjacent markets.

In brief

• As competitors change, companies can pursue business models that better serve customer needs and drive new revenue streams.
• Companies are accelerating growth by edging into new and adjacent markets.

“One  of a CEO’s biggest fears is where growth will come from — and whether an unknown rival or strategic competitor  will realize it first,” says EY-Parthenon Principal Amar Mehta.

In fact, according to a recent EY report,1  67% of executives believe that their biggest competitive threat during the next three years will come from an indirect competitor in an adjacent industry or an unknown rival.

“While it’s natural to look for opportunities within your current marketplace, that isn’t really where many companies are growing,” Mehta says.

For example, a leading manufacturer recently extended its business model to include digitized fleet management solutions by creating an integrated parts, services and maintenance offering. In another example, a major pharmaceutical company recently purchased a nature-based healthcare producer to acquire an entirely new customer base and accelerate growth  in a faster moving adjacent market. Both companies’ CEOs are looking to build new billion-dollar businesses through these innovative capabilities.

“Companies can achieve a higher return on capital investments by reviewing business models and assets with a fresh lens, and then deciding upon a buy, build or partner strategy for the markets they want to enter,” says Susan Lee, EY-Parthenon Principal.

Five considerations when moving into new markets

1. Identify the right markets

First, prioritize markets that fit your company’s strengths and where there are synergies. Don’t focus solely on the hottest trends or new areas of interest. Then identify the proper mix of products and services that can best meet customer needs in a way that creates scalable growth. As your portfolio and market focus evolve, the competitive set will change so prepare a response to new rivals as part of your strategy.

2. Recalibrate the go-to-market model

Consider how new business models can impact your sales channel strategies, especially if you are pursuing inorganic growth. Keep customer needs at the center of your plan by developing a future sales strategy aligned to how products and services will be sold (e.g., separately, as a bundle or a subscription service). Similarly, reconsider indirect channels as they evolve to account for new customers, capabilities and selling models.

3. Redesign your pricing strategy and monetization model

Invest time up front to understand value drivers of the new portfolio, market and customer segments. Success depends on change management and commercial discipline, especially with salesforces from different markets. Require conditionality in your discounting and build a plan that you can enforce. Finally, enhance pricing analytics to measure true customer profitability and enable salespeople with insights to accelerate growth.

4. Enable “controlled failure” and bold changes

For example, go-to-market teams may need to rethink how they bring a broader set of offerings to customers, and leaders may need to prepare for longer sales cycles. R&D teams may need to pivot product investments toward the company’s new mission and purpose.

5. Take a product launch approach to measurement

Monitor key metrics weekly to capitalize on wins and address issues quickly. Include revenue growth, market penetration, margin and customer retention, as well as lead qualification, cross-sell, win rate and customer satisfaction.