GROWTH SECRETS: Meeting the markets needs

Ventures which succeed in achieving high growth rates are always created and/or supported by a significant environmental change, usually soon after the change has occurred or when it has reached critical mass.

That is, something has happened in technology, the political environment, consumer values or in the economy which has created a gap or need. High growth businesses are created or changed to satisfy an immediate or emerging need in the community usually at a time when there is an inadequate supply of solutions to meet that need.

Simply put, high growth occurs because there is an emerging need which cannot be satisfied by existing businesses. This gap creates a vacuum which the new or existing firm recognises and they provide a solution quicker than others.

As demand outstrips supply, there is less pressure from competitors and some consumer forgiveness around quality and product features. Emerging markets, as they grow, tend to fragment and this gives the emerging business time to carve out and protect a niche in the market. By the time industry generally has caught on to the new market demand, the early entrants have had an opportunity to build scale and put up their own protective barriers.

Thus entering a market at the right time is critical to gaining traction, seizing market share and setting up protection from competitors. Most changes which drive growth activity are external to the business. Changes in legislation, consumer values or in the economy are changes which the business reacts to rather than drives. Changes in technology may be initiated by the firm or be accessed by the firm if developed elsewhere. The smart business is the one which sees the change or recognises the opportunity inherent in the change before others.

Changes in and of themselves do not necessarily lead to growth opportunities.

The change needs to be significant enough, or to have a sufficient near term potential, to result in a reasonable market size which can generate enough business activity to justify business investment. The change needs, in most cases, to be disruptive. That is, it needs to have the potential to make existing solutions redundant or to create new problems which have previously not had much attention. The change also needs to be associated with a consumer or commercial need which is sufficiently compelling that enough consumers will be willing to pay to satisfy the new demand.

Changes in legislation or in local, regional, national or international regulations or standards drive considerable business activity. Most often regulations change the status quo and require individuals or companies to behave differently. The change is often associated with compliance and this in turn spawns a need for education, training, monitoring or auditing, new methods, processes or equipment. Compliance situations usually have penalties for failure to comply, such as fines or prison sentences, thus the pressure on consumers and commmercial organisations to buy is high.

Recent changes in international accounting standards have created a high demand for accounting services. This in turn has put pressure on educational institutions to increase the number of graduates. There is a demand for new textbooks as a result of the new standards. Reporting systems have to be changed and that has put more demand on the applications software industry.

When you examine the source of this new demand you can see it goes back to changes in global business. Large international corporations have been frustrated with having to comply with multiple reporting standards in different countries resulting in significant duplication of work as they first report locally for a subsidiary and then have to redefine the financial information to report to Head Office. This in turn came about because global commerce had been stimulated by world wide free trade agreements and advances through the international trade treaty agreements.

Business growth is stimulated by such changes.
Changes in environmental legislation, especially around chemical usage and disposal, result in current equipment and processes being outdated thus driving new equipment design and sales. Changes in occupational health and safety legislation drive education and auditing activities. Changes in housing and building regulations drive changes in education, equipment, building methods and materials.

While many changes in legislation are announced in advance, few people actively prepare for the change, usually leaving it to the last minute. Thus the business which can foresee the impact of such changes and can develop programs, products or processes to assist companies and consumers meet the new demands are often in a very good position to capture the new market space. If this can be done using protected products or processes, then good luck to them!

Other changes in our economy and our society happen gradually but, over time, can dramatically change our social situation. Thus waves of immigrants into our communities as a result of wars, natural disasters, terrorist activities and disruptive civil unrest gradually change the mix of cultures, religions and values. With these changes come demands for such things as new forms of food, entertainment and travel. Other changes occur through population shifts and population aging. The changing nature of industry through globalisation, technological developments and new discoveries results in the decline of some sectors and the rise of others.

Trends over time can identify future problems. Thus an increasing population without a parallel increase in infrastructure spending will gradually create a supply shortage of water, electricity, hospitals, roads, airports and so on. A gradual ageing of the population will result in increasing demand for leisure activities for retired persons, more demand for retirement living facilities and pressure on aged care capacity.

Changing community values will result in new forms of expenditure, often by local and national governments. Thus the increasing risk of terrorism has dramatically increased the expenditure on security. This in turn has led to a burst of R&D activity in security devices and security systems.

One trend by itself can often lead to many products and services looking for new opportunities. However, niche markets are often best discovered where two or more trends converge or separate. Thus increasing demand for housing combined with new regulations on energy efficiency creates demand for materials which are more energy efficient. An ageing population combined with a trend towards fitness creates a demand for personal fitness coaching. Now combine this with increasing litigation and we can see a need for a new set of standards for fitness training for the elderly and thus new educational products.