Don't Underestimate Growth Plus the Digital Operating Basics (122)

Apr 4, 2022

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This week’s podcast is about combining two previously covered topics: growth and the digital operating basics. This can be surprisingly powerful.

You can listen to this podcast here or at iTunes and Google Podcasts.

Most of the growth thinking is a summary of work by Chris Zook at Bain’s strategy practice. I am citing the books:

He argues most all sustainable growth is based on 1-2 strong cores that continually adapt.

A profitable core is centered on the strongest position in terms of loyal customers, competitive advantage, unique skills, and ability to earn profits.
Adapting the core can be:
- New products / services
- New customers – microsegments
- New geographies
- New businesses.

Then add growth adjacencies. To assess an adjacency move:

Factor 1: Adjacency is tightly tied to a strong core.
Factor 2: An attractive adjacency market in terms of profit pools
Factor 3: The ability to capture economic leadership in that market. Competitive advantage as an attacker and then an incumbent.

Growth + DOB can sometimes get you the dream scenario:

Grow the revenue line.
Increase gross profits. An expanding margin with size.
Increase operating leverage with increasing scale. This is more about going for scale.
Invest in R&D, tech and infrastructure. This will result in a better user experience and improve operating efficiency.
1. Drive efficiencies and increase monetization.
2. Improve the user experience.
3. Expand the products and services in high growth areas.
Do targeted M&A. To increase innovation and protect against disruption.

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Related articles:

From the Concept Library, concepts for this article are:

Growth: Core vs. Adjacency
Digital Operating Basics
DOB7: Sustainable Cash Engine that Scales

From the Company Library, companies for this article are:

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