How unexceptional brands can find growth
In his post exploring Epic Growth, Mats Georgson focuses on 150 companies with an average of 860% revenue growth over 10 years and seeks to explain how they grew so fast. But these companies are not the norm, more like the exceptions.
Why? Because most brands do not compete in rapidly growing, dynamic industries. When it comes to growth, where your brand competes matters far more than the strength of your brand and most brands are stuck in static or slow growing markets.
Further, innovation-led growth is very different from marketing-led growth. Addressing a widespread need, want, or desire with a substantially better solution will generate far stronger growth than any marketing campaign. A better mousetrap does sell itself (provided it is demonstrably more effective than existing ones). So, companies must search for new, disruptive innovations that will transform people's lives, if they are to grow fast.
However, the odds are against finding something dramatically new and better, so until that blockbuster innovation comes along, companies better do everything they can to help their brand grow by identifying more granular growth opportunities and making their marketing as effective as possible.
When it comes to growth, where a brand competes matters
Back in 2008, I came across a book titled, "The Granularity of Growth", by Patrick Viguerie, Sev Smit, and Mehrdad Baghai. The findings presented in the book were challenging to someone who had spent years focusing on how brands can best growth their market share, but on reflection they made good sense, and not just for the big companies included in the study but all brands.
What was challenging? Their analysis found that market share gain accounted for only 21% of the difference in growth rates across large companies. What mattered far more were the categories and countries in which those companies competed, and which other companies they bought. Portfolio momentum accounted for 46% of the variation in growth rates and M&A 33%.
Today's most valuable brands benefited from yesterday's fast growth
Like I said, these findings make sense. Where has the most growth occurred over the last 15 years? McKinsey Global Institute's "The Next Big Arenas of Competition" identifies growth arenas including software, consumer internet, e-commerce, consumer electronics, and industrial electronics.
Most significant growth originates from the past
Significant growth mostly originates from decisions made years ago. Where a company chooses to compete has a lasting impact on financial performance. In 2018, Jeff Bezos stated,
"Friends congratulate me after a quarterly-earnings announcement and say, 'Good job, great quarter,' and I'll say, 'Thank you, but that quarter was baked three years ago.' I'm working on a quarter that'll happen in 2021 right now."
If anything, that 3-year time horizon is an underestimation of how long it takes for growth plans to come to fruition. Everything Amazon is today derives from Bezos' recognition back in 1994 that an e-commerce "everything store" had massive growth potential and his subsequent ability to make that vision a reality.
Innovation and acquisition fuel epic growth
Turning to Georgson's list, we can see that many of his epic growth brands have grown fast by leveraging the power of innovation and/or acquisition.
Many of his brands leveraged internet-based technology to solve existing needs more conveniently. Airbnb, TikTok, Shopify, Zoom, Shein, Meituan, Etsy, Gusto, PayPal, Uber, Netflix, Amazon, Alibaba, and Dropbox. Some, like HelloFresh, Casper, Glossier, Warby Parker added to that the convenience of delivering their products directly to your home (although many have had a tough time turning a profit).
A few brands on the list, like Tesla, BYD, Away, Beyond Meat, innovated and created specific products that have transformed existing product categories or created new ones. Some, like Chipotle Mexican Grill substantially expanded their availability. And many brands on the list have also benefited from buying new companies and/or capabilities or expanding their physical availability. You may never have heard of Sinch, Sea, and Bio-Rad but acquisition has played a big part in their success.
A better way to serve people's needs
To Georgson's point, the success of these companies is not a justification for brand marketing, it is a justification for finding a better way to serve people's needs.
Georgson calls needs, wants, and aspirations Demand Points – which I think is a better term than Category Entry Points – and suggests that brands achieve epic growth by combining them and becoming uniquely associated with the new offer, differentiating them from legacy brands. All well and good, who am I to argue about the power of perceived differentiation? But is this understanding anything new? No, no it is not.
Disruptive products generate their own "advertising"
Georgson seems to be suggesting that traditional marketing practices have things back to front, and maybe they have when it comes to truly disruptive brands, because they can command different growth levers.
Further, there is an element that Georgson acknowledges but then seems to ignore. Once a business takes off and becomes profitable it starts to implement other growth strategies. Expanding into new geographies. Serving new needs. Buying new companies in the same industry. Buying new companies with new capabilities. Building out the brand's ecosystem to add barriers to defection. Smart business strategy underpins later stage epic growth just as much as innovation does the initial stage.
Do something different
I would argue that you cannot retrofit this type of runaway success onto just any old brand, so what are the 99.9% of marketers with brands that compete in established, static markets meant to do?
If there is one thing that we should take away from Georgson's analysis it is to do something different. Do not accept that the brand is fixed. Find growth by changing the existing market dynamics. Do not take accepted company or category wisdom at face value. And do not exclude things that have been tried and failed before. Just because something failed once does not mean it cannot succeed with the right execution.
Search for your growth opportunities
All too often when I hear people talk about how marketing and advertising works, it is general, vague, and unspecific. If you are going to invest money in any new venture, should you not have a good idea of whether it will generate a good return? I see no reason why marketing should not obey the same rules as any other type of investment. The return may be incremental rather than disruptive, but for the right brand and the right category even a fraction of a percent market share gain can be worth millions of dollars.
An effective growth strategy starts by identifying how the brand could make more money and then figuring out how to achieve that goal. Advertising may be part of that process, but it will rarely be the only component.
So, what should a marketer do? Take a leaf out of The Granularity of Growth. Look for pockets of growth potential.
1) Search for pockets of growth potential inside and outside your existing category
To grow, you need to expand your user base. What new or underserved needs, desires, and occasions could your brand easily satisfy? To which new segments or cohorts can your brand appeal?
Assess what makes your brand an attractive choice for its existing customers. How might that satisfy the needs of other groups of people? Think behavioral segmentation, more than attitudinal. Now make sure you really understand the new customer's perspective. What are their pain points? How does your brand solve them? Do not make assumptions.
Once you have found a good fit, raise your brand's profile by illustrating how your brand satisfies those needs, remembering that most people are not ready to buy yet, so make your pitch memorable. Think more like Subaru than Tesla. Subaru achieved significant, profitable growth across many years by extending its appeal across different needs – longevity, safety, versatility, adventure – by portraying how people feel in different situations.
2) Search for ways to expand your brand's availability
Some of the fastest growth in established categories has come from geographic expansion. Many of today's biggest fast-food and beverage brands grew that way, including McDonald's, Kentucky Fried Chicken, and Starbucks. Chipotle Mexican Grill has grown the same way, steadily opening new stores, at the same time seeking to improve same store sales. If your brand is reliant on other companies for its distribution, can you expand to new channels? If Nielsen tells you that your brand's distribution is already 100%. How do you make it 110%?
3) Search for new ways to make it easier to buy your brand
Do you know what really matters most when it comes to the context and cues that trigger the need for your category? Find out. Can you take advantage of that learning to change the way your brand is presented at the point of purchase and make it a more obvious choice? Do not just default to discounts and price promotion, in many cases, you are just forgoing margin you could have retained with the right strategy.
4) Seek to improve the perceived value of your brand
Understand what people really value about the existing brand experience. Highlight the most positive aspects of the brand experience to improve value perceptions. By framing people's expectations positively, you are setting them up to confirm that impression for themselves. Associate your brand with ideas, product categories, or locations that signal exclusivity or sophistication. If your brand's benefits are generic, claim them for it with compelling marketing. Create an impression that sticks in people's heads.
5) Continue to search for ways to better serve customers
Just because innovation is not disruptive does not mean it cannot be transformative over the longer term. Delivering a better experience will help buyers to perceive your brand as different and allow it to command a premium over the competition in the short term, and lead to market share gains in the long term. Increased volume will allow the brand to benefit from economies of scale, improving margins. Identify the pain points in your category and figure out how to improve the user experience. Again, effective marketing will help frame the new experience and help boost growth.
Why? Because most brands do not compete in rapidly growing, dynamic industries. When it comes to growth, where your brand competes matters far more than the strength of your brand and most brands are stuck in static or slow growing markets.
Further, innovation-led growth is very different from marketing-led growth. Addressing a widespread need, want, or desire with a substantially better solution will generate far stronger growth than any marketing campaign. A better mousetrap does sell itself (provided it is demonstrably more effective than existing ones). So, companies must search for new, disruptive innovations that will transform people's lives, if they are to grow fast.
However, the odds are against finding something dramatically new and better, so until that blockbuster innovation comes along, companies better do everything they can to help their brand grow by identifying more granular growth opportunities and making their marketing as effective as possible.
When it comes to growth, where a brand competes matters
Back in 2008, I came across a book titled, "The Granularity of Growth", by Patrick Viguerie, Sev Smit, and Mehrdad Baghai. The findings presented in the book were challenging to someone who had spent years focusing on how brands can best growth their market share, but on reflection they made good sense, and not just for the big companies included in the study but all brands.
What was challenging? Their analysis found that market share gain accounted for only 21% of the difference in growth rates across large companies. What mattered far more were the categories and countries in which those companies competed, and which other companies they bought. Portfolio momentum accounted for 46% of the variation in growth rates and M&A 33%.
Today's most valuable brands benefited from yesterday's fast growth
Like I said, these findings make sense. Where has the most growth occurred over the last 15 years? McKinsey Global Institute's "The Next Big Arenas of Competition" identifies growth arenas including software, consumer internet, e-commerce, consumer electronics, and industrial electronics.
So, it is no wonder that over the last 15 years Apple, Google, Microsoft, Amazon, Nvidia, and Facebook have displaced more traditional companies from the Kantar BrandZ Top 100 Most Valuable Brands ranking (what is far more surprising is that McDonald's manages to hang in there).
Looking to the future, it should come as no surprise that McKinsey's analysis identifies AI and software services as the second biggest growth arena behind e-commerce. Want to bet that OpenAI, Anthropic, and Hugging Face show up in the valuable brand rankings at some point?
Most significant growth originates from the past
Significant growth mostly originates from decisions made years ago. Where a company chooses to compete has a lasting impact on financial performance. In 2018, Jeff Bezos stated,
"Friends congratulate me after a quarterly-earnings announcement and say, 'Good job, great quarter,' and I'll say, 'Thank you, but that quarter was baked three years ago.' I'm working on a quarter that'll happen in 2021 right now."
If anything, that 3-year time horizon is an underestimation of how long it takes for growth plans to come to fruition. Everything Amazon is today derives from Bezos' recognition back in 1994 that an e-commerce "everything store" had massive growth potential and his subsequent ability to make that vision a reality.
Innovation and acquisition fuel epic growth
Turning to Georgson's list, we can see that many of his epic growth brands have grown fast by leveraging the power of innovation and/or acquisition.
Many of his brands leveraged internet-based technology to solve existing needs more conveniently. Airbnb, TikTok, Shopify, Zoom, Shein, Meituan, Etsy, Gusto, PayPal, Uber, Netflix, Amazon, Alibaba, and Dropbox. Some, like HelloFresh, Casper, Glossier, Warby Parker added to that the convenience of delivering their products directly to your home (although many have had a tough time turning a profit).
A few brands on the list, like Tesla, BYD, Away, Beyond Meat, innovated and created specific products that have transformed existing product categories or created new ones. Some, like Chipotle Mexican Grill substantially expanded their availability. And many brands on the list have also benefited from buying new companies and/or capabilities or expanding their physical availability. You may never have heard of Sinch, Sea, and Bio-Rad but acquisition has played a big part in their success.
A better way to serve people's needs
To Georgson's point, the success of these companies is not a justification for brand marketing, it is a justification for finding a better way to serve people's needs.
Georgson calls needs, wants, and aspirations Demand Points – which I think is a better term than Category Entry Points – and suggests that brands achieve epic growth by combining them and becoming uniquely associated with the new offer, differentiating them from legacy brands. All well and good, who am I to argue about the power of perceived differentiation? But is this understanding anything new? No, no it is not.
Disruptive products generate their own "advertising"
Georgson seems to be suggesting that traditional marketing practices have things back to front, and maybe they have when it comes to truly disruptive brands, because they can command different growth levers.
A revolutionary, disruptive product will always generate its own "advertising," we call it word of mouth, news coverage, and cultural resonance. If strong brands are a shortcut to meaning, then strong meaning can be a shortcut to a brand.
Further, there is an element that Georgson acknowledges but then seems to ignore. Once a business takes off and becomes profitable it starts to implement other growth strategies. Expanding into new geographies. Serving new needs. Buying new companies in the same industry. Buying new companies with new capabilities. Building out the brand's ecosystem to add barriers to defection. Smart business strategy underpins later stage epic growth just as much as innovation does the initial stage.
Do something different
I would argue that you cannot retrofit this type of runaway success onto just any old brand, so what are the 99.9% of marketers with brands that compete in established, static markets meant to do?
If there is one thing that we should take away from Georgson's analysis it is to do something different. Do not accept that the brand is fixed. Find growth by changing the existing market dynamics. Do not take accepted company or category wisdom at face value. And do not exclude things that have been tried and failed before. Just because something failed once does not mean it cannot succeed with the right execution.
Search for your growth opportunities
All too often when I hear people talk about how marketing and advertising works, it is general, vague, and unspecific. If you are going to invest money in any new venture, should you not have a good idea of whether it will generate a good return? I see no reason why marketing should not obey the same rules as any other type of investment. The return may be incremental rather than disruptive, but for the right brand and the right category even a fraction of a percent market share gain can be worth millions of dollars.
An effective growth strategy starts by identifying how the brand could make more money and then figuring out how to achieve that goal. Advertising may be part of that process, but it will rarely be the only component.
So, what should a marketer do? Take a leaf out of The Granularity of Growth. Look for pockets of growth potential.
1) Search for pockets of growth potential inside and outside your existing category
To grow, you need to expand your user base. What new or underserved needs, desires, and occasions could your brand easily satisfy? To which new segments or cohorts can your brand appeal?
Assess what makes your brand an attractive choice for its existing customers. How might that satisfy the needs of other groups of people? Think behavioral segmentation, more than attitudinal. Now make sure you really understand the new customer's perspective. What are their pain points? How does your brand solve them? Do not make assumptions.
Once you have found a good fit, raise your brand's profile by illustrating how your brand satisfies those needs, remembering that most people are not ready to buy yet, so make your pitch memorable. Think more like Subaru than Tesla. Subaru achieved significant, profitable growth across many years by extending its appeal across different needs – longevity, safety, versatility, adventure – by portraying how people feel in different situations.
2) Search for ways to expand your brand's availability
Some of the fastest growth in established categories has come from geographic expansion. Many of today's biggest fast-food and beverage brands grew that way, including McDonald's, Kentucky Fried Chicken, and Starbucks. Chipotle Mexican Grill has grown the same way, steadily opening new stores, at the same time seeking to improve same store sales. If your brand is reliant on other companies for its distribution, can you expand to new channels? If Nielsen tells you that your brand's distribution is already 100%. How do you make it 110%?
3) Search for new ways to make it easier to buy your brand
Do you know what really matters most when it comes to the context and cues that trigger the need for your category? Find out. Can you take advantage of that learning to change the way your brand is presented at the point of purchase and make it a more obvious choice? Do not just default to discounts and price promotion, in many cases, you are just forgoing margin you could have retained with the right strategy.
4) Seek to improve the perceived value of your brand
Understand what people really value about the existing brand experience. Highlight the most positive aspects of the brand experience to improve value perceptions. By framing people's expectations positively, you are setting them up to confirm that impression for themselves. Associate your brand with ideas, product categories, or locations that signal exclusivity or sophistication. If your brand's benefits are generic, claim them for it with compelling marketing. Create an impression that sticks in people's heads.
5) Continue to search for ways to better serve customers
Just because innovation is not disruptive does not mean it cannot be transformative over the longer term. Delivering a better experience will help buyers to perceive your brand as different and allow it to command a premium over the competition in the short term, and lead to market share gains in the long term. Increased volume will allow the brand to benefit from economies of scale, improving margins. Identify the pain points in your category and figure out how to improve the user experience. Again, effective marketing will help frame the new experience and help boost growth.
Ultimately, finding growth is all about possessing the right mindset. As I stated in this post about the power of incrementalism, incremental growth requires the same mindset that empowers true disruption; a mindset that questions everything and continuously seeks better ways of doing things.
But what do you think? Please share your thoughts in the comments box below.
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