Weekly Business Insights from Top Ten Business Magazines | Week 307 | Strategy & Business Model Section | 1

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 307 | July 28-August 3, 2023

A multi-lens approach to finding growth in consumer goods

By Jil-Marie Dahm et al., | McKinsey & Company | July 26, 2023

Listen to the Extractive Summary of the Article

Companies might be tempted to deprioritize growth, given the challenging economic environment. But the authors’ research shows that growth is even more important in times of economic uncertainty. And companies that grow during downturns tend to outperform when the economy recovers.

Finding growth begins with making the right choices regarding where to play. To make market-beating decisions, leading consumer goods companies mine insights not from a single perspective but rather by using a combination of four lenses: consumer understanding, category and channel value pools, competitive understanding, and capabilities to win. When looking through these lenses, leading companies apply advanced analytical tools and techniques, many of which are powered by machine learning (ML), at more granular levels to generate actionable, forward-looking insights. And they use predictive tools to develop a precise, quantified prioritization of growth opportunities—a “growth road map” that also includes estimates of the financial upside and the capabilities needed to win.

But profitable growth is difficult to achieve: in 2020–21, only 29 percent of all consumer companies were accretive growers. And it is even harder to sustain.  How to beat those odds? In seeking profitable growth, there are three pathways that consumer sector companies can explore:

1. Strengthen the core of the business—in most developed categories and markets.
2. Expand into adjacencies—through innovation or acquisition, in either new categories or new geographies.
3. Ignite breakout businesses—mobilizing resources behind bold, disruptive bets.

Even when consumer goods companies see these three pathways clearly, however, it can be difficult to make the right choices about “where to play”—which categories, geographic markets, channels, and business models to focus on. Looking through four lenses to understand consumers, category and channel value pools, competitors, and capabilities is a critical step toward answering that question

Many companies are aware of these four lenses but generally emphasize only one or two, rather than generating an in-depth, data-driven view into (and a clear understanding of the implications of) all four. Neglecting one or more lenses often results in growth plans that fail to achieve their targets—for example, because a company didn’t invest enough in a crucial capability or didn’t anticipate a competitor’s moves. Some companies do consider all four lenses but then rely on tools and methodologies that look in the rearview mirror instead of anticipating where future opportunities lie.

3 key takeaways from the article

1. Companies might be tempted to deprioritize growth, given the challenging economic environment. But the research shows that growth is even more important in times of economic uncertainty. And companies that grow during downturns tend to outperform when the economy recovers.
2. Finding growth begins with making the right choices regarding where to play. To make market-beating decisions, leading consumer goods companies mine insights not from a single perspective but rather by using a combination of four lenses: consumer understanding, category and channel value pools, competitive understanding, and capabilities to win.
3. In seeking profitable growth, there are three pathways that consumer sector companies can explore:  strengthen the core of the business, expand into adjacencies, and ignite breakout businesses.  Companies that pursue all three pathways together to maximize their opportunities for success are 97 percent more likely to outperform.

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Topics:  Strategy, Business Model, Growth, Technology