Michael Porter famously remarked “the pressure to grow is among the greatest threats to business”. And yet there are few executives who haven't felt that pressure. So what are the best growth options? Michael Porter would argue[1] – “deepen your strategic position, don’t broaden it. A company can usually grow faster – and far more profitably – by better penetrating needs and customers where it is distinctive than by slugging it out in potentially higher growth areas where the company lacks uniqueness”
IKEA remains the poster child for Porter’s mantra: deepen your position. IKEA is one of the world’s most successful business models. Why has it succeeded? One reason is that, apart from an occasional foray outside its core business model, it remains resolutely focused on continuously ‘deepening’ its position. Even as it has progressively globalised over the last two decades, entering vastly different marketplaces and cultures, the business model essence has remained.
And in serving the different markets, the goal is not to ‘tweak’ products: its business model is built on ‘volume, volume, volume’. Even though it has learnt the imperative of research through the bitter experience of its failed entry into the US, the goal of the research has been to where identify where different cultures intersect. A recent Fortune article describes the scale of IKEA’s globalisation: its new centre in South Korea – three times the size of the average Walmart supercentre – is on track to become one of the top performing stores; 8 of its 10 largest stores are in China – their fastest growing market.
IKEA has also remained focused on its mission: helping ‘the many people’, including those with ‘thin wallets’. One of the findings of my doctoral research is that people require certain conditions to enable them to be the best leaders they can. Simplified, it is about clarity and competence. Clarity about strategic direction and near term priorities; and competence at both the organisational and individual level. IKEA has never lost sight of its underlying mission.
And it remains absolutely focused on keeping its costs down. In the early 2000’s they conducted an internal ‘air hunt’: air in packaging is a waste of space that costs money. Conversely, air in products is an ally in design: the more air in products the better.
What is your growth strategy? Does it 'deepen your position?' Have the discussion with your leadership team. Or send me an email if you want to test your thinking a little more deeply.
[1] Magretta, Joan. (2012). Michael Porter answers managers FAQs. Strategy & Leadership, 40(22).
