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If company leaders were granted a single wish, their most frequent request would surely be for a reliable way to create new growth businesses. Business practitioners’ overwhelming interest in this subject, which we as academics share, prompted us to undertake a major study of successful growth moves initiated by established companies in several industries. We looked at a wide range of strategic approaches to growth—everything from low-risk, incremental changes to high-risk, disruptive ones. In the course of our three-year study, we became intrigued by an approach that lay somewhere between those two extremes. At a high level, this strategy is about redefining profit drivers. At a practical level, it involves making several deceptively simple moves: Some companies reconfigured their unit of business what they bill customers for to more closely match the customers’ needs. Some companies focused on different key metrics than their competitors did, and, in doing so, created a better business design. Still, other companies helped customers change their own unit of business or key metrics. Once we started to look at new growth through this lens, we found success stories in industries that had been written off as hopelessly commoditized or strategically unattractive. In a few cases, the companies we studied succeeded so well at redefining their profit drivers that they had transformed their industries.
It’s hard to imagine two businesses more mature than ready-mix concrete and reinsurance. Both industries have been around for more than 100 years, and competition in both has devolved: The companies offer standardized products and play by well-established rules. Yet in both industries, we identified companies that were enjoying sustained and impressive growth because they had redefined their profit drivers or changed their unit of business and key metrics.
Let’s start with concrete. The problem with ready-mix concrete is that it’s highly perishable; it begins to set when a truck is loaded, and the producer has only limited time to get it to its destination. In Mexico—as in many other rapidly urbanizing countries—traffic, weather, and unpredictable construction labor make it incredibly hard to plan deliveries accurately. So a construction contractor might have concrete ready for delivery when the site isn’t ready or, worse, expensive work crews at a standstill because the concrete hasn’t arrived.