Now, New, Next: How Growth Champions Create New Value

Source: Now, New, Next: How Growth Champions Create New Value

By Jonathan Gordon, Nils Liedtke and Bjorn Timelin

What do plastic toys, headphones, and razor blades have in common? Although these are all established categories, they still provide opportunities for spectacular growth. To create new organic growth, you need a range of capabilities from insights into unmet needs to speed of action. But perhaps most importantly, you need a systematic way to identify, organize and pursue new organic growth opportunities.

As Alexis Nasard, former CMO of Heineken, said when we spoke with him, “You have to be systematic when going after revenue growth. The creation of a common framework is extremely useful.”

Based on our analysis of 40 growth champions, such as LEGO, Beats by Dre, and Dollar Shave Club, we have found that growth champions structure their new growth initiatives along three horizons:

slide0Now: Growth derived from new channels, segments and categories.

“Now” initiatives focus on new ways to generate growth quickly. This could mean making the most of existing products and services by marketing them to new target segments, introducing them to new markets, or making them available in new channels. “Now” initiatives have a high likelihood of impact, takes advantage of established capabilities and can show results quickly. They represent a company’s bread-and-butter business, which often still has a lot of overlooked potential to grow.

Take LEGO, the Danish toy-maker. In 2003, sales fell off a cliff. The company had ventured into many new categories in parallel: children’s clothes, accessories, and lifestyle products. “We went into three new categories per year, when we should have gone into one every three years,” says CEO Jørgen Vig Knudstorp. LEGO subsequently refocused its business on being a “small giant” in the category of construction kits. “We realized that the more we’re true to ourselves, the better we are,” says the CEO. LEGO’s revenue grew from €0.9 billion in 2004 to €4.8 billion in 2015.

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New: Growth generated with new products and services.

“New” initiatives take something that works and use it as the basis for innovation, such as: the launch of a new product in an existing category, the expansion of an existing brand into a new category, or the discovery and monetization of unmet consumer needs. This approach requires being able to anticipate future growth opportunities. To borrow a phrase from Canadian hockey hero Wayne Gretzky: “A good hockey player plays where the puck is—a great hockey player plays where the puck is going to be.”

Because “new” initiatives venture beyond the existing business, it requires leaders to expand the frame of reference for innovation and apply new techniques, such as social listening and digital ethnography.

Beats by Dre successfully took this approach to reinvent the headphones category. Until a few years ago, most consumers simply used the standard in-ear headphones that came with their MP3 player or phone. Beats effectively created a new market by turning headphones into lifestyle accessories. Targeting urban teenagers and style-conscious young adults, Beats combines studio-like sound quality with self-expression. Their headphones come in eight varieties and more than a dozen different colors. The company owns two thirds of the U.S. market for headphones priced at $100 and above.

Next: Growth unlocked by new business models and big bets

“Next” initiatives are about launching a new business model that either complements an established source of value creation or disrupts it. Such initiatives often absorb a lot of time and energy, while the outcome is usually highly uncertain. But if they work, they can have huge impact. Think Uber, AirBnB, and Netflix.

The lesson for incumbent players? Unilever CMO Keith Weed put it succinctly, “Disrupt or be disrupted. As marketers, we need to become better at taking risks, accepting the occasional failure, and learning quickly along the way.”  That disruption can come to even the most established businesses. For example, observers everywhere have long admired Gillette’s business model. But it didn’t protect Gillette from attackers. Only five years old, razor-blade home-delivery service Dollar Shave Club is already enjoying sales equivalent to 15% of Gillette’s U.S. market share. The start-up hit revenues of about $200 million [≈ Mitt Romney assets in 2011] in 2016, more than three times its 2014 sales. While this example seems very compelling, a recent McKinsey survey found that just 27% of companies are systematically scanning for new opportunities outside of their core business.

To drive growth, companies need to develop a new set of corporate capabilities. But that’s for another article.

Jonathan Gordon is a partner in McKinsey’s New York office.

Nils Liedtke is a consultant in McKinsey’s Brussels office.

Björn Timelin is a partner in McKinsey’s London office.

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Les chiffres fous de la 5G, qui va irriguer tous les secteurs de l’économie, High tech

Source: Les chiffres fous de la 5G, qui va irriguer tous les secteurs de l’économie, High tech

 

 

Les chiffres fous de la 5G, qui va irriguer tous les secteurs de l’économie

Les chiffres sont énormes et on peine à y croire. Mais le cabinet anglais IHS Markit évalue à 12,3 trillions, autrement dit plus de 12.000 milliards de dollars, l’apport de la 5G à l’économie mondiale en 2035. « C’est presque l’équivalent de la consommation américaine en 2016 et plus que celle de la Chine, du Japon, de l’Allemagne, du Royaume-Uni et de la France combinés, l’an dernier », souligne l’étude.

La 5G, qui doit voir le jour fin 2019, promet de multiplier par 1.000 la performance des réseaux. Et de porter l’essor de l’internet des objets. IHS a passé en revue les secteurs pouvant le plus bénéficier de cette technologie. Automobile, santé, finance, télécoms… (voir graphique), tous vont en profiter. Et c’est la somme des contributions de la 5G à ces secteurs qui donne le chiffre de 12,3 trillions.

L’étude prévoit en outre la création de 22 millions de nouveaux emplois. Soit, l’équivalent de la population de Pékin ! 85 % des Européens sondés par IHS estiment que de nouvelles industries vont émerger, liées aux bénéfices apportés par la 5G. Et, que 88 % de nouveaux services et produits vont être inventés grâce à la 5G, souligne IHS qui a interrogé plus de 3.500 décideurs et spécialistes de la technologie.

La France déjà en retard ?

Autre chiffre : la 5G devrait générer pas moins de 3,5 trillions de dollars de revenus en 2035, ce qui représente le PIB de l’Inde. C’est la Chine qui en profitera le plus, avec 984 milliards de dollars, devant les Etats-Unis (719 milliards). En Europe, l’Allemagne, dont la force de l’industrie n’est plus à prouver, devrait être la grande gagnante : 202 milliards de revenus et 1,2 million d’emplois créés. Outre-Rhin, on avait déjà été les premiers à lancer les enchères pour la 4G…

La France, elle, n’attend « que » 85 milliards de revenus et près de 400.000 emplois nouveaux. Le Royaume-Uni est derrière elle en revenus (76 milliards), mais devant en emplois (605.000). Et, outre-Manche, la 5G, c’est plutôt bien parti : le régulateur prévoit de mettre à disposition les premières fréquences dès cette année. Alors que dans l’Hexagone, des voix s’élèvent déjà pour pointer le retard. Déjà, pour la 4G, la France ne comptait pas parmi les bons élèves. « Il va falloir un vrai travail de fond de l’Etat et du régulateur pour que la France ne soit pas en retard pour le déploiement de la 5G, explique Laurent Fournier, DG de Qualcomm France. Les pouvoirs publics français ne sont pour l’heure pas très actifs par rapport à l’Allemagne ou même l’Italie. Les Italiens sont à fond sur la 5G, comme rarement on les a vus. »

L’étude IHS démontre qu’il y a une attente forte des bénéfices espérés de la 5G. « Je ne pense pas qu’il y ait de survente, affirme Laurent Fournier. En revanche, il existe une préoccupation très nette sur la capacité à investir, notamment en France. » IHS pointe, notamment, l’inquiétude des sondés pour l’économie globale de leur pays, si la 5G devait y être déployée trop tardivement, par rapport au reste du monde. 76 % des Anglais et 73 % des Français redoutent ainsi d’être moins compétitifs. A l’inverse, seuls 59 % des Allemands souffrent des mêmes maux.

Pour l’heure, dans le monde, ce sont la Corée et le Japon qui sont les plus avancés. Les Jeux Olympiques de Pyeongchang, en Corée du Sud, vont, d’ailleurs, faire office de premier terrain d’expérimentation pour la 5G. En Europe, c’est la Finlande et la Suède qui font la course en tête. C’était déjà le cas pour la 4G et, manifestement, tous deux sont plutôt bien partis pour recréer une dynamique de leadership en 5G.

Fabienne Schmitt, Les Echos
@FabienneSchmitt

TripAdvisor Rethinks Marketing as It Tries to Solve Instant Booking Problems – Skift

TripAdvisor hasn’t yet been able to create enough consumer awareness that it is a one-stop shop for planning and booking a hotel so it is considering returning to TV advertising this year after skipping it in 2016, the company stated. The user review and hotel search and booking site reported what many would consider to […]

Source: TripAdvisor Rethinks Marketing as It Tries to Solve Instant Booking Problems –

SKIFT TAKE

TripAdvisor became the largest travel site in the world based on its high-profile in free search results. But Google has become a hyper-monetized marketplace and TripAdvisor’s competitors have the resources to grossly outspending it in digital marketing.

— Dennis Schaal

TripAdvisor hasn’t yet been able to create enough consumer awareness that it is a one-stop shop for planning and booking a hotel so it is considering returning to TV advertising this year after skipping it in 2016, the company stated.

The user review and hotel search and booking site reported what many would consider to be disappointing fourth quarter and full-year 2016 earnings Wednesday with revenue and GAAP net income declining 2 percent and 67 percent, respectively, in the fourth quarter, and 1 percent and 39 percent for the entire year.

“While such volatility was largely expected, we saw a dampened back-half recovery and we were perhaps too optimistic about how quickly our product changes would raise awareness of TripAdvisor as a great place to book,” the company stated in prepared remarks released with its earnings report.

There are also additional headwinds from big-spending competitors such as the Priceline Group and Expedia Inc. — and also probably Google’s efforts to hyper-monetize search results, downgrading companies like TripAdvisor with previously strong search engine optimization.

“All the while, our competition has not been standing still and we continue to be significantly outspent on marketing,” TripAdvisor stated. “This competitive dynamic has been compounded as revenue per hotel shopper headwinds from instant booking slowed 2016 Hotel segment direct marketing expenses to single-digit growth year-on-year.”

TRYING TO RIGHT THE SHIP

TripAdvisor fully rolled out Instant Booking, which enables consumers to book hotels on the site without having to link off to a partner, in the United States in August 2015. It has been struggling to recover its click-based and transaction revenue growth per hotel shopper since the introduction of Instant Booking in early 2015.

In the fourth quarter of 2016, that transaction and click-based revenue improved sequentially to negative 7 percent, up from negative 12 percent in the third quarter. So the clicks and transaction revenue trended upwards but was still in the red.

TripAdvisor states it is encouraged by the improvements it is seeing and is investing in technology as well as digital marketing.

TripAdvisor advertised on TV in 2015 and found that it had ample awareness of the brand in some of the markets, including the U.S., where the commercials ran so it decided to sit out 2016 while it worked on Instant Booking.

But that absence on TV could change quickly.

“… We are also evaluating a multi-year brand marketing investment, including a return to TV advertising,” TripAdvisor stated. “At a high-level, we believe a brand marketing investment would enable us to reach a broad audience and could help to accelerate the user perception shift to TripAdvisor as a place to price compare and book. Size, scope, timing, and ROI of such investment are currently under consideration. We will provide our updated thoughts on this investment in due course.”

STILL BULLISH

TripAdvisor, citing ComScore studies, believes that it plays a role in 40 percent to 50 percent of hotel transactions — globally. But it isn’t making money on many of the transactions it sways so that is one of the reasons why TripAdvisor launched Instant Booking, which it sees as “a multi-billion dollar opportunity.”

TripAdvisor, which attracted nearly 390 million unique visitors per month last Summer, sees improvements in its operations, including hotel-shopper growth that accelerated sequentially to 8 percent, from 3 percent, in the fourth quarter.

The company put the best face on its struggles, stating, “Coming out of 2016, we believe we are turning a corner.” It plans to focus on revenue growth over profits in 2017, and projects that revenue growth will be in the double digits while adjusted EBITDA will be flat to lower.

FOCUS ON TOURS AND ATTRACTIONS

While TripAdvisor struggled in Instant Booking for hotels, its non-hotel revenue, including attractions, restaurants and vacation rentals, increased 49 percent to $64 million [≈ Finance industry 2011 political donations to Republicans] in the fourth quarter. For the full year, non-hotel revenue, which amounts to 20 percent of TripAdvisor’s total revenue, rose 27 percent to 290 million.

Focused on growing inventory and its addressable market, the non-hotel segment isn’t profitable, having lost $28 million [≈ Energy industry 2011 political donations] in 2016 versus a loss of $6 million the previous year.

Interestingly, beyond hotels, TripAdvisor sees attractions as its largest growth opportunity — larger than vacation rentals.

The following commercial was part of TripAdvisor’s 2014 ad campaign: