Does your business need to develop new products? Does it need to take existing ones into new channels and to new customers? Does it need to acquire other businesses? How are its costs compared with those of its competitors—and what productivity programs do you have in place to improve your cost position?
In the early 1990s, GE Medical, the medical systems business of GE, hit the wall in the United States. It experienced no growth because reimbursement policies were discouraging hospitals from buying new equipment. The business unit manager, John Trani, and his team developed a growth plan to move into adjacent segments and supply maintenance and other services to owners of medical equipment, whether sold by GE or by competitors. There were obstacles: some of the non–GE Medical equipment was far removed from GE Medical’s own hightech diagnostic machinery, and the unit would have to
persuade potential customers that its proposition had value. The unit overcame the first obstacle by acquiring a company specializing in the lower-tech equipment that GE didn’t make, and by focusing on process improvement to increase the productivity of its own people. It overcame the second by taking an entrepreneurial gamble on a small hospital in Ohio: it contracted to maintain all of the equipment and guaranteed the hospital that it would save money. Once it succeeded, GE Medical was able to go to potential customers with a track record. That original growth initiative shifted a steadily increasing portion of GE Medical’s revenues into high-margin services with higher levels of cash flow.
One tool that’s useful in defining growth opportunities is market segment mapping. The tool is simple enough; any business can be segmented. Many consumer goods companies use it to great advantage. But many more don’t, and neither do all but a few industrial companies. Planners will talk about market segments, but fewer than 5 percent of the plans we’ve seen contain any useful
mapping.
To understand how it works, let’s look at A.T. Cross’s segmentation of the luxury pen market. A simple map of Cross’s market segments identifies three different consumers. The first is the individual who wants to buy such a pen for herself; the second is the person who buys one as a gift for another individual; and the third is the corporation that buys thousands, with its logo on them, and uses them as institutional gifts. For each market segment the product is essentially the same, but demand is different and so is the strategy. Each requires Cross to deal with different competitors, channels, economics, and pricing.
A new market segment in the aircraft industry has recently changed the dynamics for manufacturers and suppliers. In the past seven or eight years, as commercial airline service and schedules deteriorated and prices rose, the corporate jet business has taken off. In 1996
Executive Jets pioneered fractional ownership, which is time-sharing in the sky, with its NetJet program. The new segment it created rapidly became the fastest-growing one in the business. Among manufacturers the big winner was Bombardier of Canada, because Bombardier built planes that were right for the market—larger than
the ones made by rivals such as Beech Aviation and Cessna and smaller than those of Boeing or McDonnell Douglas, and foreign competitors.
Taken from: Execution The discipline of Getting things Done
