NEW YORK: Brand owners must "expand their horizons" into new categories and markets to identify potential channels of future revenue growth, a study has argued.
Booz & Co, the consultancy, suggested in a report that flat global economic growth, slowing consumer demand and limited available capital make diversifying old approaches essential for major companies.
Achieving such a goal requires adopting certain "lenses" through which to assess opportunities that frequently extend "far beyond their original offerings."
In demonstration of this, telecoms group Nokia actually began life in the paper industry and games giant Nintendo first produced playing cards.
Credit card provider American Express also started as a mail service and automaker Toyota manufactured looms and thread.
Given the high risk of failure from developing new models and markets, Booz stated it was vital firms did not "wildly leap" into the unknown based on "ad hoc and unfocused" strategies.
Rather, they should conduct comprehensive research to find the best, instead of the most obvious, idea, and ensure such a shift results in an early-mover or comparable competitive advantage.
One method of delivering on this objective is looking at "share of wallet", capturing a larger portion of spending among existing customers by building a broader portfolio.
Consumer insights boast an important position here, as data mining and analytics can be employed to establish the categories which interest their current clientele, and the viability of penetrating these segments.
Virgin is an example, operating more than 300 companies - including an airline, mobile phone network and fitness centres - having cashed in on its brand recognition and loyalty.
Toyota's Prius hybrid car and General Electric's Ecomagination programme also show the benefits of tapping in to emerging areas of demand, in this case for eco-friendly items.
"The share of wallet lens often surfaces ideas that create value for customers by offering one-stop shopping," Booz said, while lowering churn and acquisition costs, and boosting margins.
Changes in regulation equally lead to opportunities, like JPMorgan leveraging the roll out of emissions trading schemes by developing a carbon exchange service, in a field now worth €94bn and growing at 80% a year.
Private sector rules are playing a parallel role, proved by Procter & Gamble implementing a sustainability scorecard and Wal-Mart setting a "de facto industry standard" by only selling concentrated detergent to save shelf space.
Utilising existing products and technology in novel ways can yield further dividends, with Black & Decker inserting motors that drove its DIY tools in electric toothbrushes and other goods.
Elsewhere, Kimberly-Clark exploited the know-how gained from its paper manufacturing processes to go beyond tissues, making feminine pads, kitchen towels, training pants and swim pants.
Arm & Hammer generated a similar outcome by promoting baking soda as an odour-eating air freshener, giving rise a "huge new market" as a consequence.
This kind of innovative thinking applies to entire business models, as evidenced by Dell's creation of a pioneering direct-to-consumer sales platform and Southwest Airlines low-cost short-haul routes.
Finally, Apple has displayed a greater capability than its rivals to introduce truly integrated digital devices such as the iPod, iPhone and iPad.
In filtering out possibilities, it is paramount to cover issues like required investment levels, potential margins, whether there is room for another entrant in a specific field, current best practice and emerging trends, Booz concluded.
Booz & Co, the consultancy, suggested in a report that flat global economic growth, slowing consumer demand and limited available capital make diversifying old approaches essential for major companies.
Achieving such a goal requires adopting certain "lenses" through which to assess opportunities that frequently extend "far beyond their original offerings."
In demonstration of this, telecoms group Nokia actually began life in the paper industry and games giant Nintendo first produced playing cards.
Credit card provider American Express also started as a mail service and automaker Toyota manufactured looms and thread.
Given the high risk of failure from developing new models and markets, Booz stated it was vital firms did not "wildly leap" into the unknown based on "ad hoc and unfocused" strategies.
Rather, they should conduct comprehensive research to find the best, instead of the most obvious, idea, and ensure such a shift results in an early-mover or comparable competitive advantage.
One method of delivering on this objective is looking at "share of wallet", capturing a larger portion of spending among existing customers by building a broader portfolio.
Consumer insights boast an important position here, as data mining and analytics can be employed to establish the categories which interest their current clientele, and the viability of penetrating these segments.
Virgin is an example, operating more than 300 companies - including an airline, mobile phone network and fitness centres - having cashed in on its brand recognition and loyalty.
Toyota's Prius hybrid car and General Electric's Ecomagination programme also show the benefits of tapping in to emerging areas of demand, in this case for eco-friendly items.
"The share of wallet lens often surfaces ideas that create value for customers by offering one-stop shopping," Booz said, while lowering churn and acquisition costs, and boosting margins.
Changes in regulation equally lead to opportunities, like JPMorgan leveraging the roll out of emissions trading schemes by developing a carbon exchange service, in a field now worth €94bn and growing at 80% a year.
Private sector rules are playing a parallel role, proved by Procter & Gamble implementing a sustainability scorecard and Wal-Mart setting a "de facto industry standard" by only selling concentrated detergent to save shelf space.
Utilising existing products and technology in novel ways can yield further dividends, with Black & Decker inserting motors that drove its DIY tools in electric toothbrushes and other goods.
Elsewhere, Kimberly-Clark exploited the know-how gained from its paper manufacturing processes to go beyond tissues, making feminine pads, kitchen towels, training pants and swim pants.
Arm & Hammer generated a similar outcome by promoting baking soda as an odour-eating air freshener, giving rise a "huge new market" as a consequence.
This kind of innovative thinking applies to entire business models, as evidenced by Dell's creation of a pioneering direct-to-consumer sales platform and Southwest Airlines low-cost short-haul routes.
Finally, Apple has displayed a greater capability than its rivals to introduce truly integrated digital devices such as the iPod, iPhone and iPad.
In filtering out possibilities, it is paramount to cover issues like required investment levels, potential margins, whether there is room for another entrant in a specific field, current best practice and emerging trends, Booz concluded.
Data sourced from Booz & Company; additional content by Warc staff
