Brands need to feel the fear and do it anyway when it comes to embracing new business models, or risk losing out, according to the Initiative for Real Growth (IRG) study led by WPP’s Kantar Consulting.
The IRG research, which included more than 500 interviews with senior business leaders and over 1500 survey respondents across 73 countries, found that there are huge opportunities for businesses to expand their expertise into new sub-categories or even new categories altogether. The research indicates that a willingness to adopt new business models is almost twice as high in brands which overperform on revenue growth compared to underperforming ones – 66% vs 38%.
Some companies chase this by setting up in-house innovation centres, or start-up incubators aimed at capitalizing on emerging trends or driving new ideas with the business. Snack Futures at food giant Mondelez is one such example – its innovation unit seeks to ‘invent, reinvent and venture’ around their three key priorities of wellbeing, premium snacks and digital platforms. Revenue growth overperformers also don’t throw out the core objective if any particular innovation fails.
For those companies with more money to spend, buying up competitors with a disruptive approach or a particularly compelling business proposition is also an option. For example, Pepsi’s recent acquisition of Sodastream offered the company a home delivery and subscription business model, alongside its extensive presence on supermarket shelves. The environmental credentials of Sodastream are also attractive, especially in a consumer market which is increasingly concerned with the impact of the products they buy. Expanding into a new business model also offered the usual benefits of adding new audiences and diversifying revenue.
Likewise, CVS Health’s purchase of Aetna wasn’t just an opportunity to enter one business - it allowed them to explore multiple new models across verticals, channels, segments and cultures. From retail to benefits to clinics to digital programs, they’re not leaving anything on the table.
Both moves offered exciting new growth opportunities that tapped the core expertise of the company.
The IRG research indicates that for marketers to truly participate in the top level discussions, commercial literacy is vital. Currently marketers are often dependent on their finance colleagues – they need to boost their business acumen around new business models and learn to think more like their M&A colleagues. While some category marketing norms are transferable, chasing new business opportunities requires a different mindset – ensuring that all parts of the business can see the benefit and are speaking the same language when it comes to the vision.
Three keys to success:
- Ensure that the investment approval process allows for multiple business models – finance doesn’t have to be a ‘spreadsheet mafia’ if they understand that growth can come from a whole range of models.
- Second, existing start-up platforms or create innovation labs which pushes the boundaries.
- Finally develop training modules that teach marketing to the finance team and finance to the marketing team – everyone needs to speak the same language and be part of the same growth conversations, as equals.
This article was produced in partnership with Kantar Consulting.