1. 1
Growth Strategies
Dr. L. Prakash Sai
Internal (“organic”) growth, including:
 Greater share of the profit pool for existing products and
services in existing markets and channels;
 New products and services;
 New markets and channels;
 Increased customer retention.
External growth (through alliances and acquisitions):
 In existing products, services, markets and channels;
 In adjacent businesses surrounding the core;
 In non-core businesses.
Growth Avenues

2. 2
Defining Growth Trajectories
NEEDS
CUSTOMERS
Existing New
A B
CD
Push PastResponse
$XB
Global
Your
Share
$10 B
$20 B
$5-10 B$18 B
Existing
Existing
New
New
N
E
E
D
S
CUSTOMERS
1994: Owns half-of
world market ($20 B).
But, market is not
growing.
Growing
the Pond
1995: Acquisition of
Italy‟s Nuovo Pignone
broadened the pond to
$ 25-30B.
1996: Moving into
supplying services as
well as equipment to
its utility customers
opened $18B Pond –
enlarging its total
business to $48B.
1998: Redefined its
pond as global energy
industry – $700B (37
times of 1994 figures)
Global Energy Pond
$ 700 B.
GE Power Systems: 1994-04
[Now: GE Energy]
$20 B.
(2004)
“From Well-Head to Consumer”

3. 3
IV
I
III
Existing
Existing
New
New
N
E
E
D
S
CUSTOMERS
II
William Cunningham
Co-founder
(1930-97)
Eleanor Josaitis
CEO and Co-Founder
I - 1968: Focus:Hope
established in Detroit USA
as a food program for
mothers and children.
II – 1971: The program has
been extended to feed the
senior citizens.
III – 1981: Established tools
for economic self-sufficiency
– thru Machining Training
Institute and IT Center.
IV – 1993: Training for
community development –
Center for Advanced
Technologies.
“Make My Work Live On”
Core Growth

4. 4
Local
Global
Expansion
Distribution
Indirect
Internet
Micro-segmentation
of current segments
Un-penetrated
segments New
segments
New to
world
Complements
Support Services
Next Generation
New Models
New
Substitutes
New-to-world
Needs
Sell Capability
Outside
Backward
Integration
Forward
Integration
NEW
BUSINESS
NEW
CHANNELS
ADJACENCY TYPES
1. The best adjacencies build on and reinforce the strongest cores
Relatedness to a strong core is the most powerful and reliable engine of
value creation. Many of the most successful growth companies were able
to maintain strong, highly measurable and mutually reinforcing economics
between the current business and the new adjacencies.
2. Drive adjacencies toward the most robust profit pools
A profit pool evaluation embodies the size of the industry, its current and
potential profit dollars, and the extent to which those earnings could cover
the cost of capital for the leading players.
3. Insist on the potential for leadership economics
The decision to make a major investment to push out the boundaries of a
core business into an adjacent area requires a clear view of the
reinvestment and cash requirements in the future.
CHOOSING ADJACENCIES

5. 5
UPS: Expanding the Core Through Adjacencies
Atlanta USA is the global headquarters of UPS, the package delivery company.
UPS currently has nearly 360,000 employees - up from the ten-person bicycle
messenger business Casey started in Seattle about one hundred years ago.
By 2002, around a central core of delivery and in a market growing 4 to 5 percent, UPS held a
two-decade long record that placed it among the most elite performing growth companies.
When UPS CEO Mike Eskew talks about the series of adjacency moves that propelled the
company forward again and again. The transition:
from local message delivery (1907),
to local package delivery (1918),
to regional package delivery to common carrier (1950),
to national network, to the addition of two-day air freight capabilities (1953),
to next-day-air service through the purchase of a fleet of planes (1988),
to global package delivery today by virtually any method.
Next Step: The new wave of specialized logistics and information adjacencies.
What is a “Profit Pool”?
 A Profit Pool can be defined as the total
profits earned in an industry at all points
along the industry’s value chain.
 The pool will be deeper in some segments of
the value chain than in others and depths will
vary within an industry segment as well.
 Segment profitability may also vary widely by
customer group, product category,
geographic market or distribution channel.
 The pattern of profit distribution in an
industry is often very different from the
pattern of revenue distribution.
 Profit concentrations result from the actions
and interactions of companies and
customers.
 The Profit Pool is not stagnant.
Rental Trucks + Trailers
Moving Accessories + Insurance
Rental Storage Space

6. 6
P
R
O
F
I
T
P
O
O
L
S
P
R
O
F
I
T
P
O
O
L
S

7. 7
Red ocean strategy Blue ocean strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value/cost trade-off. Break the value/cost trade-off.
Align the whole system of a
company's activities with its strategic
choice of differentiation or low cost.
Align the whole system of a company's
activities in pursuit of differentiation and
low cost.
STRATEGIC PERSPECTIVES
Chan Kim and Renee Mauborgne
Blue Ocean Strategy
Guy Laliberté Cirque du Soleil
Founder and CEO (Circus of the Sun)
“Reinventing the circus”
The fun & thrill of circus with the
intellectual sophistication &
artistic richness of the theater.

8. 8
Smaller Regional Circus
Ringling Brothers
The Strategy Canvas: Cirque du Soleil
high
offeringlevel
low
Price
Fun & Humor Unique VenueAisle Concessions
Multiple Show
Arenas
Thrills & DangerAnimal Shows
Star Performers
Theme
Refined Viewing
Environment
Multiple
Productions
Artistic Music
& Dance
Cirque du Soleil
Strategy Canvas: Southwest Airlines
High
Low
Price Meals Lounges Seating
Class
Choices
Hub
Connectivity
Friendly
Service
Speed Frequent
Point-to-
Point
Departures
Average Airlines
Car
Transport

9. 9
Key Blue Ocean creations
(Automobiles)
Blue
Ocean
Created
By?
Driven By
Technology or
Value
Pioneering?
At the time of
Blue Ocean
creation, is
the Industry?
Ford Model T
Unveiled in 1908,theModel T was the first mass-
produced car, priced so that many Americans
could afford it.
New entrant Value pioneering
(mostly existing
technologies)
Unattractive
GM's "car for every purse and purpose"
GM created a blue ocean in 1924 by injecting
fun and fashion into the car.
Incumbent Value pioneering
(some new
technologies)
Attractive
Japanese fuel-efficient autos
Japanese automakers created a blue ocean in
the mid-1970s with small, reliable lines of cars.
Incumbent Value pioneering
(some new
technologies)
Unattractive
Chrysler minivan
With its 1984 minivan, Chrysler created a new
class of automobile that was as easy to use as
a car but had the passenger space of a van.
Incumbent Value pioneering
(mostly existing
technologies)
Unattractive
Source: W. Chan Kim and Renee Mauborgne, “Blue Ocean
Strategy”, Harvard Business Review, October 2004.
Key Blue Ocean creations (Computers) Created By
Driven By Technology
or Value Pioneering?
Industry
Attractiveness
CTR's tabulating machine
In 1914, CTR created the business machine industry
by simplifying, modularizing, and leasing tabulating
machines. CTR later changed its name to IBM
Incumbent Value pioneering
(some new
technologies)
Unattractive
IBM 650 electronic computer and System/360
In 1952, IBM created the business computer industry
by simplifying and reducing the power and price of
existing technology. And it exploded the blue ocean
created by the 650 when in 1964 it unveiled the
System/360, the first modularized computer system.
Incumbent Value pioneering
(650: mostly existing)
Value and technology
pioneering
(360: new and
existing)
Non-existent
Apple personal computer
Although it was not the first home computer, the all-
in-one, simple-to-use Apple II was a blue ocean
creation when it appeared in 1978.
New Entrant Value pioneering
(mostly existing
technologies)
Unattractive
Compaq PC servers
Compag created a blue ocean in 1992 with its
ProSignia server, which gave buyers twice the file
and print capability of the minicomputer at one-third
the price
Incumbent Value pioneering
(mostly existing
technologies)
Non-existent
Dell built-to-order computers
In the mid-1990s, Deli created a blue ocean in a
highly competitive industry by creating a new
purchase and delivery experience for buyers.
New Entrant Value pioneering
(mostly existing
technologies)
Unattractive

10. 10
Key Blue Ocean creations (Movie Theaters)
Blue Ocean
Created By?
Driven By
Technology or
Value
Pioneering?
Industry
Attractiveness
Nickelodeon
The first Nickelodeon opened its doors in 1905,
showing short films around-the-clock to working-class
audiences for five cents.
New
Entrant
Value
pioneering
(mostly existing
technologies)
Non-existent
Palace theaters
Created by Roxy Rothapfel in 1914, these theaters
provided an opera like environment for cinema viewing
at an affordable price.
Incumbent Value
pioneering
(mostly existing
technologies)
Attractive
AMC multiplex
In the 1960s, the number of multiplexes in America's
suburban shopping malls mushroomed. The multiplex
gave viewers greater choice while reducing owners„
costs.
Incumbent Value
pioneering
(mostly existing
technologies)
Unattractive
AMC megaplex
Megaplexes, introduced in 1995,offered every current
blockbuster and provided spectacular viewing
experiences in theater complexes as big as stadiums,
at a lower cost to theater owners.
Incumbent Value
pioneering
(mostly existing
technologies)
Unattractive
Source: W. Chan Kim and Renee Mauborgne, “Blue Ocean
Strategy”, Harvard Business Review, October 2004.
Costs
Buyer Value
Value
Innovation
The Simultaneous Pursuit of
Differentiation and Low Cost
 Value innovation is created when
a company's actions favorably
affect both its cost structure and
its value proposition to buyers.
 Cost savings are made by
eliminating and reducing the
factors an industry competes on.
 Buyer value is lifted by raising
and creating elements the
industry has never offered.
 Over time, costs are reduced
further as scale economies kick
in due to the high sales volumes
that superior value generates.

11. 11
Growth
Horizons
Dr.L.Prakash Sai
Horizon 1
Extend and defend
core businesses
Horizon 2
Build emerging
businesses
Horizon 3
Create viable
options
Time (years)
Profit
3-Horizons’ Model

12. 12
Bombardier’s
Cascading HorizonsServices
International
Capital
(financing & leasing)
Transportation
Motorized Consumer Products
Aerospace
Commercial Aircraft
Amphibious fire fighters
Business jets
New Prototypes
New Prototypes
3-Horizons in Aerospace
(Examples)
CRJ-50
Dash 8 Turboprop
CRJ-70
Dash 8-400 Turboprop
New Prototypes
3-Horizons in
Commercial
Aircraft
(Examples)
New Prototypes
Learjet 31A and 60
Challengers
Learjet 45
Global Express
3-Horizons in
Business Jets
(Examples)
Horizon 1
Operators
Horizon 2
Business Builders
Horizon 3
Visionaries
Type of
People
Deep functional and/or
industry expertise.
Strong drive to hit
targets and meet plans
consistently.
Discipline.
Entrepreneurial desire to
create.
Comfort with ambiguity
and change.
Top line focused, sharp
decision makers.
Champions.
Unconventional thinkers.
Talent
Approach
Create personal
(career and
compensation)
consequences for
near-term
performance, including
clear penalties for
under performance.
Impose “no excuses”
management style.
Provide autonomy,
freedom to act, and
mandate to create and
build.
Opportunity to create
personal wealth through
cash bonuses and equity
participation.
Opportunity to build,
create and leave a legacy.
Provide psychological
rewards; recognition of
ideas; freedom to
experiment and explore.
Provide career advantages:
opportunity to satisfy
intellectual curiosity; option
to become Horizon 2
Business Builder.
Provide financial rewards.
Talent Management By Horizon

13. 13
Horizon 1
Operators
Horizon 2
Business Builders
Horizon 3
Visionaries
Focus Executing to defend, and
increase profitability of
existing businesses.
Resourcing initiatives to
build new businesses.
Uncovering options for
future opportunities and
placing bets on selected
options.
Outputs Annual operating plan:
tactical plans, resourcing
decisions, budgets.
Business building
strategies; investment
budget, detailed business
plans for new ventures.
Decisions to explore: initial
project plan, project
milestones.
Planning For Growth
Horizon 1
Operators
Horizon 2
Business Builders
Horizon 3
Visionaries
Focus Near-term bottom-line
results and cash flow
Top-line growth and
capital productivity
Size of payoff and
probability of success
Measures  Profit
 Return on invested
capital
 Productivity or
efficiency
 Revenue growth
 Market share or
installed base
 New customer
acquisition
 Profit
 Capital investment
efficiency
 Expected net present
value
 Project-based
milestones
 Option valuation
 Rate of conversion from
idea to business launch
 Number of initiatives
Performance Measurement

14. 14
Operational Skills
Privileged Assets
Growth-enabling Skills
Special Relationships
 IT Management
 R&D
 Product Design
 Low-cost
Manufacturing
 Distribution Networks
 Brands
 Reputation
 Customer Information
 Infrastructure
 Intellectual Property
 Acquisition & Post-
merger Management
 Financing & Risk
Management
 Capital Management
 Customers
 Suppliers
 Partners
 Government
Elements
of
Capability
Platform
E X A M P L E S
Hardware
Manufacturers
Vendors and
Resellers
Systems
Consultants
Software
Developers
Proprietary
Software Reputation
Installed
Customer Base
Continuous Product
Enhancement
Operational
Skills
Privileged
Assets
Special
Relationships
SAP’s Distinctive Bundle of Capabilities

15. 15
Horizon 1
Horizon 2
Horizon 3
Staircases and Horizons
Create viable
options
Seed growth options
Test biz model
Build emerging
businesses
Replicate proven
biz model
Extend and defend
core businesses
Manage for
profitability
Replicate Proven
Biz Model
Manage For
Profitability
Test
Biz Model
Seed Growth
Options
Developed
world‟s largest
combined-cycle
plant in Teesside,
UK
1990-91
1992
1993-96
Developed
plants in
Philippines
and
Guatemala
Developed power
plants world-wide:
Second plant in UK
Projects in India,
China, Philippines,
Turkey, Indonesia
1992
1990-91
1988-89
1987-88
1986-87
Acquired combined cycle plant
in Argentina
Developed plant
in MassachusettsConstructed
second Texas
plant and
acquired New
Jersey plant
Constructed
flagship
Texas plant
Operated small
gas-fired plant in
Texas
Project Promotion,
Structuring and
Financing
International
Operations
US Plant
Development
and Construction
US Plant
Operations
International
Project
Development
PLATFORM OF CAPABILITIES
Enron’s
Staircase in
Power Generation
(1986-96)