McKinsey’s Seven Degrees of Freedom for Growth

There are a number of different ways in which an organization can choose to grow. While many companies stick to just one or two proven plans for how they are going to continue to get bigger, that choice may wind up limiting them in what they can accomplish into the future.

McKinsey’s Seven Degrees of Freedom for Growth

Rather than getting stuck in a rut doing the same old things over and over again, it is beneficial to think creatively about the many ways in which it might be possible to expand. When a manager or owner is willing to think outside of the box when it comes to growth, there may be doors open up that never before seemed possible to access.

To help in the mission of thinking creatively about growth, one can turn to the Seven Degrees of Freedom for Growth tool from McKinsey. This tool outlines seven unique ways in which growth can be achieved. Of course, each of these options will be used with varying degrees of success based on the market at hand, the current state of the organization, and more. Let’s take a closer look at each of the seven options.

Selling Existing Products to Existing Customers

This is perhaps the most obvious, but also the most limited, of the options on the list. By selling to customers who already trust your company, you have bypassed one of the biggest challenges that faces anyone trying to make a sale. Also, since you are just trying to sell products that are already in your line, there is not the time and financial requirement that goes along with developing new goods. However, you can only go so far by selling to customers who already know your business, so this is a growth model that isn’t going to sustain you forever.

Acquiring New Customers in Existing Markets

Another popular method, this degree of growth looks at selling the goods you already make to the same market that you already serve – but to new customers. It is likely going to take a renewed marketing effort to find this option to be successful. The marketing systems that you have used previously have been able to track down one kind of customer within the market, so changing it up and taking your marketing in a new direction might be the best option for engaging a new segment of the market as a whole.

McKinsey’s Seven Degrees of Freedom for Growth

Creating New Products and Services

This option for growth is going to be among the most time and cost intensive, but it also has the biggest potential. You will want to play off of the products and services that are already popular within your line, so you can leverage the respect and trust that you have built in the market. Going in a completely different direction would be like starting a new company entirely, which comes with an entire other set of challenges. By playing off what you already do, such as by selling in a related market, you can continue to build brand loyalty and recognition while having an easier time getting the new products off the ground.

Developing New Value-Delivery Approaches

Every business wants to deliver value to its customers – that’s the point of being in business in the first place, and it is how you succeed in business. So, are there any ways in which you can add value to what you currently offer your customers in order to make your organization more attractive? How could adding more value to current or future products lead to growth? Common ways to add value include streamlining production in order to lower prices, or improving the overall quality of the product while keeping the price constant.

Moving Into New Geographies

It is possible to reach a point of saturation within your current markets if you have tapped out your marketing efforts. To continue to grow after you have already drawn everything you can out of your current markets, it only makes sense to look for new geographical areas in which to compete.

Moving Into New Geographies

As you would assume, there is plenty of risk associated with this model for growth, so all actions and investments should be carefully planned and research before they are undertaken.

Creating a New Industry Structure

Sometimes, growing in business means associating yourself with other successful, established organizations. Can you find any companies that would make for a natural fit with your own to form a partnership of some kind? You need to have a clear plan in mind for how a partnership or merger is going to benefit each individual business, because these arrangements can go wrong when not done correctly. There has to be value in the deal for your own business, or you will simply be giving away some of what you have created without getting anything in return. This is certainly a possible area for growth, but it is one that should be approached carefully.

Opening Up New Competitive Arenas

This would often be referred to simply as diversification. By moving your company into new arenas where you can compete for new customers is one way to open yourself up to the potential for rapid growth. However, these new arenas are sure to have plenty of their own competitors, so you can’t take for granted success with this method for growth.

Opening Up New Competitive Arenas

You always have to be able to add value for the customer in order to succeed, and that isn’t necessarily assured when you enter a new market that is outside of your realm of experience.

Looking over McKinsey’s Seven Degrees of Freedom for Growth, it is clear that there is a whole world of possibility out there waiting to be explored. It is just as clear, however, that there are often risks associated with the push to expand and growth. Therefore, all growth efforts must be taken on cautiously, and success can never be assumed. Only when the growth degree, or degrees, that are chosen are a good fit for the organization and its goals will the company be on the right track toward a bigger future.

Key Points

  • You can use the Seven Degrees of Freedom for Growth tool from McKinsey to help you think creatively about how to grow your existing business.
  • Selling Existing Products to Existing Customers: This is perhaps the most obvious, but also the most limited, of the options on the list.
  • Acquiring New Customers in Existing Markets: Taking your marketing in a new direction might be the best option for engaging a new segment of the market as a whole.
  • Creating New Products and Services: Selling into a related market means that you can continue to build brand loyalty and recognition while having an easier time getting the new products off the ground.
  • Developing New Value-Delivery Approaches: Common ways to add value include streamlining production in order to lower prices, or improving the overall quality of the product while keeping the price constant.
  • Moving Into New Geographies: This allows you to continue to grow after you have already drawn everything you can out of your current markets.
  • Creating a New Industry Structure: Can you find any companies that would make for a natural fit with your own to form a partnership of some kind?
  • Opening Up New Competitive Arenas: By moving your company into new arenas where you can compete for new customers is one way to open yourself up to the potential for rapid growth.
  • This model can help you to see growth opportunities that are not immediately obvious.

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