In the natural world, extreme conditions like droughts can force plants and animals to adapt — some flourish, some just survive, and some disappear.
Competitive pressures in the technology industry are forcing companies to adapt today. So, how can a tech company flourish, in a business climate that is both unstable and yet brimming with potential?
As the market’s potential blooms in the coming year, tech companies can prioritize three key actions to drive growth:
- Solidify your growth strategy for organic and inorganic opportunities.
- Foster growth enablement to support the strategy.
- Modernize your demand generation to drive organic growth home.
To grow together with the emerging opportunities, companies need to focus their resources on the channels and strategies that hold the most potential for them.
Global growth for U.S. tech companies
6:38 | Transcript
Solidify your growth strategy
Do you want to focus on growth that is organic, or inorganic? “Many tech companies excel within their sweet spot, yet may overvalue their perceived ability to deliver at high quality across non-core capabilities,” said Grant Thornton Growth Advisory Principal David Koppy.
“This has practical implications when tech firms expand their product or service portfolios, or seek to open new markets. A new or ambiguous path can create opportunities for tech firms to develop compelling solutions. But organizational blind spots and inconsistent expectations for quality can limit growth aspirations.” Koppy said. When a company wants to grow into new products or services, it needs to consider whether it should take an organic or inorganic approach.
To prioritize organic growth, you need to examine the strength of your existing products or services and determine how you can further extend it. That can mean adding a new feature or solving a common problem with a new product or service. Or, it might just mean selling to untapped markets. Should you go international, or target a new customer industry? Questions like these form the basis of an your strategic intent.
“To generate organic growth, technology companies must understand each customer’s industry, along with the opportunities and threats they face — especially those that create a need for technology solutions. Technology companies also need to understand each customer’s current technology landscape and infrastructure. “With that information and some deliberate go-to-market planning, companies can bring their customers actual insights about how their software meets a critical need, or fills a gap in their technology portfolio,” said Grant Thornton Growth Advisory Principal Jonathan Eaton.
Another opportunity for growth is expanding the software footprint with a current customer. Customers might have affiliates, partners or other divisions or departments that can benefit from the same service or product that has already been sold in.
“Simply stated, do market and customer analysis to better understand the companies you sell to now — are they a part of a larger conglomerate, a larger holding company? Are they part of a private equity group?” Eaton said. “If so, try to identify where there may be unmet demand for your software solutions, within that broader entity. I think that's a creative way to understand the markets that you’re in, the customers that you have, and how you might generate new revenue.”
To expand into offering new products and services, a company must prioritize a transformation and evolution of the way that it creates value. “While organic growth is an essential core competency of technology firms, organizations need self-awareness to understand what is achievable organically versus the required effort,” Koppy said. “If the expected organizational lift requires too much investment, shift in focus, or time, then this introduces the potential to explore inorganic growth.”
Mergers and acquisitions can be powerful, but they come with overhead and risks. “Knowing that may of the best-intended inorganic acquisitions actually erode value, a lot of what you consider is the trade-off between the amount of effort required to stand something up on your own, or the speed at which you want to grow,” Koppy said.
“In the present moment, there's a lot more acquisition of companies that will help unlock next-level capabilities, like in AI, or companies that allow market consolidation and create a bigger footprint.,” Koppy said.
“I think you will have an uptick in M&A in the back half of the year, as the companies that were raising capital in 2021 are running out of runway.”
From another angle, tech companies often consider growth through mergers, or even whether they can be targets for acquisitions themselves. “I think you will have an uptick in M&A in the back half of the year, as the companies that were raising capital in 2021 are running out of runway,” said Grant Thornton Technology Industry National Managing Partner Andrea Schulz. “They might be looking to exit, or those investors will be looking at exit through acquisition,” Schulz said, noting that M&A activities could be slowed by regulatory processes.
As companies weigh the options of organic or inorganic growth, resources can be a deciding factor. Companies can take a proactive approach to fueling their growth strategies with growth enablement.
Insights on growth in other industries
Foster growth enablement
Tech companies that have an appetite for growth might not have the resources to drive their strategy. Companies can develop those resources by fostering growth enablement in many areas, like building and maintaining a strong and vibrant company culture or developing the company’s workforce with innovative recruitment and a bold vision.
“One of the things that I've seen from creative software companies is they look at how to strategically price the various types of functionality within a software solution.”
At the forefront of growth enablers is capital — both earned and saved. To optimize costs, tech companies can revisit how they offer and deliver products or services. “One of the things that I've seen from creative software companies is they look at how to strategically price the various types of functionality within a software solution. Instead of selling the software as one larger solution, they price smaller pieces of functionality or break the larger solution into multiple modules. The result is they can differentiate their pricing based on the unique needs of any given customer and, more often than not, they can drive higher pricing.”
Another major aspect of cost optimization is getting the best and right talent in place. As companies evaluate employee fit and performance, some have turned to cutbacks and layoffs. “That's where you're getting the recent layoffs and cuts in tech,” Schulz said. “It’s that refocusing on what products are actually driving the operating margin and bringing the company forward on the path towards profitability.”
Growth enablement can involve some tough decisions and serious risks, but it can also be an essential step in driving a growth strategy that ultimately connects to customer demands.
Modernize your demand generation
Your growth strategy needs to connect with existing customer demands, but there is rarely a large market of entirely untapped customer demand. So, technology companies need to ensure that demand generation capabilities are in line with industry trends and that they demonstrate a quantifiable return.
“Demand generation excellence implies intentionality around customer strategy, marketing strategy, sales strategy and other complementary designs.”
“Demand generation excellence implies intentionality around customer strategy, marketing strategy, sales strategy and other complementary designs,” Koppy said. “Underneath demand generation, and there's a lot that can be done to modernize and increase effectiveness out investment dollars.”
Your demand generation needs to drive awareness and consideration of your products or services through a multi-pronged approach that makes potential customers want to know more. It’s the art and discipline of getting new and genuine interest from a new group of targeted customers — with an understanding that today’s customers are already more knowledgeable than ever before, and they want to clearly understand the value created.
“Tech companies have some of the more sophisticated demand-generation tactics,” said Koppy. “They also have better analysis of where prospective customers are seeking information, and they can use marketing automation to create campaigns that target them.” Eaton added, “Successful demand generation leads to revenue growth. When a technology company is good at demand generation, they obviously drive organic growth, thus taking market share.”
Steps will soon accelerate
The recent slow-down in tech industry growth caused some companies to adapt, some to flourish, and others to disappear. Now, as companies prepare for new growth and fresh opportunities, the race for survival and success is about to begin.
Companies need to make sure they’re prepared. “Companies need to consider whether they will have what they need, to supercharge and hit these growth goals they have,” Schulz said. Now is the time to ensure that your growth strategy is updated, fueled and ready to take on the race to growth.
Find out how other industries are managing growth
Our technology and telecommunications featured industry insights
No Results Found. Please search again using different keywords and/or filters.