My Playbook for Digital Growth (259)

This week’s podcast is about digital growth, which is really a process. It's a weekly grind to capture incremental growth as well and new waves.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Here is the link to our Tech Tours.

Much of this thinking is by Chris Zook and Bain’s strategy practice. I am citing these books:

• Profit from the Core
• Beyond the Core

Here is my favorite summary quote.

Here's a quick summary of core vs. adjacency.

Most all sustainable growth is based on 1-2 strong cores.

A profitable core is centered on the strongest position in terms of loyal customers, competitive advantage, unique skills, and ability to earn profits.

Growth adjacencies include:

• New customer segments:
  • Micro-segmentation of current segments
  • Unpenetrated segments
  • New segments
• New geographies
  • Global expansion
  • Local expansion
• New channels
  • Internet
  • Distribution
  • Indirect
• New products
  • New to world
  • Complements
  • Support services
  • Next generation
  • Just new products / services
• New Businesses
  • New to world needs
  • New substitutes
  • New models
  • Capability adjacencies
• New value chain steps
  • Forward integration
  • Backwards integration
  • Sell capability to outside

-------

I am a consultant and keynote speaker on how to accelerate growth with improving customer experiences (CX) and digital moats.

I am a partner at TechMoat Consulting, a consulting firm specialized in how to increase growth with improved customer experiences (CX), personalization and other types of customer value. Get in touch here.

I am also author of the Moats and Marathons book series, a framework for building and measuring competitive advantages in digital businesses.

This content (articles, podcasts, website info) is not investment, legal or tax advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. This is not investment advice. Investing is risky. Do your own research.

Transcript

:
Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast from Techmoat Consulting. And the topic for today, my playbook for the digital growth grind. And this is really about growth mostly focused on digital, which is a bit different than sort of the standard approach to growth, more like a subset of it, but a little bit different. And really that it's a grind, it's a process, it's...  strategic direction, some choices, but it's a lot of daily activities. So, I'm going to kind of go through how I think about it. I haven't talked about this too much really. I usually focus on sort of operations, digital operating basics, moats, things like that. But yeah, the growth piece is a big deal.  So, I thought I would start to lay out sort of how I view that, how I sort of recommend CEOs and whatever, to think about it, decisions that need to be made, that sort of thing.  So that'll be the topic for today.   Let's see, housekeeping stuff. We have our Shenzhen Greater Bay Area Tour coming up in November, which is going to be basically three days on the ground in Shenzhen talking about, you know, companies sort of bottom-up deep dives into companies, specifically industries, some company visits, and then also some top down.  thinking about frameworks or how to think about China, how to think about the greater Bay Area, which is.  You know the region that surrounds Shenzhen which is 90 million people. It's a major project by the Chinese government. It's arguably by most metrics the world's most populous urban city environment in the world. Bigger than London, bigger than New York, bigger than Tokyo. So, kind of a major thing. We're going to talk about that as well and how do you think about it. So that'll be the tour. If you're interested in that you can go over to techmoconsulting.com and we'll put the information up there. We started signing people today.  So that's been going quite well. If you're interested it’s about $900 for the trip, not including airfare and hotels, which we provide options, but people can kind of choose. We're hosting it at the Four Seasons, but people can kind of stay where they want depending on what you want to do. Anyways, details will be on the website today. Take a look at that.  Other housekeeping?  Nope, I think that's good.  Standard disclaimer.  Nothing in this podcast from my writing or website is investment advice. The numbers and information from it and the guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment, legal or tax advice.  Do your own research.  Okay, the concepts for today. Main one is just core versus adjacency growth. which is a pretty useful framework.  I think it's mostly by...  a guy named Chris Zook who used to lead Bain's Strategy Practice. I he may have retired now. But there's some books that are written about it. I'll put the links to those books beyond the core, profit from the core. But it's basically the idea that growth is either going to be in your core business or it's something adjacent, i.e. not too far away, such that you can leverage existing customers, existing technology, existing channels into that which dramatically increases your probability of success. concept and that's most of what today's podcast is going to be about. Second one is growth related explore versus exploit. This is more of a portfolio approach to growth where you’re planting seeds, you're piloting, you're testing things, you're exploring. And then you, you know, the ones that do well, you sort of fuel and give them more recesses and help them scale up. And the others that don't, you kill them quickly. So, explore. See, people call it like planting seeds and cultivating.  I like to explore and exploit.  So those are kind of the two concepts for today. You can find those in the concept library. Alright, let's talk about... I growth. I did a podcast a couple weeks ago about size. Not necessarily scale, which is relative, but size. Look, you're a big company or a small company. And size has just a lot of benefits. There's a lot of advantages that come with just being bigger. Now at a certain point you get disadvantages but generally speaking it kind of cuts across the board. It's kind of fuzzy.  You can make a long list, you're better able to specialize at various levels, you get better people, it's easier to raise capital, you have more stability, predictability.  There's a lot of benefits to size.  It's easier almost to say what are the problems with being smaller, SMEs, know, smaller 20, 30 person firms. Well, you know, they don't have the resources. They can't... do explore and exploit and plant lots of seeds and see what does well. No, got to make bets and they have not that many resources to do it, whether it's money or people, time, bandwidth mentally, things like that.  they've really got to be focused on a way that large companies don't really have to do.  The others I think people don't talk about enough are sort of survivability. One of the interesting things like, you the default strategy in business is get bigger.  That's default. Everyone just try and get bigger, grow, because size is better. The kind of secondary strategy is, okay, let's say you can't really grow for some reason. You're maxed out. You don't have any opportunities. You're struggling.  The secondary default strategy is just survived. Like just try and stay alive. That means if you have to do businesses that aren't profitable really, but it keeps your people employed, you're breaking even. Just do that. Why? Because survivability buys you time and it gets you options. A lot of companies you struggle, you struggle, you're barely flying the plane, but you've stayed alive and then things change and suddenly you get good options. A lot of the best options for growth. are kind of happenstance. Baidu is doing very well right now in generative AI. Now they were struggling for the last 10 years, at least in terms of getting any sort of real growth relative to the other digital giants, but they were doing okay. People weren't paying attention to them. And then generative AI popped up and suddenly they had a tremendous growth trajectory, just sort of fell in their lap. So, know, survivability is a good secondary strategy. Let's just stay alive because that buys us time. And with time comes optionality. Who knows what's going to happen? So anyways, I kind of think about it that way, but overall size is a bit of a fuzzy subject.  Growth is kind of similar.  Growth is a generally good thing. oh, not just because you get bigger in sizes, but I'm saying growth in itself, a firm that is growing has a lot of advantages over one that is say stagnant or declining is worse.  It's kind of a growing firm versus a non-growing firm. It's kind of like the difference between running and walking.  It's just a more energetic culture.  People tend to be motivated. There tends to be a sense of momentum.  Things are getting done. It really feels different. You can hire people easier. That's definitely true.  And, you know, a firm that's growing, you're doing things that a firm that's walking is not doing. You're continually hunting for new things.  You're continually looking for your next growth, whether it's a big wave of growth or whether it's just incremental improvements, which are important.  and you're making investments in the future, in growth. We're used to experimenting, we're used to placing bets and doing that. Well, a firm that's sort of just flat lined doesn't really do that.  They don't make those investments, they aren't pushing the barrier, they don't have the same feeling, you're not taking chances as much.  It's a real qualitative difference between growth and non-growth in terms of companies. And you know, it doesn't have to be 20%. If you're doing 5%, 3%, 4%, that's great. There's also this idea that like, you know, I think someone, heard someone described as Newton's second law of motion, an object in motion tends to stay in motion. You know, the most likely firm to grow 5 % is one that grew 5 % last year.  It creates sort of a momentum and let’s stay in motion. I've heard growth is described as like oxygen for businesses. It just makes them better.  you're investing, you've got better people, all of that. So again, it's kind of a fuzzy thing. But I would say again, qualitatively across the board, a growing firm has a lot of advantages that a non-growing one doesn't. Sort of like large to small firms.  Now, let's start to talk sort of about digital growth, which is, it’s a bit different. So, I have sort of a digital strategy framework that I've been working on forever.  I talk about it endlessly.  mostly I've taught, it's basically got three components. Actually, it's four, but let's say three.  Growth, get more customers, grow the business. Two, improve your operating performance. And then three, build a moat. Right, so.   You meet with the CEO; I want to know answers to those three questions. What's your plan for growth? And by plan, plan tends to be a little fuzzy. So, a better way to say it is, what are the next three initiatives you're doing to drive growth?  That's more tactical, it's more like right now.   Same for the second one. What are the two or three initiatives you're doing to improve your operating performance? And usually, I'm talking about digital operating performance.  And that one almost becomes a matter of, are you ready to upgrade to the next level of digital operating performance? You kind of got to move up the ladder a bit in terms of your capabilities there.  That's more like system building than the first one. And then the third one, okay, what are your three to four initiatives to strengthen your moat and sort of improve your marathon? That's where you your competitive advantage.  So that's a way to sort of... crystallize a conversation with senior management and get them focused on the next six months.  And then outside of that, you can talk a lot about a lot of stuff. I mean, these are pretty big questions, but it helps if you distill it down to two or three things against each of those questions. Okay, now.  Something I haven't really talked about, which I'm going to start talking more about is within, and I put sort of individuals as symbolizing those three areas of a digital strategy. So, growth, kind of say, hey, that's the Steve Jobs plan. He was amazing at launching new products, opening up new markets, things like that.  Operating performance, that's the Elon Musk plan.  he's arguably one of the most ferocious operators ever. Like he just moves at a speed that's kind of stunning and at a very technically advanced level. And then the third one, Moat, that's Warren Buffett Land.  He's the Moat guy.  Okay, so I kind of use it, but there's really a fourth one in there, which is this idea of, okay, growth, that's under number one. But really in digital, what we're talking about, when we talk about growth, you start talking about things like, let's launch new products. Let's take our existing products to a new geography. Let's try to move from channel A and channel B, let's say direct to consumer to another channel, omni-channel.  Those would all be sort of classic, and there's others, growth strategies for anything, services, products, whatever. When you talk about digital products or businesses that have a significant digital component, you start to talk about growth by innovation. Because if you've got a digital aspect, a digital user interface, there's all, I mean that's really the deep well. If you're growing by geography, that's good. You're eventually going to run out of countries to go to. Apple has this problem.  You know, if you're going to go by product, hey we're going to do an entirely new product, we have Coca-Cola, we have Fanta, let's do something else. Okay, you're going to run out of sodas a little bit. Those are bigger moves. But growth by innovation.  That's kind of almost a never-ending well, a bottomless well. We can add new features to the app. We can create secondary services that we can cross-sell to. We can bundle here; we can bundle there. We can add experiences. We can improve the experience.  We can increase the touch points. We can personalize. We can go after, can micro-segment our customer base and start to take it apart that way. We can take apart the process by which a user engages with us and create new touch points. Right? Like you can do that stuff in a way, digital can do that in a way that like Coca-Cola can't. So, when I'm talking growth, I'm almost always talking about both growth by innovation, which is usually continuous customer improvements and innovations. You know, and I've sort of laid out a whole playbook for that, almost like an entire consulting service based on let’s do continuous improvements to the customer experience. It's going to get you growth, it's going to get you more touch points, it's going to get you more data, it can move your NPS score up, it can get you more revenue, it can get you long-term value up, I it can really move almost all the metrics we care about.  And they're mostly related to growth. So, within that there's really four sort of questions within this strategy and I'm almost always talking about number two and number four. growth by innovation, and let's build them out.  That's most of what I talk about on these podcasts. And that's where digital tools, particularly generative AI, can really change the game quite quickly. You can really move the needle on these numbers in those areas. And what's interesting is there's a great quote in one of Chris Zook's books, just a random page. It's not even a standout quote. It's just in a random paragraph. m and I was reading it the other day and I flagged it and I'm like that is exactly what I believe like almost exactly how I view digital strategy and I flagged it and I'll put it in the show notes I screenshotted it and then I was looking back from my notes like five years ago and I had read this book and I had screenshotted the exact same page  and circled the exact same quote five years ago. I'm like okay that was kind of interesting I'll read it to you here it's and I'll put it in the show notes. Here, this is a direct quote from Beyond the Core, which is about adjacency growth opportunities, and this is the Chris Sook book.  Quote, mastery at the customer level and control over competitive dynamics are the keys to earning profits in business. Like, that's literally point two and point four I just talked about.  Mastery at the customer level. Okay, that's growth by innovation, that's customer improvements, that's continuous innovation at the customer level. Everything I just said.  And control over competitive dynamics.  That's Moats.  I mean, it's literally my entire worldview and strategy crystallized down to one sentence. Quite well.  And then he goes on. Focused companies that have a strong or dominant core and that hit on a repeatable formula for extending their strength to new arenas are the breeder reactors of business. Okay, he's talking about going from beyond. This is a growth strategy. You grow your core, you improve your core, you adapt your core, your core business. And then you go after adjacent opportunities, adjacent growth opportunities in a repeatable systematic fashion that extends your strength to new arenas. I'll read it again.  Focused companies that have a strong or dominant core and that hit on a repeatable formula for extending their strength to new arenas. are the breeder reactors of business. Yeah, that's literally most of my growth strategy when it comes to targeting adjacencies as opposed to growth by innovation. He doesn't talk much about growth by innovation. When he was writing these books, he wasn't really talking about digital businesses. He was talking about more classic Fortune 500. So, the innovation lever is not nearly as powerful in those businesses. Last bit, quote, these companies create value year after year while the majority of businesses live in a twilight of uncertainty, feeling more controlled by outside forces than by their own will. That's kind of how I talk about. You know, be a dominant company. Dominate your business. Have a tremendous competitive advantage.  One of the ways that plays out, which I've talked about a lot without these exact same terms is, it gives you a sense of control of your own destiny. Here's the quote again.  These companies create value year after year while the majority of businesses live in a twilight of uncertainty, feeling more controlled by outside forces than by their own will. Yeah, it's that dominant model. actually, have this, there's even a shorter version of that question.  In my checklist, when I go through businesses, one of my checklists, I pulled a lot of my sort of questions from people like Thomas Russo and Warren Buffett and Charlie Munger.  One of them comes from Thomas Russo, very famous sort of value investor in the United States. And one of his questions, which I literally ask every single company about every single company I look at as does this company control its own destiny? Coca-Cola controls its own destiny. Yes, the world changes and things can happen, but by and large, they don't get up every morning and have to react to things that other people have done or customers have done or competitors have done. Facebook controls its own destiny, for the most part. They have to adapt and do some things, but yeah, they're not getting bounced around. like a little boat on the ocean with a hurricane. No, they're more like, you know, the large sort of ocean-going vessel that's charging, know, of plunging ahead through.  Even waves don't move it very much. Yeah, it's kind of the same idea, but I think he said it in a nice form. These businesses live in a twilight of uncertainty, feeling more controlled by outside forces than by their own will. Yeah, that's literally one of the last questions I ask when I've done all the sort of checklists and questions for a company. Then I sort of pull it up to that level. And that's literally like the last question I ask myself. Does this company control its own destiny? Yes or no? And you usually know. Anyways, I thought that was kind of great. I'll put it in the show notes.  Okay, let's move on to growth, but that's generally a framework for how I think about this as it relates to digital, which is kind of a different strategy than traditional business strategy. So let me summarize core versus adjacency growth. And this is all from the books. I'll put the...  the links to the books if you want to get them the amazon links in the show notes I’ll put a link actually to a podcast I did on this like several years podcast 104 so  this  is 259 a couple years ago pretty much on the same thing it's just a summary of this way of thinking about growth which I think is very helpful in some situations but it doesn't get you all the way there with digital it gets for me it's about half okay so  The argument from the book, and this is me summarizing it, this is really three books, but  the idea is that  sustainable growth, sustainable profitable growth, which is what these books are focused on, is all about having one to two strong core businesses.  And this is basically them going back and looking at hundreds and hundreds of companies in the 1990s. I think they did it in the 2000s, but I don't think they've done it beyond that. And these are all large companies like Fortune 500, the kind of clients you'd expect a Bain or BCG to have. their priorities are a bit different. But if you look at all these companies, what they say is, look, the ones that not just grow, but grow profits sustainably, five years, 10 years, 15 years. It's all, all of them seem to have one to two strong cores. That's the engine that gets you sustainable growth that is profitable. Now there's a lot of ways to grow that aren't profitable and a lot of growth comes and goes.  So, they're looking at a very specific question. Now they sort of define profitable core businesses as they use different language than me on this, but they look for loyal customers, competitive advantage, unique skills, the ability to earn profits. Okay, that's just business analysis. I would just call those attractive companies that have competitive advantages and good unit economics. So, their language is a little different. I don't think their summaries for competitive advantages are very complete.  So that's sort of number one. The strong core, one to two.  The core has to adapt over time.  You can't just leave it stagnant and do the same thing over. So, you always have to sort of be responsive to things that are impacting your core.  And some of those can be very slow over time. Like people don't drink as much sugary soda now as they did 20 years ago. know, a lot of, there's substitutes from Coca-Cola and Pepsi to say orange juice and bottled water. You know, in 1985, people weren't drinking bottled water.  So, you've got to look for things that are sort of impacting your core and you've got to adapt the core over time. And in some businesses, it's slow and gradual and nice like Coke.  In media, it can happen pretty quick. Cable businesses getting turned upside down.  Videos on screen, short video, okay, video moves pretty quick.  And how fast it's going to adapt usually depends on changing regulations, changing technology, and changing customer behaviors. That's what's going to drive any adaptation you need. Outside of that, okay, the core that you need to adapt over time, you also need to think about going for adjacencies. We need to find new sources of growth. Cores are going to die over time.  Sometimes they do.  The melting core is a problem, but you always need to sort of systematically be going after adjacency. Now the word adjacency is pretty important actually. When you launch new services or new products or go into new geographies, all those would be considered adjacencies, the probability of success is quite low. They say it's about 25%. When people launch growth initiatives, we're going in from Europe to the UAE.  Think 25 % success rate. We have a new product we're launching. Think 25%. This is a low probability activity, so you have to have a systematic approach that increases the probability of success. What you don't want to do, what you want is systems that do this repeatedly all the time. that have learning feedback loops, that's how you get the probability of success higher. What you don't want to do is do random, occasional big growth initiatives. That's going to have a low, even lower probability of success. You don't want a company that doesn't do a lot of growth initiatives making a big move every three to five years. Likelihood of failure is much higher. You want constant. systematic sort of attacks on adjacent opportunities every month, all the time. Feedback.  You know, it's like, I don't know, I don't have a great analogy for this.  It's like trying to have a hip-hop song. If you just release one song every two years, your chance of having a hip-hop song is low. But if you're releasing, you know, 50 songs every month, your likelihood of getting a hit is much higher. Kind of the same idea. Okay, so...  One, you got to think about a probabilistic approach to attacking adjacent opportunities. And two, you need to think about leveraging the strengths of your core into those. So, they talk about the distance. How far is this new opportunity from your core? And the closer it is, the better. So, distance would be something like, can I leverage my current customers into this new opportunity? That shortens the distance. Can I leverage my existing channel into this business? Can I leverage my core technology into this business that is differentiated? Anything you can do to shorten the distance between the core and an adjacency is going to increase your probability of success. And they actually have a pretty good formula for calculating distance. You can put a number on it. But that's what you want. You want a systematic approach and you want to adjacency that's as close as possible because that's going to increase your probability of success of either getting an incremental revenue growth opportunity or maybe you're going to catch a wave.  Usually, it's one of those two. We're looking for incremental growth all the time every month and we're also hoping to catch a wave from time to time. OK. So that’s my summary of what they're doing. Now when they talk about growth adjacency, they have six of them.  I'll read them to you really quick, but I won't go through them.  Get a new customer segment.  That could be a group outside of your current customers. Honestly, the best place to usually look is to look for a micro segment within your current customer base and pull those out and create more personalized things for them. It's weird, like, as a good rule of thumb, the greatest source of growth is always to look internally. You look inward to grow.  So new customer segment, new geography, new channels, go online, go into physical stores, new products, something that's new to the world that's never been done before. Maybe it's a compliment to your current business. Maybe it's a support service, something like that. an entirely new business, so not a new service on our existing business, but something totally new, a new business model, a new capability that you're selling.  And then the other one is sort of a new value chain steps.  If maybe you want to integrate backwards, forwards, vertical integration, maybe you want to take selling your current capability and sell it to a service outside, all those things are sort of business model moves, value chain moves. So anyways, they lay out six.  But they have one phrase I like where they say sort of adjacencies are moderate but relentless expansion attempts. You're always sort of attacking your adjacencies all the time and you have to have a system for doing that which I'll talk about. Okay let's talk about digital growth which is different. Now, the strategy I just gave you is, as mentioned, focused on large companies, focusing on profitable growth, and focused sort of long-term sustainability, which is fine if you're an MNC and you're looking to make your quarterly numbers and show profits. These are gigantic companies.  That's not... most companies. Most companies are smaller SMEs, medium companies, even you know 20 person companies, things like that. Everyone's focused on growth and that playbook kind of works but not really. First of all, profitability is not always the goal. As mentioned before if you can just get bigger as a company and go from 50 employees to 100 employees even if the growth was achieved without profits. We're bigger, we're bringing in more revenue, but maybe the new business is sort of close to operating breakeven. It's not generating profits. That's still a really good move, because it's going to get you a lot of resources. You can do more things; you can launch more products. It's going to give you greater stability. You're going to be less exposed to volatility. ah Shocks to your system are not that big of a risk, the bigger you get.  Now in the digital world doing something like that, see it all the time. We see companies right now like Alibaba had its earnings announcements last couple days ago. And they talked about how Alibaba and these digital giants of China are all going after instant commerce, insta commerce, insta shopping. Where you can order a sweater in your... home at 8 p.m. on a Sunday and someone will deliver the sweater in 15 to 20 minutes. Insta-commerce. Not just food, but apparel and other things.  everyone's after that sector right now, but it's not profitable. Very small profits. And Alibaba actually talked about this in their earnings report. They kind of said, this strategy is about consumer mindshare. We're trying to stay in people's brains and get more users and get more engagement and get more activity, even if it's not really profitable. And then literally the next sentence in their press release, they said, and this is resulting in increased profitability of our standard e-commerce business. So, they're cross-selling insta-commerce people. They're doing instant commerce, they're getting attention, engagement in users, and then they're cross-selling and pushing them to core e-commerce, which is much more profitable. So, they actually saw a boost in their core e-commerce, but this new business was not, for the most part. So yeah, we're going to do a lot of growth initiatives that are not profitable.  Maybe they get us mind share.  Maybe they don't get us more users, but they get us more engagement. Engagement is very important. It builds long-term value. It builds retention and loyalty. Maybe we're just doing things to get data. You know, I've sort of said before, there's at least three different types of products you may have in a portfolio of products as a company. You have margin products, you have attention products or engagement products, and you have data products. You may have a portfolio of all three of those because you need all of that. That's not actually unique to digital. used to work on shopping centers and the food court, and I used to see the numbers, right? It was under my sort of portfolio a bit. And the food court really didn't make any money. It was very small. The anchor stores, we had a Marks and Spencer, that made money. But you got to have the food court to bring people into the shopping mall. And then they go to the Marks and Spencer.  So, most businesses have a portfolio of services or products. And attention, engagement versus margin versus data is not a bad way to think about it. So, we may want non-profitable growth.  And especially if you're a small company, because not only does it get you stronger there, but it gets you more resources and it gets you capabilities. That's very important.  Now, that said. Profitable growth is worth 10 times more than any other type of growth because it gets you cash flow and that means more marketing spend, more R &D, more investment in the future and you know let's not underestimate the importance. If you're growing your profitable businesses, if you're getting profitable growth, that’s the most important thing by a factor of 10. However, in digital we do a lot of stuff that's not.  The other thing I think this sort of growth, know, this sort of Bain book, well, I guess it's by, I know if it's by Chris Sook or by Bain specifically, let's say it's by Chris Sook. It doesn't talk about growth by innovation, right? It's a lot of products and adjacencies and, you know, if you're in digital growth by innovation, as kind of kind of said, is priority number one. That's your best growth method. customer improvements, personalization, innovation, better experiencing, adding complementary services, things like that. So that's kind of a little bit of a different.  Now that said, I'll give you my growth strategy here in a second, but let me, guess, up the fact that I have a couple biases. Let's say one, two, three, four, four biases of how I view all of this that really do shape my thinking.  Number one, most businesses don't really get to pick where they want to play. Now, if you're an M &C, you can do that. You can make investments and go into other sectors and go into other product lines.  Most businesses don't get the option of doing that. They kind of have to build from where they are. So hence, focus on the core, go to something adjacent, very close, maximize your probabilities of success. Two, performance in digital is like 80 % company specific. When you're thinking about investment, they'll always say like, choosing where to play is the most important thing. What industry, what type of business? When you're in a digital business, you can really move the needle with a good management team that's innovative.  in digital thinking. So, company performance really does vary dramatically. So, I like to lean, I like this idea, let's lean into customer improvements as our primary growth strategy.  Number three, the business world as it's impacted more and more by digital is getting faster and more difficult. One, everything's happening faster, so you have to be digitized, you have to be fast, and you need to be smart. You need data coming in that lets your management make decisions very, very quickly.  You kind of got to go for growth. because there's a more extreme distribution of winners and losers. The winners are winning more than ever and the losers are falling faster.  Being okay and just kind of in the middle of the pack is a lot more precarious of a situation than it was in the 1960s. So, you can't be in the middle of the pack and be comfortable. If you're in the middle of the pack, if you're at the top of the pack, if you're at the bottom of the pack, you need to be leaning into growth. That's your bet. You need to be on offense. So lean into growth no matter where you are because the playing field is much more brutal than it used to be.  And that said, growth is, let's say, number one. Build your moat is number two. Hence, that's number two and four I just talked about. Customer innovation and growth, build your moat. Same idea I just kind of said. And then keep in mind that adaptation is much more part of the game than it used to be. Hit products don't last as long. Even products that are good have to keep adapting. So, adaptation is more of a significant piece than it was 20, 30 years ago. That's just a list of my sort of worldview biases. So, I'm going to give you my growth strategy, but you can see it kind of reflects all of that. Okay, my approach, which I just called the digital growth grind. Point number one is, look, growth is a constant grind. It is just a weekly activity. You grind away at it all the time. It never ends, but it's a process and it just needs to be baked into the company at the process level.  And it needs to be baked into the culture. You need a growth culture across the company.  And the activities that matter within that are constant learning, rate of learning, which I talk about a lot, constant experimentation and constant adaptation. Right? You need just this constant feedback loop of we're trying things, we're experimenting, let's look at the numbers, let's do it again. That failed. That's just a normal week. That's the digital growth grind.  Within that, the strategy is basically focus on the core and focus on sort of one step adjacencies. So, build your core, focus on your core, adapt your core, focus on adjacencies that are one step away, make them as close as possible. Now within that, growing the core business, all right, what does that mean? Good approaches to start by looking inward.  Start by taking apart your customers, trying to understand their behaviors, what they care about. That needs data, right?  And focus on how to improve it.  Micro segments of customers are usually a good place to start to try to find new growth opportunities.  Another useful exercise is just map out the processes. Like, what is the user experience? Let's just start from beginning to end.  for customers that really enjoy our product, for customers that stayed for a while and left, for customers that didn't like it at all, they looked once, they didn't buy.  Map out the processes, try to do as much customer segmentation and insight as humanly possible.  That sort of inward focus is usually the best place to find the new opportunities for growth, definitely within your core. And then based on that, you do constant customer improvements, growth by innovation. Basically, my customer experience playbook is all about that.  Number two, in terms of adapting the core, kind of talked about that. That's not particularly unique to digital. It's the same.  When you attack sort of one step adjacencies, which are nearby, digital services tend to be a very good adjacency to go for. If you're going to do major moves like adding channels, that actually takes some time. If you're going to go for new geographies, that takes time.  But if you've got a good connection with your customers, maybe they're using your app, maybe you've got some engagement with them when they come shopping, you’re in a very good position to do digital services, which have a fairly high probability of success relative to other things.  You got to do it right. And as mentioned, the issue when you go for adjacency is the high failure rate. So, you don't want to do it infrequently, you want to do it all the time. You don't want to do it far from the core, you want to be really close to the core. That's why I call it one step adjacency.  Usually digital services, new features, complementary products, those are easier to bring home in the digital world than they are in the physical world. Because we can put the other service right on the screen the customer's already looking at. You can't really do that so easily in stores and things, but you can on a smartphone screen. Now, as mentioned, to do this, you've got to kind of go at it every week. In reality, that just means a couple activities you have to dial into the work plan of management.  You need rate of learning.  Right, you need constant learning, a closed loop between our customers and what they're doing and the feedback and what's working.  You need constant customer improvements and innovation. That's a lot of brainstorming with management to think of new things.  Decide what two to three ideas we're going to test this month: what two to three growth ideas we're going to test this month.  Then it's a lot of experimentation and testing to see if it works. And also, within there.  You're going to get an early, if you're doing those three things, you're going to get a lot of early warning signs for the need to adapt. You're going to start to see the numbers. Hey, something that used to work is not working like it used to. So, this idea of do we need to adapt, you're going to see it in the numbers if you're doing this process on a weekly basis. If you're not, you can get blindsided. Anyways, I'll write that up in the show notes, just sort of a basic outline for the digital growth grind and what that means.  For those of you who are subscribers, I'm going to send you one, maybe two articles that go into all this in a lot more detail. What are the most common causes of failure of the core? What are the most common causes of failure in adjacency moves?  What are your biggest concerns? How do you maximize success? All of that stuff. And that's a lot of adapting of these books and a couple other sources as well. So, I'll detail this out a lot more.  But I figured that was enough strategy for today. I guess one last point here to keep in mind. me There's an interesting slide which I'll put in the notes, which basically is from the book that says in the 1990s. Most growth came from sort of two places. It came from core performance and adjacency expansion, like 85%. Outside of that, there were a couple other things that might give you growth for sustained profitable growth.  Another was redefining the core, changing kind of what you do in a significant way, or bringing a new business model or market to the world. Fast forward 10 years, it's in the same graphic. Core performance and adjacency expansions fall into 50 % of the growth. Now, new to the world business models is 34%. So, to me, that's digital. That’s the sort of permanence you could get from a strong core with some smart adjacencies is not nearly...   as strong as it used to be. So, you've got to be much more adaptable and I would say in digital it's even more so. So, you know keep that in mind. It's a pretty good...  that's for large companies in North America 20 years ago. So, it's a grain of salt you know there but I generally think that's true.  And that is the content for today. I'll put a lot of this in the show notes because there's a whole lot of thinking in there, but I'll try and boil it down to just my own sort of simple digital growth playbook that I use, which I try to keep simple. And then ultimately it comes down to, OK, what three to four growth initiatives are we doing this month? That's it. Think about it, think about all the factors, a lot of discussion, all these frameworks I just talked about, but then it's got to come down to every month, okay, what are our three to four growth initiatives we're doing? And that just happens all the time. That's kind of what I talk with CEOs a lot about. Okay, we've talked about it, it's great, let's get this down to a playbook that can be executed over the next two months and see how we do. Okay. That is, it for me. The concepts for today, obviously, core versus adjacency growth and also think about explore versus exploit as a different sort of growth strategy. As for me, it's been a pretty good week. Nothing really big or monumental. I'm going to be traveling a lot of the last couple of months. I'm just kind of taking it easy for a while. I did see a good movie, Prometheus. which I'd seen before, but I kind of remembered it was mixed and it was an alien’s movie, sort of, but it was kind of a movie about...  engineers who may be created humans in the same universe as the aliens like Alien, you know, those horror movies.  But it's not really about the aliens and it was pretty great. Like it's Ridley Scott. I watched it on the big screen.  I really enjoyed it actually. I thought it was really like cool science fiction with great visuals and all that.   And it was supposed to be, I guess, part of a trilogy and the one that followed up was called Alien Covenant, where, you know, after they sort of discovered these engineers who created the humans, they go to the alien, they go to their home world. and I was like, oh, this is going to be good. They track them down and go to their home world where they're located. And it turns out it's just like the worst movie. It's terrible.  it almost like kills the whole franchise or trilogy. It's so bad.  yeah, if you haven't seen the second one, Alien Covenant, don't watch it. It's just awful.  But the first one, Prometheus, I really enjoyed it. I'm going to watch it again because it's really...  It reminds me bit of like Dune. Like I really love the Dune movies in the books because it's like there's so much cool thinking in there. Like it's a whole universe they created with philosophies and religions and peoples and all. This is a little bit it reminds me of the same. They've created this whole other universe and you get a brief look at it in that first movie and it's like oh this is really interesting. And then they shut it down pretty quick with the terrible second movie and I guess they never made the third so oh well. But yeah Prometheus I really enjoyed that actually I'm going to watch it again maybe tonight and see if I can figure out some more stuff anyways that is it for me yeah I hope everyone is doing well and I'll talk to you next week bye bye