Scaling-up requires profitability focus along with market share increase focus | ThinkNorth While navigating the complexities of business growth, the pursuit of market share expansion often takes precedence, sometimes overshadowing the crucial aspect of profitability. Conventional wisdom suggests that as companies scale up and aim for larger market shares, they inevitably face the trade-off of sacrificing margins. However, we challenge this notion, advocating for a strategic approach that emphasizes both market share growth and profitability. Traditionally, companies have pursued market share gains at the expense of margins, engaging in price wars and aggressive marketing strategies to capture a larger portion of the market. While this approach may yield short-term gains in terms of market presence, it often leads to unsustainable business models characterized by thin profit margins and heightened competition. At our core, we believe that scaling-up should not come at the cost of profitability. Instead, it should be a balanced endeavor that incorporates a dual focus on market share expansion and maintaining healthy profit margins. This requires a shift in mindset and a meticulous approach to business design. Many small and midsized organizations, with their unique business models, create substantial value for their customers. The question however is, whether they are capturing a part of that value as profits for their organization. Understanding of the available and applicable profit models is critical to ensuring that the growth in sales is accompanied by growth in profits.
General Electric generates profits for itself from the “customer solutions” profit model. Swatch generates profits from its “product pyramid” profit model. Intel and Sony generates profits from their “time” or “first movers advantage” profit model. GE, Microsoft, Gilette and Maruti Suzuki generate profits from their “installed base” profit model while Nike and Coca-Cola generate profits from their “brand premium” profit model. Without a clear understanding of how profits happen and how businesses must designed to capture it, there will not be any profits. I nour own growth journey in my previous organization, for our engineering division, we achieved significant sales growth from 300 cr to 1000 cr while simultaneously increasing our margin from 7% to 15%. This success was not merely the result of aggressive expansion tactics but rather a carefully crafted strategy that prioritized profitability alongside market share gains. Profitability gains came from more customised and better designed product offerings, focus on operations excellence and achieving improved price realizations. In conclusion, scaling-up requires a holistic approach that balances the pursuit of market share with a steadfast focus on profitability. By redefining traditional paradigms and embracing a strategic mindset, companies can achieve sustainable growth without compromising their bottom line. As we navigate the complexities of scaling-up, let us remember that true success lies not just in expanding our footprint but in building a resilient and profitable business for the long term.
