Growth outside the core

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The full version of this article is available on Harvard Business Online (subscription required).

The Idea in Brief

Seventy-five percent of growth initiatives fail. So how do the few firms that generate sustained, profitable growth succeed? They expand their strong, core businesses—in predictable, repeatable ways—into related markets where they can excel.

For example, they may continue to focus on their core products, but sell them in new geographic regions, through new distribution channels, or to new customer segments. Such companies develop-and rigorously apply—a strict repeatability formula to these adjacency moves. This formula enables them to change just one variable at a time and execute moves faster.

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Fundamentals of Growth

The payoff? Companies that execute adjacency moves using a repeatable formula grow revenues three times faster than average firms in their industry. Take Nike. By systematically expanding product sales into a series of sports, Nike raced past rival Reebok—growing its profits from $164 million to $1.1 billion, while Reebok's shrank from $309 million to $247 million in the same timeframe.

Read the full article on Harvard Business Online.