[Reading the Theme] Draw the Roadmap for Future Economy by Developing New Growth Engines

2013. 9. 12. 10:04


Draw the Roadmap for Future Economy by Developing New Growth Engines

 


Always Have Interest in New Growth Engines


 

Always Have Interest in New Growth Engines

 

 

Products and services can be categorized into four types in terms of profitability and growth. Those that are poor in both will disappear, and those that satisfy both will be a huge hit. Products that sell well today mostly have good profitability but slow growth, and some products that are yet to make a profit may become profitable in the future. New growth engines are today’s small trees that will become tomorrow’s giant trees if they are well raised. An organization may fall into danger if it does not pay attention to new growth engines just because it is doing well today. Here we should note that it is only safe if it is related to our core competences. It is necessary to challenge a completely different business, but we must play it safe.

 

In the last few years, a company that had been one of the top 10 interior companies attempted to jump into the construction industry and failed, finally going bankrupt. The interior company did not think much of the construction business before starting, but they failed to sell their buildings and resulted in failure. They neglected the fact that the two businesses are completely different despite the similarities on the outside. Therefore, when thinking about new growth engines, we must carefully examine what we can do the best and what businesses are related to the essence of our own.

 

 

Focus on Technological Development, the Insurance for the Future


  

Focus on Technological Development, the Insurance for the Future

 

 

There was an electronic company that diagnosed after the consultation that their problems were in marketing. They decided that their poor sales were due to weak brand power and inappropriate product promotion despite their good products. So they invited an overseas marketing specialist and held their meetings in English. As a result, they fell behind in developing new products and suffered for a few years.

 

To become a great wrestler, he must be able to do a body-twist throw. A body-twist throw is the ability to lift the opponent at a breath. If there is no such basal physical strength, all other techniques are useless. It is the same with new growth engines. Investment in technological development must have precedence of other things. It is necessary to make bold investments in developing technologies. Technological development is like rice seeds; no matter how hungry you are, you cannot cook rice with them. Technological investment is the seed to prepare for the future. However, most companies tend to cut down on R&D costs if there is a deficit. Investment in R&D is the insurance for the future.

 


Thoroughly Examine the Cash Flow


  

Thoroughly Examine the Cash Flow

 

 

There is an expression, ‘winner’s curse,’ which means that the winner will fail because of victory. A certain conglomerate recently collapsed due to an unfeasible M&A. This conglomerate, which has grown from door-to-door sales, acquired a construction company and a financial company that are bigger than the holding company. Then they invested a great deal of money in the solar business, but the cash flow was not going smoothly and as a result they went into receivership. This investment was commonsensically too much to begin with. They saw things too optimistically without examining the cash flow properly. We must always think conservatively when it comes to cash.

 

 

Look Closely into the Customers’ Movements


 

 

Look Closely into the Customers’ Movements

 

 

Business begins with customers. Companies must look into what customers want and where they are headed to, and take appropriate measures. They must not make inappropriate products and services that do not go with the flow of the customers. There was a card company named America Greetings. The card market was going through stagnation, but America Greetings discovered people’s need to write a card for the deceased and created cards to commemorate the memory of the deceased, which was a huge hit. We must always ask ourselves the following questions in order to find new growth engines: Who are our customers? Where are they? Where are they headed to? What do they buy? What is our current business, and what must we do in the future? What are our core competences?

 

 

Create a Culture That Can Protect New Divisions


 

 Create a Culture That Can Protect New Divisions

 

 

The new material division of a certain company required incredible investment costs for over 10 years. This irritated the heads of other divisions that generated profits. They criticized the head of the new material division, saying, “We’re generating all the profits, but you’re using them up,” and “Your division a bottomless vessel.” But the owner protected the division until the end, even recommending the head not to attend meetings. As a result, the new division is generating the most profits. Many new businesses with growth potential disappear due to the brutal tyranny of other divisions. The existing businesses are big trees, and the new business is merely a small seedling. In the same organization, people are likely to make the error of dealing with seedlings the same way they deal with big trees.

 

 

 

The writer Han Kun-tai

 

 

 

 

 

 

 


 

 


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