Managerial choices for sustainable growth

Dr. Michael M. Goldman, professor, University of San Francisco, is also marketing and sales teacher, researcher, and advisor to organisations in the U.S., India, Kenya, and South Africa. From investigating how to retain baseball season ticket holders of the San Francisco Giants, to advising the MTN Group on leveraging their FIFA World Cup sponsorship, to developing sales skills workshops with the Los Angeles Clippers, he has worked with students, managers and clients to enhance their abilities to acquire, grow and retain profitable customers. Goldman impressed the audience while delivering his keynote address on “Managerial choices for sustainable growth” at the MIMANSA 2023 – 2nd International Research Conference organised recently by Association of Indian Management Schools (AIMS) and Sri Balaji University, Pune (SBUP), at SBUP Pune campus. Through examples, Michael M. Goldman, explains how an advertisement of a product must be created for increasing its sales revenue and the myriad ways of bringing in sustainable growth. Corporate Citizen brings you the excerpts.

McKinsey’s Three Horizons of Growth

Horizon 1 - Defend and expand current core business (1-2 yrs)

Horizon 2 - Fostering emerging new businesses (3–5 yrs)

Within the current financial year and into the next financial year, where are additional revenues, margins, profitability, customer base products? Where they are going to come from? And that’s about defending and reinforcing our existing product areas. But then, of course as we think about growth, we are thinking of more medium term and long term. And so with these two horizons we’re thinking about fostering emerging new businesses, what are those investments we can make now that are going to deliver new revenues in two or three or four years’ time, with those revenues and products do not currently exist? Innovation is one of your themes for your research, for your posters, for your internal entrepreneurship or your external entrepreneurship and innovation. And so that’s Horizon-2.

Horizon 3 - Seed future businesses (5+ yrs)

And of course Horizon 3—I think about ChatGPT 3 and 4, Bing, and all of these new AI tools and businesses that are emerging as we speak. If you’ve logged on to TikTok anywhere in the last few hours, you will know that it is full of people talking about these new tools and these new businesses being created through things like open AI and other AI technologies right now.

What was happening 18 months ago, what was happening three years ago, what was happening to Elon Musk and others in Silicon Valley? They were starting to invest in these technologies perhaps 5–6 years ago. And so the question we need to ask ourselves from a business point of view is, what should we be investing in today that no one can imagine would turn into business, but that in five years from now is going to be a substantial business that we wouldn’t have thought about? And that’s the third horizon of growth.

So, how do we think about growth? We think about short term, medium term and long term. We think about customers and products or markets, and so across these different variables, we see multiple opportunities to think about growth.

I want to share with you few examples of cases were we are starting to see these different growth options that play out:

Case study- 1 — Brita

We all know Stephen Curry from Golden State Warriors, here in San Francisco, in California—a pretty good basketball player by all accounts. This case study that I was involved in over last few years, is writing up this case study about Brita, which is a water filter company. They produce healthier, tastier water, which is critical in many parts of the world. Brita wanted to increase their revenues. They are market leader in the US and at the time of this case study in 2016, they were the dominant player and any senior executive will tell you—they wake up every morning and they think about growth. The executives at Brita were waking up every morning and were thinking about how do they grow better. They were a substantial business, they were generating lots of money, but they were not growing. And, business people can sometimes be bit greedy, that’s one argument. The other argument of course is they need to manage different stakeholders and share all those returns on one of those stakeholders. And of course increasing wealth for employees is an additional stakeholder and concern.

"Think about growth for the right reasons and focused on the right things. Sustainable growth is not just growth of any kind. It is about being very clear about what kind of growth we’re trying to get and then what are the myriad ways we can do that

So Brita wanted to increase their growth and they wanted to increase revenues. So they decided to sponsor Stephen Curry. They had a managerial choice to think about how do they spend their marketing Dollars. So, what did they do?

So, we think about antecedents and consequences from a research point of view. There’s going to be some kind of management action, management decision that hopefully leads to some kind of outcome, which is about growth. It doesn’t just happen. People don’t just wake up in the morning and decide to buy more stuff. So, it’s our actions, our managerial choices that drive that behaviour.

So, here the choice was sponsor Stephen Curry for three years. He is a really well-known basketball player; he is known internationally and he has a really good following in Asia, as well as of course in the US and among young people—and he will be able to increase our sales. This sponsorship will put us on right places and he will be boosting the product and who doesn’t love a great sports endorser— think about cricket. And so here is an opportunity to really grow.

The marketing people thought that here is a really smart way to think about great athletes, great celebrities, great endorses—we have heard a lot about great influences. If you are on Twitter or TikTok or Instagram, you know all about influences and we know how much money is going into influences. So, here is a brilliant opportunity—I’m afraid it didn’t work.

One of the challenges with growth is you don’t know beforehand whether something’s going to work. That’s really why we do research. We do research around growth and we do research around understanding marketing strategy and sponsorship strategy. In this case, to understand the ways in which things work, so we can make better choices. The situation here is, there are some very smart marketing people who thought that Stephen Curry would automatically deliver it. Unfortunately, what they realized was that Stephen Curry was big on water, Stephen Curry loved water, Stephen Curry spoke about water, Stephen Curry drank water. What he didn’t talk about was Brita. So what people were doing is buying water, but there’s a whole bunch of different ways you can buy water that has nothing to do with Brita. You can buy bottled water, you can buy other kinds of water filters, water filtration systems for your house or for your fridge, whatever it might be. And so, the consumption of water increased—is a brilliant campaign to grow the consumption of water, but it did nothing for Brita business.

And so there was a key lesson for the Brita executives about growth and around messaging, and how to make sure that if you’re trying to grow growth, you try to grow the right thing. Here the situation was that the campaign was focused too broadly and it focused on category as opposed to the brand. So it grew water, which is great for everyone else, but it’s not great for Brita, because what Brita is selling is not really water. Brita is selling water filters.

Second piece of effective campaign: The first piece of advert content was very much a typical sport marketing sponsorship kind of content. It’s about the athlete, dealing with what the athlete does and trying to connect it to a brand. What they realised is that they were focused on the wrong messaging, they were focused on the wrong kind of growth. So this second campaign was much more effective at starting to shift the focus, at not just Stephen Curry the athlete, but Stephen Curry the person who is fully endorsing this brand and is involved in some way in your life, in that fun clip around Brita in the fridge, and it’s much more about the product. And so things started to shift in the campaign. And in the last piece of content, is really where this campaign got to, is the key lesson here about growth and what we are really trying to grow when we think about these kinds of campaign.

Third piece of campaign: It’s quite a different campaign as you see from the first piece of campaign, all the way through the third piece of content. If you want to try and distil that evolution in the campaign on what you think the Brita executives learnt about growth. They did this sponsorship to try and grow. What did they grow? What did they learn? Where did they land up? I can tell you that by the time I got to that third piece of content, took about nine months. Finally, the sales started to turn and they started to see a growth in their market share, and they started to see a growth in sales. They even started to see a growth in price points and margins. So, what do you think they learnt through this campaign, through this three examples of the piece of content that I showed you?

"One of the challenges with growth is you don’t know beforehand whether something’s going to work. That’s really why we do research. We do research around growth and we do research around understanding marketing strategy and sponsorship strategy. In this case, to understand the ways in which things work, so we can make better choices

Sponsorship accountability is moving towards financial outcomes This is a study that was done in the US with large scale advertisers and they were looking at the extent to which those advertisers were driving such certain metrics. It shows that there is an evolution that is happening and there’s a maturity that happens within organisations, as they think about growth, especially using sponsorship to try and drive that growth. The starting points are more marketing related, awareness related, impression related, kind of metrics. And it’s often where organisations start and where managers make some basic questions, basic decisions and sometimes basic errors. It’s easy to do and you can understand how managers being human beings will sometimes go for the easy option. It’s easy to get impressions and it’s easy to measure those impressions, and it’s more direct and quick to measure those impressions or that brand exposure or some kind of willing ness to purchase—and so we can measure those marketing outcomes and we can pat ourselves on the back, and so we have done a great job.

Unfortunately, that’s not the growth that pays the bills. I can’t pay people’s salaries with brand awareness. I can’t deliver value to all my stakeholders including my shareholders, just with marketing outcomes. I need to deliver business outcomes. So you can see how we move through phase two and we head towards phase three here, which is rather financial outcomes. So the sponsors for businesses looking to generate growth through some kind of marketing spend like sponsorship or any kind of other marketing communications tool. Increasingly the metrics are focused on end result, outcome, external metrics, where the lesson for us around sustainable growth is that there’s a pipeline—we have to measure at multiple points, we have to focus on the end results. Is this delivering the growth around revenues, margins and profitability and is it filling the pipeline going forward? So, it’s not just a short-term blip.

That’s where the comments in the room are so important around the issues and the themes—purpose-driven brands allow us to differentiate in the marketplace, where we are not just competing on a product or a price or a fun piece of content. But we’re competing based on who we are, how we operate and how we as an organisation are different to other organisations. And, when that connects to the target audience that we want to win, because we may compete against other companies, but we compete for the customer and so if we’re picking the right customer and we’re aligning the values and we’re standing for something, that’s a lot more sustainable because it delivers ongoing revenues. And, we know as consumers that we will often feel a stronger affinity to those kind of products and brands and organisations, that we feel authentically stand for the kind of things we care about. Of course if they’re whitewashing or green washing or just talking rubbish, then we see through that quite quickly, especially in today’s 24x7 news cycle. But, if we authentically stand for something, that can lead to that sustainable value overtime and that’s one of the key takeaways here in this Brita-Stephen Curry case study. It wasn’t about water; it wasn’t about Stephen Curry. It was about filtering bad stuff out. It was thinking about the brand purpose, what the business stands for, what is the authentic point of difference—the competitive advantage of that brand over other brands. It’s not just a water filter, it stood for something more. And the key challenge here for marketing people is that we sometimes get it wrong as marketing people, when it comes to growth.

Here is a quick survey of marketing goals versus business goals—here in orange the typical marketing goal, the typical marketing focus on growth, it’s around increasing product awareness, increasing brand awareness. Well, that’s nice if you are a marketer, but that’s a short-term and internal deliverable, we can’t pay the bills with. And, what does business care about? Business cares much more around revenues, much more around customer experience; it’s around customer acquisition, customer retention. Those end result measures that are really the thing that are going to give us sustainable growth over time.

Case Study- 2 - Fancam

Fancam—it’s a South African business. It is a group of people from Cape Town who were into cameras and were into high definition spherical images. So, they created this idea of Fancam and their first product was the ability to zoom in when you have a sporting event think about the IPL, World Cup, Olympics and American sport context as well. Zoom in and be able to identify yourself. I’ll give you an example here — this was a Fancam that was captured recently and this was a Boston Celtics game—again your NBA fans, your basketball fans, this is a live Fancam right now. I’m just zooming in on a browser and I can go right in and I can pick this guy over here, who looks little bit bored, in his green jersey. Now we can tag that person as our buddy or that person can tag themselves, perhaps try and put a smile on their face, that they were there. And, that was the first product that Fancam created, essentially using this gigapixel camera, spherical 360-degree image—that was a fun activation for sports teams. For sponsors, this one’s sponsored by an investment company that sponsors the Boston Celtics, a basketball team.

So, a cool product for a South African company competing around the world and doing business in US dollars, in America. But they hit a ceiling—not the ceiling of arena, but they hit a business ceiling and they were looking for growth. What they realized is that the installations they had here, these cameras that they had in the arena, can do a few different things over time. And I spoke about AI earlier, where they’ve got computer vision technology built into the cameras. And so, what they’ve been able to do is create a separate business called CrowdIQ. This is not a facial recognition business, but it is a facial tracking business and what it essentially allows you to do, just like this example — if you’re at an event and you want to see who is looking at the screen, the big jumbotron screen in the middle of the arena, who is on their phone (that could be a good or bad thing) and who is actually watching the game. You can do that based on this kind of analysis where the AI—the computer vision essentially processes what the cameras are picking up and turns that into data that sponsors, team businesses, facilities, arenas, can then use to manage their business in real time. It’s a very different business to what Fancam originally created but they had similar technology that they were able to diversify and think about how over a period of time they were able to grow in new ways. CrowdIQ has doubled the revenues of this business and it came out of a little experiment that they ran. So, they were driving this business and they were in Horizon-1, and they were focused on selling Fancams and getting people to zoom in and tag themselves in Facebook, and they were selling that for 25,000 dollars a Fancam. They were doing very nicely, they were having a good margin, a good business. And then a few of the tech guys got together and said, “Well we wondered what else they could do with this kind of technology”. They started playing around and they started running experiments so it was a kind of about Horizon-2, Horizon-3 business. And it was actually within 3 years that they created this Crowd IQ opportunity, thinking about existing markets—my existing market is the arenas that I’m in—but thinking about a very different new product. So product development diversification kind of idea, thinking about how do we grow in very different ways.

Conclusion

I hope this few examples today were useful to you to think about growth—think about growth for the right reasons and focused on the right things. Sustainable growth is not just growth of any kind. It is about being very clear about what kind of growth we’re trying to get and then what are the myriad ways we can do that. And in these two examples I’ve shared with you today, I hope you’ve seen a number of ways that can be done.