Can a ‘last company standing’ strategy unveil hidden value?

March 3, 2024

What’s the advice you’ll hear from nearly every growth expert out there? ‘Chase after growth markets!’ They’ll tell you to find markets that are already on the upswing, or go for markets that promise solid growth due to emerging consumer trends, shifts in technology, or even changes in regulation. But here’s a twist: What if your forte lies in a stagnant or even shrinking market? In this essay, we delve into the counterintuitive strategy of creating value in no- or low-growth markets, exploring how being the ‘last company standing’ can actually be a boon.

Different playbook

Is carving out value in such a market a pipe dream? Far from it. Yet, the playbook differs:

  • Market leadership, signified not just by sheer market share but by cost efficiency, product superiority, and service excellence, often trumps market attractiveness. But remember, being the undisputed number one is crucial.
  • In markets that aren’t growing, share gains and consolidation become achievable goals. Many competitors might retreat, eyeing greener pastures. This terrain, however, demands patience and grit.
  • Cost leadership and irrefutable product reliability take center stage—trust, more than anywhere, becomes your currency.
  • Understanding and mitigating business cycle volatility is key.
  • Fostering cash flow growth without skimping on strategic investments is vital, even as you may strategically pull back in areas.
  • Such operations can bankroll ventures in more dynamic markets, with value sprouting from enhancing cash flows and extending business lifecycles.

Reflections from the field

My journey has led me to helm entities in these very markets. Let’s be candid: Low or no growth sectors rarely get the top brass’s heart racing, propelling us to scout for new growth avenues—be it through geographical expansions, novel chemical innovations, or uncharted applications. Yet, the mission remained to bolster cash flow amidst a static revenue line. By adhering to the principles outlined above, we not only succeeded but continue to thrive. This journey also taught me the importance of investing in team morale, especially since the fruits of their labor often fuel ventures in more lucrative but riskier fields.

Corporately speaking, having a portfolio of such businesses is akin to possessing a financial bulwark, astonishingly immune to economic swings. A stumbling block emerges when contemplating divestitures, given the financial market’s penchant for growth potential over steadfast financial health.

In the post-Covid world, the ability to identify, cherish, and enhance these enduring stalwarts could well be the lifeline companies need amid the storms.

Ready to dive deeper?

Whether you’re navigating the calm or bracing for the next tempest, understanding the nuanced art of value creation in no-growth markets is pivotal. If you’re pondering over how to leverage your position or breathe new life into these segments, I’m here for a chat. Reach out at peter.gommers@peter4strategy.com or +31-6-53361249 to explore how we can turn these overlooked assets into your strategic advantage.

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