Exploration into new markets
What are best practices? What does not work? Which approach fits your organization? Free initial consultation.
How will your company earn money in 5 to 10 years? Many industrial companies are asking themselves this question in a rapidly changing market landscape. It is not only the electrification of drive systems, the reorganization of supply chains and the increasing shift in margins from hardware to software manufacturers that are presenting B2B industries with considerable challenges. The growing speed at which innovations are being brought to market and technologies are becoming commodities also requires more continuous innovation and adaptation. Can New Business Development be a solution?
But which hype and which bubble do you have to go along with? Industry 4.0, IoT and automation? 3D printing, circular economy and climate neutrality? Predictive maintenance platforms, digital customer journeys and blockchain? Many important topics. Probably none of these will be your business of tomorrow and the day after tomorrow. Rather, these are accompanying topics, but not the B2B business segment of tomorrow. Not if you are a typical industrial company in a hardware business.
Engine manufacturers are looking for new business areas with acceptable margins. Mechanical engineering companies are looking for new sectors and plant technologies in which they can use their expertise and technological competence to add value. Manufacturing companies are looking for new products that they can produce and sell with their existing or slightly modified production capacities.
So the question remains: if things can’t go on as before, how will we earn money in 5 to 10 years’ time?
What are best practices? What does not work? Which approach fits your organization? Free initial consultation.
The success of past boom years has led many companies into a situation where sales kept increasing and efficiency gains have dominated everyday life for years. Faster production, fewer errors, everything just-in-time and, if possible, no stocks, superfluous multiple partnerships or other “hip fat” in the organization. Neglecting business development can lead to several negative consequences.
In most cases, companies have nevertheless opened up new areas of business. On the basis of incoming customer inquiries. “Can’t you also …?”. “Yeah, sure. We’ve never done it before, but we’ll manage …!”. In many cases, that was all that happened in terms of innovation and business development in industrial companies. And often enough to sail carefree in the seller’s market for years.
A blessing and a curse of success. What has fallen by the wayside is adaptability, a willingness to experiment and the ability to innovate. In short: the willingness to leave comfort zones. Picking up the phone and cold calling into new business areas? Today, this is often an insurmountable hurdle even for long-standing sales professionals.
However, companies that do not innovate in new markets, new products or new technologies are increasingly losing margins, market shares and future opportunities to more agile and technologically advanced competitors. Paper manufacturer Zanders, mechanical engineering company Voith, chemical company DruckChemie, wind turbine manufacturer Senvion and Hirschvogel Automotive are just a few examples of well-known industrial companies that have been forced into insolvency or massive job cuts due to a lack of future viability and new business.
Tapping into new business areas can help to build competitive advantages and drive future innovations. In the environment of technology, business and the people in the organization, there are economic, technical and psychological reasons for this approach.
Successful examples of companies that are continuously developing new business areas and fields of application include Speira Aluminiumwerke with the development of semi-finished product production for electric batteries, the mechanical engineering company Brückner with recycling technologies as a supplement to plastics production, the chemical company Hüttenes-Albertus with additive manufacturing as a supplement to foundry chemicals, cable manufacturer LAPP with the e-mobility division LAPP Mobility and fastener manufacturer Böllhoff.
In principle, this can involve the design of completely new fields of application. In most cases, the adjacent markets (adjacencies) offer themselves as fields of activity with lower entry barriers. Although the most obvious topics in New Business Development are not always the most successful. Only a practical check through first-hand market research can quickly clarify where opportunities lie and where not.
An established approach that has been used successfully across many industries is based on search fields and fields for innovation. Two important steps on the way to customers willing to pay in neighboring and distant new markets.
Three to six months is a typical period for opening up new business areas and adjacent markets (steps 1 to 3). A further three to six months for concept development (step 4). The following realization is highly market and industry specific and also depends on how much technology development and investment is necessary to score on the new market.
This customer-oriented approach ensures that products, technologies and services are developed and enhanced on the basis of market demand. Direct dialog with potential target groups and target markets is crucial to success. As trivial as it may sound, in the end innovation, business field development and new business development are “people business”.
Fast and successful support in finding innovation potential and establishing new business areas with New Business Development. Clear structure, orientation and support with a tested approach and many years of expertise.
The following success factors are crucial to achieving new business areas quickly and smoothly:
Prioritizing first-hand customer feedback and active market sounding through target group interviews and customer interviews is crucial. Many sectors look very promising on paper. But more important than market studies, graphs and charts are outreach, cold calling new contacts and companies as well as lead generation.
After all, not every sector is open and suitable as a new sales market. Perhaps we don’t speak their language, perhaps the companies have completely different issues than we think or perhaps there is no suitable match either personally or professionally. We only find that out when we talk to people. People who know their way around and make decisions in our selected markets, sectors and companies. The right conversations with the right people provide truly promising approaches, as the example of Bühler Technologies, manufacturer of analysis technology and fluid control, shows.
Sounds very simple. Often it is not. When cold calling into new markets, even established sales professionals quickly get cold feet. Only the right approach, the right conversation set-up, the right contacts and a suitable evaluation can prove real market potential with a willingness to pay.
The Ansoff matrix helps with strategic planning, identification and evaluation of growth opportunities. It helps to decide how far away new business areas should be from the existing business and how much new technological development may be necessary. The company answers how ambitious it wants to be on two different axes. This is similar to the model of innovation horizons.
For example, mechanical engineering company AlphaTech Engineering can expand into medical technology with new sales channels (market development). Beta Automation could innovate its product line by integrating AI technologies and changing material combinations into its existing automation solutions (product development). Delta Motors could diversify as a manufacturer of diesel drives by developing components for electric vehicles for the renewable energy sector (diversification).
The tools are not new. It is crucial that the right people come together to align and make a decision. Typically in a well-moderated innovation workshop. This is the only way to ensure that the determination is taken seriously and not contested at the next best opportunity. Once the new target industries are in doubt, New Business Development quickly becomes a battle of excuses. Warum alle vorher schon wussten, dass das sowieso nicht klappt und wer nicht alles vorher schon gesagt, dass das nichts wird.
There are always more potential markets than the project team can realistically explore. The model of Porter’s five forces (Porter’s 5) helps companies to understand the competitive setup of potential future industries. The model provides deeper insights into market positions and challenges. Understanding these forces helps us to pre-select promising sectors and markets.
Promising, because the sector has growth potential and unresolved challenges. Anyone who has been hoping for the use of artificial intelligence for a long time can get their money’s worth here. It is easier to gather initial information using artificial intelligence tools than via Internet search engines.
But also promising, because the challenges and requirements match our company’s expertise, strengths and potential offerings. In this case, there is little that can be done with artificial intelligence. Rather, it is about what managers can imagine, where there are points of contact and what it is better to leave alone due to scorched earth and a lack of motivation.
Business development is not sales. And the target group quickly notices whether providers are bringing new added value to the industry or simply want to sell items from their outdated catalog. A minimum degree of openness for the further development of the current portfolio is really necessary. Of course, you like to take the quick wins when the solution for the new customer happens to be on the shelf. Incidentally, this is an extremely common, positive side effect in new business development.
Not to be confused with technicians forging grandiose product ideas and then trying to place them on all possible markets. An approach that often creeps into technology-driven companies. The worry of arriving empty-handed at the customer’s is simply very great. But ultimately, this is exactly what makes the New Business Development approach so successful: getting on board together with potential future customers and cooperation partners in the business ecosystem or innovation ecosystem.
What approaches are there? How do you burn time and money?
What do other B2B companies do? Best Practices & Discussion.
Business development in B2B industries requires a combination of market knowledge, technological innovation, a customer-oriented approach and good decision-making processes for stable, strategic decisions. Various instruments such as the Ansoff matrix or Porter’s 5 Forces are important. The human factors are much more decisive. At management level, in business development and in the potential target market. This enables companies to develop robust strategies to exploit new market opportunities and promote sustainable growth.
TOM SPIKE helps you to develop a proactive approach to business development. As an innovation consultancy , we help you to position your company and your business units for success in the constantly and rapidly changing B2B landscape.
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