Beyond a certain maturity point, the opportunistic approach that fed your growth engine starts to choke it, undermining the company’s longer-term goals.

Many companies begin with the belief that they can grow anywhere and serve any customer: the world is their oyster. For earlier-stage and smaller businesses that have seen initial success from opportunistic growth, this type of thinking is especially common.

But to reach its full potential, every company needs to outgrow that mindset. Beyond a certain maturity point, the opportunistic approach that initially fed your growth engine starts to choke it, undermining the company’s longer-term goals to achieve scale, become a market leader, go public or achieve a highly profitable exit.

In this GrowthBit, I’ll look at the sequence of moves that companies should make in order to find their focus on a core market, break the start-up or early-stage ceiling and achieve rapid, sustainable growth at scale.

When you have a clearly defined brand, value proposition and end goal, it is easier to recognize and discard the opportunities and directions that don’t fit.

Start by defining who you are and what your ideal future state looks like

Identifying your core market involves clarifying your identity. What are you known for today and where do you compete most successfully in the market? What do you want to be known for or as in the future? What unique strengths can you leverage to achieve that future state? When you have a clearly defined brand, value proposition and end goal, it is easier to recognize and discard the opportunities and directions that don’t fit.

This form of strategic thinking, in turn, supports your ability to scale in two ways: you can avoid creating inefficiencies by spreading finite resources—including investment dollars, management time, and capabilities—too thin, and you can allocate more resources to high-potential initiatives that are most likely to maximize growth and returns.

Nike is a great and often cited example of this kind of disciplined approach to growth. They successfully transitioned from running shoes to an incredibly varied athletic and athleisure empire. But they did it systematically and strategically, evolving from running shoes to other products for the same core customer before making a lateral move into adjacent sports—such as basketball and soccer—populated by athletes with similar needs and priorities. By being thoughtful about their growth trajectory, they didn’t lose momentum.

Build a strategic plan that includes a qualitative dimension

With a clear understanding of your core identity, you can develop a strategic plan to help you get where you want to go over the long term. The end goal should be expressed not just in financial terms or as a quantitative target but rather as a destination and an evolution of your identity. Where do you want to be in five years? How do you want to define yourself and the value you bring to your target market?

Start with the end in mind and work backward to determine realistic steps to get there. It sounds basic, but for many early-stage companies, the vision of success is nebulous, open-ended, or based on a target valuation for the company, not a specific market position. By defining the goal in these terms, you can be more precise in mapping the logical progression of events that need to happen to get you there. It also shows you how much effort is involved in moving the dial in that one area—which helps you resist the temptation to pivot to other markets and dilute your impact.

Strategic Steps to Get from You Core Market Focus to Your Long-Term Goal

Listen to the data with an open mind

Finding your focus involves introspection, but it’s also important to balance internal perspectives with external market data. The internal data comes directly from the customer. Why do they choose you? Why do they go with a competitor? What more could you be doing for customers that is anchored in the value you deliver to them today?

The external data comprises broader market research, and it should be used to challenge internally held beliefs. This can be intimidating, and the idea of collecting it can be overwhelming, but you don’t need all the data in the world. You just need enough to provide external context to internal perspectives. This type of data can include competitor analysis, insights from their customers (via social listening or solicited feedback), market data and even investment trends: where are those investment dollars flowing?

Then lay aside any preconceptions and listen to what the data tells you. Maybe it will lead to diversification into new markets, channels and products. Or maybe it will show you that those exciting opportunities will pull you off course toward your goals.

Here’s an example. I once worked with a company that produced specialized performance sunglasses. They tried and failed to grow revenues by successively expanding into beach apparel and outdoor entertainment equipment. When we examined the data, it showed us that the company hadn’t saturated the retail stores in their core market and their products weren’t in every location of their existing retailer clients. Once we removed the distractions and refocused capital, operations and management time on the core business, we drove massive growth and profitability just by getting more of the SKUs they already had into the same customers’ stores and expanding across the U.S.

Having this discipline to look at expansion opportunities within the context of their distance from your core market is critical. The further a new opportunity is from your core, the odds of success drop. With a strong framework to represent your core, you can still see the opportunities on the edge and identify steps to get there without sacrificing success in that core market.

Once we removed the distractions and refocused capital, operations and management time on the core business, we drove massive growth and profitability.

Get everyone on board with the core market direction

Once you know where you’re going, it’s time to define the growth pathways that will get you there and the steps you need to take to follow those paths. By connecting and sequencing the five-year vision into a cascade of departmental and individual objectives that stretches from the top to the bottom of your organization, you ensure that everyone understands how their contribution supports the vision and that team activities and incentives are aligned with—and can be measured against—the goal.

This doesn’t mean that innovation can’t still be prioritized and valued. The entrepreneurial culture that contributed to the company’s early success can continue to invigorate it as you embrace the next growth stage. But it can’t be allowed to overwhelm the strategic direction. Put limits around this type of activity by allocating a specific amount of capital or staff time to pursuing and testing out ideas or structure an innovation team or lab. These types of initiatives ensure that ideas still percolate without bubbling over and distracting the broader organization from the goal.

Here’s the bottom line.

An opportunistic approach fuels growth for many earlier-stage companies, but it’s not sustainable or scalable. Establishing greater clarity around your core market and more control around the way you execute on that vision may feel as though you’re closing the door on viable opportunities. But this discipline will ultimately accelerate your growth by applying finite resources to the places where they can amplify your market identity and generate the greatest return.

Learn more about LLR’s Value Creation Team, purpose-built to collaborate with portfolio companies and help them define and execute on high-impact growth initiatives.