Generating Profitable Growth

The permanence of a company in the market is closely related to its ability to grow: small companies are more fragile to the changing Latin American environment and, therefore, more likely to disappear. However, growing profitably is not easy. Knowing the edge strategy model is very important, since it offers us alternatives to increase sales and profits.

Various statistics maintain that in Latin America the mortality rate of companies is around 70%: 7 out of 10 companies created do not exceed the first year of life and, most, close in less than five. The main explanation is the difficulty of adapting to the external environment, which presents innumerable challenges on the continent due to its volatility.


Normally, companies that overcome these external storms, among other aspects, have a common denominator: they have exceeded a certain minimum level of sales, generating a size that ‘protects’ them against certain ups and downs. Some have successfully explored unfamiliar markets, while others have efficiently squeezed their key assets.


Most often, however, companies fail in this quest building a  profitable growth strategy. Exploring unfamiliar markets is no easy task: sometimes the desire to leave a mature market forces the company to venture into businesses where they lack strategic assets or the ability to create them. Similarly, the more that is squeezed out of a current business model, the more assets specialize toward that way of making money. There we have the example of Walmart and its difficulty in facing the challenges that Amazon presents .


Fortunately, there is a middle way, less risky than exploring unknown markets and more profitable than seeking efficiency in today’s business. Edge strategy is a way of thinking that emphasizes taking advantage of what is at the edge of the company: discover benefits in nearby territories.


Edge strategy is a way of thinking that emphasizes taking advantage of what is at the edge of the company: discover benefits in nearby territories.


The edges of the business

The edges of the business are generated in the mismatch of our value proposition and the set of permission granted by the client. People have desires that they satisfy by buying a good or service; By choosing a particular company, you are granted “permission” to fulfill part of those wishes.


When our value proposition is not exactly the same as these wishes, a mismatch occurs. For example, a professional may seek a master’s degree program in business to open up career opportunities, but is not interested in the international component of the program as he wants to work in his own country.


This mismatch should not be seen as a problem, but precisely as an opportunity: given that our clients vary a lot between them, our value proposition will hardly meet the expectations of all of them 100%. The exercise of identifying these mismatches is known as the edge strategy.


The product edge strategy describes situations where our product or service is imperfectly calibrated to meet the needs of our customers: many of them will be willing to leave us more money if we seek to calibrate it better. This is what Apple does when it sells phone cases to its customers; whoever buys a telephone is not looking for the device itself: it seeks to be able to communicate and carry out other operations without damaging the telephone. A housing offers additional security, better meeting customer wishes.


The strategy of the edge path describes situations where our company can redefine its participation in the way that helps the client to complete their mission. Some young couples would be willing to go to the movies if they had an area where they could safely leave their baby. The Mexican Cinemex, by offering CineMá, an adequate room in volume and sound for these couples to enjoy the film in the company of their baby, is a clear example of growing through sales at the edges of the business after deciding to accompany one more step in the set permission of the client.


Finally, the enterprise edge strategy describes situations where the strategic assets of the business are exploited in a way that was not envisioned when they were created to sustain the traditional business. It is reflected in Amazon’s strategy when it rents or sells much of the technological infrastructure that sustains its businesses.


In short: it is necessary to grow profitably without putting at risk our current or future position in the business. Seeking opportunities at the edge of the business, in the product, in the definition of the customer path or in the company, can generate significant growth and support the strengthening of the company.


Have you ever thought about the growth opportunities that present themselves at the edge of your business?