Here is a brief excerpt from an article by Gerald Adolph and Kim David Greenwood for strategy+business magazine, published by Strategy&, PwC’s strategy consulting group (formerly Booz & Company). They explain why and how the only sustainable way to capture new opportunities is to remain true to what your company does best.

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Illustration by Robert Samuel Hanson

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Growth is the ultimate test of business vitality, yet questions about it haunt business leaders. How much will we grow this year, and beyond? How much growth do we need? What kind of growth do we need? How should we balance revenue growth against margin improvement? How far afield from our current business should we look for new customers? Once we know where we want to be, how do we get there?

The best recipe for sustained, profitable growth is simple in its basic concept. It requires a capabilities-driven approach — making the most of what you already do well — that goes well beyond traditional market-back approaches, which try to deliver whatever the outside world seems to need.

It is also devilishly difficult in its details, because it assumes you will use any means at your disposal to achieve your goal. There need be no trade-off between current markets and adjacent markets, or between organic methods (such as marketing and innovation) and inorganic methods (such as mergers and acquisitions). You can and should blend all of these, ideally in a dynamic and fast-paced way, as long as they are aligned with the proficiency and advantages you already have.

Thus, before you pursue growth directly, you should have in place the three elements of a clearly defined, coherent strategy: (1) a value proposition that resonates with customers, supported by (2) a system of distinctive capabilities, combined in a way that competitors can’t match, with (3) a portfolio of products and services that are all aligned to the first two elements. You must also be able to deliver on that value proposition, translating concept into competitive position with a viable, sustainable business model that generates profits and cash flow.

You can grow profitably and sustainably only from a position of strength. If your enterprise is struggling to maintain its economic lifelines, then foundational work on strategy, organization, cost optimization, or other factors is needed before any new growth strategy can succeed. Companies that enter new businesses to escape a weak position generally become weaker still, because they move into markets where they lack the capabilities needed to succeed.

Companies that enter new businesses to escape from a weak position generally become weaker still.

Typewriter maker Smith Corona, for example, understood the needs of students and self-employed typists better than anyone else; this helped the company develop a successful line of word-processing computers in the 1980s. But the company couldn’t sustain that business, because its efforts to expand into office supply distribution, kitchen appliances, daisy-wheel printers, and paints had left it without the resources to compete against other types of personal computers. Blockbuster Video sought to protect itself from disruption in the early 2000s by buying Circuit City — an effort to create synergy from two weakened businesses without a clear logic for creating value together.

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Here is a direct link to the complete article.

Gerald Adolph is a senior leader in Strategy&, PwC’s strategy consulting group. Based in New York, he specializes in growth strategy. He was formerly the senior partner leading the mergers and acquisitions practice at Booz & Company.

Kim David Greenwood is a director with Strategy& and co-leads its growth strategy team. Based in San Francisco, he works extensively with technology, communications, hospitality, consumer product, and industrial companies.