Thinking ‘out of the box’ will deliver major revenue and profit growth in the New Normal world

We are living in very uncertain times. Major wars are underway in Ukraine and the Middle East. And the concept of ‘Business as Usual’ is returning to the 1970s model – of disruption and military conflicts.

As suggested last week, demand-led strategies based on “doing more with less” are now key to future revenue and profit growth.

Abraham Maslow identified this critical issue in his Hierarchy of Needs, as the chart describes:

  • A relaxed environment encourages us to focus on Self-Development and Service
  • But more troubled times force us to refocus on Security and Safety

This is the challenge that we all face today.

VALUE WILL BE THE KEY MARKET FOR GROWTH

The BabyBoomer-led SuperCycle created a Middle Market for the first time in modern history. The Boomers had money to spend, and they loved the concept of “affordable luxury”.

They liked the idea of buying a “brand” that would confirm their status. And they could afford to buy a Lacoste tee-shirt for $80, rather than a chain-store one for $10.

But those days are in the past, as we have discussed with smartphones. Samsung once held 1/3rds of the global market with its mid-range products.

Today, they have just 20%, whilst the Value segment is now 60% of the market.

This highlights how future Winners will be those who focus on low delivered cost. Service-based offerings will also be key, as Apple has done with its App Store.

CHANGING DEMAND PATTERNS CREATE NEW OPPORTUNITIES

 

Branding is still important. But the key features have changed. Today, consumers want brands that reflect their values, particularly around sustainability.

And the products have to be affordable as the chart shows:

  • Reshoring. Local-for-local supply chains are making a comeback. People want to know where their products were made
  • Advanced manufacturing is key to unlocking this market. It is able to reduce costs and CO2 emissions
  • Circularity is also set for major growth. Recycled plastics reduce costs and waste, and create new jobs locally
  • Renewables are another way of reducing costs. And they provide greater security of supply versus fossil fuels
  • Electric vehicles are also seeing exponential growth. They were 17% of global sales in 2023, double the percentage in 2021

THE PERENNIALS 55+ ARE PROBABLY THE MOST UNDER-SERVED MAKET IN HISTORY

Increasing life expectancy and falling birthrates mean that the Perennials 55+ generation are the main source of population growth.  As the chart shows, their numbers have already risen 5x since 1950.

But only now are companies waking up to the opportunity they create for innovation.

They already own most of what they need. And their incomes decline as the retire. So services are becoming an increasingly important part of the product mix, as they don’t need more manufactured goods.

Second-hand markets are another attractive and fast-growing market. And they aren’t just for Perennials. Used smartphones are already 21% of the market, with volume up 4.5x since 2014.

DEFENCE IS ANOTHER FAST-GROWING MARKET

In recent years, its been fashionable to downplay defence. But today, governments are being forced to ramp up spending in response to increasing threats around the world.

Last week, for example, EU President Ursula von der Leyen said she would create a dedicated defence portfolio if she was given a second term.

As we’ve seen in Ukraine, there is a need for new technology, such as drones. But there is also a major need for new and faster ways of making basic needs, such as ammunition.

Supplies are running out, and need to be urgently replaced.

The issue is simply that market needs are now changing very fast.

Understanding demand patterns, and how they are changing, is now key to delivering future revenue and profit growth.