This model, in the broadest terms, is a strategy tool that aids businesses in terms of recognizing their strategic growth prospects. It was created by partners at McKinsey & Company and described in the 2000 book called “The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise.”
Main Benefits of Mckinsey’s Seven Degrees of Freedom for Growth
Mckinsey’s Seven Degrees of Freedom for Growth helps you:
- Identify the possibilities that will help the businesses to expand most
- Recognize the strategic growth prospects
Creating value-added products in addition to expanding geographic and product reach
Explanation of Mckinsey’s Seven Degrees of Freedom for Growth
The Seven Degrees of Freedom for Growth was developed in response to managers who suppress creative ideas for growth while seeking to grow their companies. Each degree enables managers to broaden their perspectives and challenge preconceived notions. Here are the seven degrees:
- Selling existing products to existing customers.
The first stage is to put more emphasis on selling more of the everyday items to existing clients. An easy technique to support business growth is to evaluate the marketing plan to persuade current consumers to make more extensive and frequent purchases. Looking at price is another way to determine whether changing the pricing strategy would benefit consumers more and spur growth.
- Acquiring new customers in existing markets
It highlights the ways of attracting new clients to boost growth in the current product lines. Using market segmentation to split the market into specialty groups is one approach. A company may create new marketing strategies in this way that will particularly appeal to clients in particular market categories.
- Creating New Products and Services
This third area focuses on creating new goods and services to boost business expansion and refining present interests to increase their attractiveness to potential and current clients.
- Developing New Value-Delivery Approaches
Handling goods when they are delivered to clients is relevant to this degree. To foster development, a business would seek to enhance the processes it uses to develop, market, and provide its goods. This involves assessing whether outsourcing may shorten manufacturing and, consequently, delivery times or whether new distribution channels could reach new consumer markets.
- Moving Into New Geographies
In addition to looking for new chances in uncharted territory, this degree examines expanding distribution in the present regional markets.
- Creating a New Industry Structure
The utilization of partnerships and acquisitions to expand the firm is encouraged by this degree. Gaining new business partnerships and completing acquisitions can improve economies of scale, giving companies more negotiating leverage with suppliers. While this can be a powerful strategy for accelerating business growth, there are dangers involved due to the unpredictability of mergers and acquisitions.
- Opening Up New Competitive Arenas
The final level of growth to consider is the study of new options through diversification. It can discover resources and talents inside the firm to diversify and enter other markets and sectors using techniques like VRIO Analysis and Core Competence Analysis.
How to Apply Mckinsey’s Seven Degrees of Freedom for Growth?
Maintain a balance between your current business and growth strategies. Use McKinsey’s Three Horizons of the Growth model. Use BCG Matrix, Growth-Share Matrix, or GE – McKinsey Matrix to assess your portfolio and optimize your investments.
Understand the industry structure in which your company operates via Porter’s Five Forces – An Ultimate Guide. To analyze the risk correlated with each strategy and to build an expansion strategy that will grow your company faster, use The Ansoff Matrix.
Prepare a roadmap to be successful in intense competition. D’aveni’s 7s Framework helps you to compete in the market in an unexpected manner. Use Bowman’s Strategy Clock to choose a strategic approach to succeed in a market and analyze your position in the market. Use PESTEL Analysis to evaluate the opportunities for your business and develop strategies against possible threats.
Additional Tips and Readings
- GE – McKinsey Matrix is a comprehensive portfolio assessment to optimize your investments and returns.
- VRIO Framework determines where your competitive advantage lies and how to exploit it.
- Keller’s Brand Equity Pyramid to assess your brand equity and strengthen it.
Contact us to explore new paths to grow your business via Mckinsey’s Seven Degrees of Freedom for Growth.
