Strategic Investment for Future Success
In the context of Evidence-Based Management (EBM), making strategic investments based on current market conditions and customer satisfaction is crucial for sustaining and growing a business. This article explores where a company should invest to build on its current success when it has high market share and high customer satisfaction.
Exam Question
Your company has a single product with very high market share (UV) and very high current customer satisfaction (CV). It was the first product of its kind on the market and competitors have yet to catch-up. As you plan the company’s future, where should you invest to build on your current success?
(choose the best answer)
A. Develop a services business around the current product to increase revenues.
B. Continue to invest in new features for the current product so as not to lose customers to competitors.
C. Use profits to reward investors with a dividend and/or stock buy-back, and let them decide where to invest.
D. Limit current product investments to essential enhancement and defect fixes, and explore new markets.
Correct Answer
D. Limit current product investments to essential enhancement and defect fixes, and explore new markets.
Explanation
Correct Answer
D. Limit current product investments to essential enhancement and defect fixes, and explore new markets:
With very high market share and high customer satisfaction, your current product is already performing exceptionally well. To sustain long-term growth and success, it is strategic to explore new markets. This approach mitigates the risk of market saturation and dependency on a single product, while also leveraging your strong market position and customer satisfaction to enter and potentially dominate new markets.
Why the Other Options Are Less Effective
A. Develop a services business around the current product to increase revenues:
While developing a services business can enhance revenue, it might not be as impactful as exploring new markets. The potential for growth is limited compared to the opportunities that new markets might offer.
B. Continue to invest in new features for the current product so as not to lose customers to competitors:
Although investing in new features is important to maintain competitiveness, focusing solely on the existing product could lead to diminishing returns. Balancing investment between maintaining the current product and exploring new markets is more strategic.
C. Use profits to reward investors with a dividend and/or stock buy-back, and let them decide where to invest:
Rewarding investors is a viable option, but it doesn’t contribute to the company’s long-term growth and market expansion. Investing in new markets and innovations is a better strategy to ensure sustained success and competitiveness.
Benefits of Exploring New Markets
Diversification: Reduces the risk associated with relying on a single product or market.
Growth Opportunities: Tapping into new markets can provide significant growth potential and revenue streams.
Innovation: Encourages the development of new products and services, fostering innovation within the company.
Market Leadership: Leveraging your current strong position to enter new markets can help establish early market leadership.
EBM Framework Insights
Current Value (CV): Maintain current high customer satisfaction by ensuring essential enhancements and defect fixes.
Unrealized Value (UV): Exploring new markets can uncover unrealized value and growth opportunities.
Ability to Innovate (A2I): Investing in new markets promotes innovation and the development of new products.
Time to Market (T2M): Efficiently entering new markets can enhance your competitive advantage and market presence.
Relevance to the PAL-EBM Exam
Understanding how to make strategic investments based on current market conditions and customer satisfaction is crucial for the PAL-EBM exam. This knowledge demonstrates the ability to apply the EBM framework to sustain and grow a business effectively.
Key Takeaways
- Exploring new markets is a strategic investment to build on current success.
- Balancing investment between maintaining the current product and entering new markets mitigates risk and leverages strengths.
- Strategic investments should focus on long-term growth and diversification.
Conclusion
To build on your current success with very high market share and customer satisfaction, it is strategic to limit current product investments to essential enhancements and defect fixes while exploring new markets. This approach ensures sustained growth, diversification, and innovation. For more information on preparing for the PAL-EBM exam, visit our Professional Agile Leadership PAL-EBM™ Exam Prep.
