WITH the winds of prosperity returning, Singapore's CEOs can aim again for growth. But lifting their new initiatives off the ground requires mastering new techniques.

Indeed, two-thirds of senior executives worldwide believe growth is much harder to achieve today than it was five years ago, according to a Bain survey. These same executives are feeling more pressure than ever.

Where will executives turn for strong new sources of growth? In the past, companies typically sought growth from either expanding their core businesses or improving their weaker businesses or from diversifying and pursuing hot markets. Today, though, our analysis indicates that most new growth will come from pushing the boundaries of a strong core business into 'adjacent' territory.

When we examined the growth records of several hundred companies, six basic types of 'adjacency moves' emerged. There are product adjacencies (for instance, Keppel's move from ship repair to building of offshore rigs and specialised ships); geographic adjacencies (the string of overseas acquisitions by SingTel and DBS in recent years); and value-chain moves (Great Eastern's move from life assurance to asset management). In addition, there are customer adjacencies (ST Aero's move from servicing military aircraft to maintaining and overhauling commercial airlines' jets); channel adjacencies (Eu Yan Sang's branching out from selling its Chinese medicines and herbs from its own stores to selling selected products through drugstores, supermarkets and convenience stores); and new businesses based on core competencies (SembCorp Industries' move into becoming one of Asia's largest third-party logistics suppliers).

Each of these moves is inherently strategic, and therefore the domain of the CEO. Each entails a high degree of risk by moving a company into unfamiliar territory on at least one dimension, and often on several dimensions at once. Each usually requires significant investment of time and money that could otherwise be reinvested in the core.

Yet only one in four of these kinds of initiatives succeed at generating profitable growth, our analysis shows. Adjacency moves gone awry account for most of the 25 major non-dotcom business disasters of the past 10 years—including the Enron implosion and the collapse of Kmart. The shareholder value lost by these 25 failures totalled US$1.3 trillion.

In Singapore, MPH, a household name in publishing, wandered far from its core into confectionery, property, spas and even curtain making, to name a few. It lost hundreds of millions of dollars. Under new ownership as Blu Inc, MPH has recently returned to its original publishing and media core, divesting its peripheral businesses, turning profitable again while reaping handsome returns for shareholders.

Still, some companies consistently defy the odds and manage to outgrow their competitors by a factor of two or more through successful adjacency moves. What allows one company to succeed where most fail? Why do smart management teams armed with quality research falter so often? The answers vary by industry and circumstance. But a few key themes shine through.

Seek out detailed customer insight

Nearly 80 per cent of the successful adjacency formulas we studied were built around insights about customer behaviours. It's a logical connection for companies to make: The more attuned a company is to the preferences of its customers, the more readily it can spot untapped opportunities.

Such customer knowledge propelled the growth of Singapore Technologies Aerospace from its humble beginnings maintaining the new Republic's fledgling air force to become the world's largest independent aircraft maintenance, repair and overhaul company.

ST Aero understood that the skills that it had acquired in the military arena were transferable to the commercial world. Both military and commercial customers were essentially looking for the same things: a full range of services covering the life cycle of their aircraft (from routine maintenance through to structural modification and avionics upgrading), as well as high reliability and short turnaround times.

ST Aero knew that commercial airlines and airfreight haulers wanted to keep the most planes in the air at any one time, each filled with paying passengers or freight. ST Aero is continually working with customers to develop new capabilities on different aircraft and sets new records for short cycles on complex overhauls and repairs. By keeping close to its customers, ST Aero has become a key earnings contributor to parent ST Engineering, accounting for 40-45 per cent of the group's sales.

Develop a repeatable formula

The company that comes up with a formula to find and execute adjacency moves can outgrow its competitors. Repeatability enables a company to build an organisation around its growth programme. A repeatable formula creates the confidence to invest quickly, provides a method by which to find the next opportunity and makes it possible to handle more adjacencies faster and execute them better.

Adjacency consistency was central to the success of 70 per cent of the best performing growth companies. Keppel Offshore & Marine started out as a Singapore shipyard focused on the repair of small and mid-sized vessels. Today, Keppel has become a global leader in ship repair, the construction of offshore oil-exploration structures, specialising in shipbuilding and ship conversions.

Keppel accomplished this through moves that it repeated again and again across its product portfolio. In its offshore business, Keppel moved into offshore drilling rigs beginning in the early 1970s and later into offshore production platforms. Carefully gauging each step outward from its core, Keppel moved from fabrication, to providing supporting services (such as heavy lifting and outfitting), to engineering and development, to undertaking repair work.

Only after it had exhausted these growth avenues in Singapore did Keppel start to venture overseas in 1990.

Repeatability also allowed Keppel and ST Aero to move out across the globe in concentric rings. Each expanded into geographic adjacencies by systematically entering new markets and building strong leadership positions. Again, success hinged upon building from a solid domestic core business, and targeting the same kinds of customers, with the same products, through similar channels while changing a single variable—the geographic market.

The formula enabled Keppel to follow its oil-exploration customers into the Gulf of Mexico, the North Sea, the Caspian Sea and Brazil, while ST Aero has sought new customers in the US and UK.

The same approach has served as a model for successful organisations like Citigroup, SingTel and DBS, as well as rising stars like Osim and Eu Yan Sang.

Keep adjacency moves closely related to a strong core business

Though it sounds obvious, many companies stumble by either misdefining their core businesses or misjudging how an adjacency relates to the core.

Relatedness is not a matter of intuition or guesswork. Executives can measure the 'number of steps from the core' by looking at the key areas where an adjacency overlaps with the core, such as target customers, the channel, the infrastructure, a key brand or shared technology.

In its 90 years, Great Eastern has weathered wars, depressions and political turbulence, thanks to a very stable core.

Today, it remains the largest asset-based life insurance company in Singapore and Malaysia, with more than 2 million policyholders. While keeping its eye on its base, it evolved to serve related customers: in 1992, it began offering bank assurance. Seven years later, it added asset-management services to become the financial services company Great Eastern Holdings. And, with its recent merger with Overseas Assurance Corporation, Great Eastern now provides general insurance.

Today, its 'life planners' offer a range of financial services products to customers.

And, as a sustained value creator, Great Eastern posted a 33.5 per cent increase in profit for 2003. Many successful adjacency moves involve extensive advance work to confirm the linkage between the adjacency and the core business.

The CEO's challenge is to reconcile the tension between the independence of a new growth initiative and its life-giving linkage to the core. The best adjacencies strengthen and extend the core. For example, Dell Computer studied the Asian market, looked at its direct-to-the-customer model, and decided it 'will work anywhere in the world', said CEO Michael Dell at the time.

Though criticised as a misguided attempt to 'colonise the world' by sceptics, the strategy worked; it delivered 58 per cent compound annual revenue growth (from minuscule to nearly US$3 billion) between 1994 and 2001 in the Asia Pacific region.

ST Aero, Great Eastern and Keppel all demonstrate two key principles of growing outside the core. First, adjacency expansion succeeds only when built around strong core businesses that have potential for leadership economics. Second, the best place to look for adjacency opportunities is inside a company's strongest customers.

Repeatability offers just one formula for profitably outstripping your sector's growth. Others include investing in faster product innovation or cornering market power, to name a couple. But focused companies with a strong core that hit upon a formula for expanding their strengths to new arenas have it made for the long term. Such repeatability becomes a source of growth and value, year after year. And the formula for repeatability already lodges in your experience—you just need to look for it.

Mike Booker is a vice-president in Bain & Co's Singapore office. Chris Zook, leader of Bain's global strategy practice, is the author of 'Beyond the Core', recently published by the Harvard Business School Press.