Building a Growth Factory
Scott D. Anthony
David S. Duncan
Harvard Business Review Press
Boston, Massachusetts
Copyright 2012 Harvard Business School Publishing
All rights reserved
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ISBN 978-1-4221-9355-6
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CONTENTS
INTRODUCTION: STARING DOWN THE GROWTH CHALLENGE
Solving the Challenge: The Growth Factory
P&G and Citi
COMPONENT 1: THE GROWTH BLUEPRINT
1a. Growth Types
1b. Growth Goals and Guidelines
COMPONENT 2: PRODUCTION SYSTEMS
2a. Robust Innovation Processes
2b. Idea Supply Chain
2c. New-Growth Groups
2d. Little Bets Labs
2e. M&A and Partnership Engines
COMPONENT 3: GOVERNANCE AND CONTROLS
3a. Idea Governance Systems
3b. Portfolio Tracking Systems
3c. Resource Allocation Systems
3d. Continuous Improvement Systems
COMPONENT 4: LEADERSHIP, TALENT, AND CULTURE
4a. Lean-Forward Leaders
4b. Innovation Talent
4c. Measurement and Reward Systems
4d. Development Programs
CONCLUSION: PARTING THOUGHTS
Three Ways to Get Started
Final Advice for Leaders
About the Companies
Summary References
About the Authors
Introduction: Staring Down the Growth Challenge
IN 2012, two of the world’s largest multinationals celebrated momentous anniversaries: Procter & Gamble turned 175 years old, while Citigroup reached 200 years. While both companies have naturally had good days and bad days, surviving over such long periods is impressive and unusual. In fact, Citi is the oldest of America’s thirty largest companies and P&G is the fourth oldest.
Most leaders, of course, want to do more than survive over the long term. They want to perform. And to perform they need to grow. The bigger a company gets, the stiffer its growth challenge. P&G, whose annual revenues are about $80 billion, seeks an organic growth rate of about 5 percent a year. At first blush, that may seem mundane. But framed a different way, that’s like creating a brand the size of Tide (which is sixty-five years old), or a company the size of Hasbro (which is almost ninety years old) every single year. Hitting that target matters; growth creates the opportunities that attract and motivate top talent, ensures that P&G fends off competition, is a primary driver of long-term performance, and provides cash for investment in future growth.
When growth stalls, it can set off a devastating chain reaction. Company assets go underutilized, jobs are eliminated, competitors diffuse talent, and capital markets react. Management is forced to fight day-to-day fires rather than focus on innovation and growth, and the downward spiral intensifies.
The leadership challenge for many companies is finding a way to keep their growth engines humming to avoid this downward spiral. Common responses include declaring innovation a strategic imperative, launching a handful of high-profile new-growth ventures, and starting focused internal efforts to develop a stronger “culture of innovation.” But these piecemeal efforts often disappoint.
Every stalled company was, at one point, a great growth company. How can company leaders keep the momentum going?
Solving the Challenge: The Growth Factory
In this ebook, we’d like to propose an alternative approach. Work by leading-edge practitioners and decades of research have created a robust set of tools and approaches that allow companies to achieve their growth goals by making innovation repeatable and reliable. To do this, they need to go beyond isolated programs to develop a system of enablers working together in an integrated way. We call this system a “Growth Factory.”
Figure 1 displays the four key components of this system:
1 A growth blueprint that details growth types, goals, and guidelines
2 Production systems that transform the raw materials of innovation—ideas—into booming growth businesses
3 Governance and controls that help the factory to function at scale
4 Leadership, talent, and culture that feature the right people, in the right roles, doing and saying the right things
Fully functioning growth factories don’t spring up overnight, particularly in large, complex organizations. Building the factory’s foundation requires serious commitment from the company’s top leadership and dedicated resources. It also requires substantial patience. Efforts are likely to have false starts and unpredictable twists and turns. Companies shouldn’t seek to build a growth factory overnight. As the conclusion suggests in more detail, companies can start simply by working on a handful of demonstration projects, defining key innovation terms, and using the
