and reward systems
The June 2011 issue of Harvard Business Review detailed P&G’s effort to systematize the pursuit of growth (“How P&G Tripled Its Innovation Success Rate”). The story begins in the year 2000, when P&G found its revenue shrinking despite a robust economy and substantial investment in research and development and consumer insight. An internal analysis showed that only 15 percent of P&G’s growth efforts were succeeding, and the ones that did were small. The analysis suggested that P&G’s growth pipeline was inadequate for its long-term aspirations. The interventions described in the article were transformational. By 2011, 50 percent of P&G’s growth efforts succeeded. Initiatives had doubled in size. That’s a sixfold boost in productivity. Most importantly, the article reported that P&G’s growth pipeline was sufficient to meet internal innovation targets. Proprietary analysis by innovation thought leaders Jeffrey Dyer and Hal Gregersen showed that in 2012 investors rated P&G as the world’s twenty-fourth most innovative company, based on the substantial “Innovation Premium” baked into its stock price.1
Consider the very different sorts of challenges facing Citigroup, one of the world’s biggest financial institutions. In December 2007, Vikram Pandit took over as CEO after Citi reported surprisingly disappointing third-quarter earnings (Pandit stepped down as CEO in October 2012). Of course, disappointing earnings were an early sign of the financial crisis that hit the global economy with full force in 2008. One of Pandit’s first actions was to commission an in-depth look at Citi’s current situation, strengths, and gaps. One finding was that innovation was no longer viewed as a core competency. While Citi had been responsible for many “firsts” during its history, including creating the first global foreign exchange network and connecting the world by financing initiatives such as the transatlantic cable and the Panama Canal, the assessment found that the innovation pipeline had dried up and that the culture had shifted away from manifesting innovation as a core value. Don Callahan, Citi’s chief administrative officer, told Pandit, “It’s worse than we thought. We’ve lost innovation.” Pandit’s response was direct: “Get it back.” Pandit believed that for Citi to not only survive but thrive, it had to urgently reestablish innovation—and the growth that innovation creates—as a central focus.
Citi is earlier in its journey to systematize the pursuit of innovation-driven growth than P&G, but despite the 2007–2008 financial crisis, the company had enough core strength to reboot, refocus, and reenergize its pursuit of growth, and since then has made substantial progress toward revving up its own growth engine. Notably, the appointment of a chief innovation officer and the creation of a new team, Citi Ventures, which operates in close partnership with some of Citi’s most innovative business units and leaders, have had real business impact and created an innovation system that Citi has begun to scale across the enterprise.
While P&G and Citi are both giant companies that we have worked with closely (Anthony was the coauthor of the P&G article mentioned earlier), many of the lessons apply to smaller companies as well. Building a Growth Factory also includes a handful of illustrative examples extracted from our firsthand experience at Innosight, an eighty-person professional services firm where we both serve as members of the global leadership team.
Whether you are the CEO of a multinational, multibillion-dollar company or the head of a three-person enterprise, we hope detailing the components of a functioning growth factory will help you to achieve the results you seek.
1. “The World’s Most Innovative Companies,” Forbes.com, http://www.forbes.com/special-features/innovative-companies-list.html, accessed September 17, 2012.
Component 1: The Growth Blueprint
| Growthblueprint |
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IN LEWIS CARROLL’S classic Alice in Wonderland, a lost Alice seeks guidance from the Cheshire Cat.
“Would you tell me, please, which way I ought to go from here?” she asks.
“That depends a good deal on where you want to get to,” the Cat responds.
“I don’t much care where—” Alice says.
“Then it doesn’t matter which way you go,” the Cat concludes.
As the old saying goes, if you don’t know where you are going, any road will take you there.
A clear growth blueprint is an important first step in the transformation from treating growth as a gamble to approaching it in a more disciplined way. An ideal growth blueprint has two primary elements:
1 Growth types that clearly define the types of growth strategies the company will pursue
2 Growth goals and guidelines with specific, shared targets and clear definitions of tactics that are on and off the table
Table 2, which is extracted from the full growth factory assessment, shows how to get a quick view of your performance in this component.
TABLE 2
| Element | Requires attention | On the way | Desired state |
|---|---|---|---|
| Growth types | No definition of growth types | Defined growth types, at least one of which is noncore; nonspecific classification criterion | Defined growth types with simple, agreed-upon classification criteria |
| Growth goals and guidelines | No clear vision | Directional vision lacking key specifics | Codified and shared growth targets with detailed on- and off-the-table strategic options |
1a. Growth Types
Clear Definitions of the Types of Growth Strategies the Company Will Pursue
Before a company constructs a factory to manufacture a product, it must decide what specifically it wants to produce. The same holds for a growth factory: before constructing
