Building a Growth Factory
By Scott D. Anthony and David S. Duncan
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About this ebook
Even the best-performing companies eventually stall. Sustaining momentumand remaining a great growth companytakes a system.
Scott Anthony and David Duncan call this system a Growth Factory.” They’ve seen it work in a small set of elite companies that have created environments where innovation is both repeatable and reliable, not relegated to an off-site or isolated division that has no real connection to the organization’s future.
In this HBR Single, Anthony and Duncan draw on their extensive experience working with these growth factory organizationsmost notably Procter & Gamble and Citigroup. They highlight the four main components that make innovation repeatable and reliable, citing real examples of what P&G, Citi, and even their own firm, Innosight, have gone through to stay firmly on a path toward growth despite huge challenges. They offer practical advice on how you can put their system into action in your own companywhether it’s a large multinational or a small start-up.
HBR Singles provide brief yet potent business ideas for today’s thinking professional. They are available digitally at HBR.org and through the Kindle Store, the iBookstore, and other ebooksellers.
Read more from Scott D. Anthony
The Little Black Book of Innovation, With a New Preface: How It Works, How to Do It Rating: 4 out of 5 stars4/5Silver Lining: Your Guide to Innovating in a Downturn Rating: 4 out of 5 stars4/5
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Building a Growth Factory - Scott D. Anthony
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
No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.
ISBN 978-1-4221-9355-6
Find more digital content or join the discussion on www.hbr.org.
The web addresses referenced and linked in this book were live and correct at the time of publication but may be subject to change.
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:
A growth blueprint that details growth types, goals, and guidelines
Production systems that transform the raw materials of innovation—ideas—into booming growth businesses
Governance and controls that help the factory to function at scale
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 growth factory assessment shown in table 1 to identify the areas that need the most attention.
FIGURE 1
In an effort to make the book as practical as possible, each of the specific elements that follow includes implementation tips, specific questions to help leaders assess their own performance, warning signs that indicate potential trouble, and further reading. The introduction to each of the four components includes the relevant portion of the growth factory assessment to help readers visualize what strong performance looks like.
P&G and Citi
P&G and Citi are the two examples that we’ll draw on most extensively. Despite their long histories, they had (and have) significant challenges to overcome.
TABLE 1: Growth Factory Assessment