Building a Growth Factory. David S. Duncan

Building a Growth Factory - David S. Duncan


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      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 [email protected], 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:

      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 growth factory assessment shown in table 1 to identify the areas that need the most attention.

      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.


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