October 2004

A Deeper Look at Breakthrough Growth

•  Why don't we see more of it?

•  What you can do about it?

As a member of The Innovator's community, you appreciate that the vitality and viability of your enterprise increasingly requires a New Growth Trajectory. Without genuine innovation the flywheel of growth starts slowing down. The enterprise slips down the aging slide of the corporate lifecycle.

New trajectories are not something limited to the corporate or business unit levels. Every link of the value chain is subject to lifecycle and competitive forces. To remain a vital contributor, customer service, research & development, supply chain and brand management must increasingly redefine their value.

Breakthrough Growth

The 3 critical questions to have top-of-mind in achieving and sustaining Breakthrough Growth.

  1. How can this put us on a new growth trajectory?
  2. How can this deliver remarkable, unprecedented results, noticeably different from the old trajectory?
  3. Is this way of thinking and working going to sustain the new growth trajectory?

Keep in mind as you read this article that 'remarkable and unprecedented' in breakthrough implies:

  • There are significant unknowns.
  • It is beyond existing capabilities but not beyond capabilities you can develop or acquire.
  • What is remarkable for your organization may not be remarkable for another.
  • Going after a result, which is remarkable and unprecedented, requires a different leadership mindset.

There are two primary areas in which YOU can realistically promote Breakthrough Growth: (1) in your own organization and (2) with affiliated organizations that you have a direct working relationship. As you read the article, you will see

  • actions that are under your control.
  • actions you can take, that others must sanction.
  • actions that can be mutually developed and undertaken with others.

Some basic facts about growth and innovation (1)

  • Historically, less than 10% of companies have sustained growth that creates above-average shareholder returns, for more than a few years.
  • More than 2/3 of acquisitions fail to generate positive shareholder return to the acquiring company.
  • More than 60% of improvement initiatives fail to deliver expected results, regardless of the methodology, i.e. Six Sigma, re-engineering, total quality.
  • During the past 10 years, only 9% of companies' increased revenues and profits more than 5.5%, and earned their cost of capital.
  • Once a company's growth has stalled, the odds that it can successfully re-accelerate growth is only 1 in 16 .

Dissatisfaction with growth and innovation is three-fold:

  • The incremental level of business impact.
  • Big thinking isn't permeating the behavior of everyone. It is isolated in pockets.
  • Innovation has become overly connected to product development.

Why don't we see more Breakthrough Growth?

Executives don't personally require it of themselves and others

Executives are anything but complacent about growth. Yet, most executives will fail to deliver above average returns or above average performance. An interesting aspect of human nature is that most executives are convinced this statistic applies to someone else.

Executives who personally confront this dilemma are emboldened by it. Those who deny this truth pursue familiar strategies.

Rounded Rectangle: Competitor Innovation + Your Regrets  - or -  Your Innovation + Competitor Regrets

Momentum in the marketplace and inside the company only carries growth so far. Consider these very different approaches to growth:

Company #1: The objective for Company #1 is to grow 10% annually. Each division is tasked to grow 4-5%, about the rate of overall market expansion. The strategy is to close the growth gap through corporate-level investments. Executives are compensated when they meet the internal growth target. In this organization, would big ideas be welcomed or dismissed?

Company #2: Contrast that view of growth with that of Stryker Corporation. Ned Lipes, EVP, shared: "Our Chairman leads the company by driving us to think about how to achieve 20% and grow market share every year. The question is 'how am I going to achieve it.' When the bar is set high, it changes the thought processes of everyone in the company."

Leading breakthrough growth is challenging and personally demanding. It changes

  • What you fund
  • How you compensate
  • Who you promote, hire and exit
  • Where you spend your personal time
  • Where you require key people to spend their time

Innovators send the right signals to their people.

Trapped in traditions of thinking

Human nature traps us in our own traditions of thinking. We are creatures of habit -- attracted to process thinking because it offers us consistency, reliability, uniformity - all aspects of tradition. Tradition is important for those areas where we want continuity from the past.

This creates the dilemma between new growth trajectories and maintaining continuity.

Trap: Traditions of thinking have led to an imbalance between facts and imagination. Sound business judgment requires that you get the facts right about today's reality. However, if you use today's facts to project the future reality, all you should expect is improvement . nothing new. Our traditions of thinking have deified facts and analysis at the expense of imagination.

Innovators stimulate possibility thinking.

Trap: Imbalanced emphasis on financial planning versus business execution. When financial plans are aiming for continuity, little innovative action is required. Plan moderate gains in the financials, then traditional tactics and actions suffice for execution. However, bold endeavors require a different level of thinking to make futuristic ideas practical.

Innovators think through tactics and actions, with their people.

Trap: Breaking established patterns is uncomfortable. The very nature of a pattern of thinking or reacting is that it is second nature, automatic and comfortable. Breaking patterns takes work and determination. Learning to think differently means going through phases of being awkward, making mistakes and feeling frustrated with your own progress. From Bob Danzig, former head of Hearst Publishing: 'My role is helping people operate outside their Corridors of Comfort.'

Bold opportunities evoke risk and conflict

A common reaction to bold growth opportunities is 'This is risky!' In the instant that one thinks 'risk', there is an immediate emotional reaction.

From within the mindset of corporate tradition, risk equates to danger. The emotion is fear. Caution becomes the appropriate response.

In the mindset of the entrepreneur or enterprising executive, risk is an integral part of any big growth opportunity. 'What are the risks?' 'What will we do about them?' These questions become the call for inventive thinking and action.

 

New Trajectory Growth raises conflict

Examples

  • In one typical situation, the management team was initially split; the parent company was initially split; the key customers were split on whether to proceed.
  • In another situation, Six Sigma projects that were controversial never made it through the chartering stage.
  • One company instituted a Stage-Gate approach to new business development. The conflict went away; so did new businesses.

While the business discussion is on the relative merits of an opportunity, the undercurrent of conflict comes from people's differing emotions. Unless you surface the individual, emotional views of the risk, nothing gets resolved. Nothing gets learned. The futility of raising ambitious business opportunities is reinforced.

Tension and conflict are inherent in big ambitions. An inability to manage our own emotional reaction or the emotional reactions of others, forces the business opportunity into the most conservative, cautious course.

Innovators manage their own emotional reaction; they help others do likewise.

Ignoring subtle signals and hidden flaws

For opportunities where there is familiarity, expertise, and experience, executives assume that a plan properly executed will deliver success. This assumption usually proves valid.

Breakthrough endeavors, by their very nature, have gaps and unknowns that you cannot see at the outset. Human nature is to be right about our own point of view, which constitutes the seeds of failure. By managing bold opportunities in a traditional manner, companies (1) fail to have everyone on the lookout for what was missed; (2) fail to give serious consideration to the people who see difficulties (usually those on the front line and far removed from the decision-makers).

Innovators (1) look for what has been missed, and (2) value what others see that they may not see.

The Critical Success Factors of Breakthrough Growth

When companies put themselves on a new growth trajectory:

  1. Leaders redefine winning and infuse it, at all levels.
  2. Leaders make the opportunity compelling.
  3. Leaders push the thinking.
  4. Leaders cultivate commitment.
  5. Leaders extend their reach to more people over time.

1.   Redefine Winning Before You Have the Answers

Jack Welsh widely popularized the redefinition of winning when he declared that every GE business would become #1 or #2 in their industry or exit GE.
Jim Collins in his book, Good to Great, Why Some Companies Make the Leap . and Others Don't, emphasizes that each selected company redefined itself in terms of:

  • What they are passionate about
  • What they can be the best at
  • Their economic engine

Leaders create new futures for their enterprise and for their people. Winning is redefined before you have the answers; even before you have all the questions. The leadership challenge is to convey, with absolute certainty, that success in the future is an irrevocable change from what success has been in the past. Only then can people adjust their thinking.

The human response to redefined winning is to find individual ways to succeed in the newly defined environment. This is fundamental to human nature. Remove barriers and people spontaneously seek out new thinking, behaviors, and courses of action to be individually successful.



Innovators make the comfortable future extinct.

2.  You Make the Opportunity Compelling

People usually think a 'burning platform' is needed to put a company or organization on a new growth trajectory. A burning platform is of course, a mixed blessing.

Business circumstances can be urgent. However, what makes an endeavor compelling is that it captures the human spirit. Blockbusters, game changers or market disruptors rarely come with the label 'compelling' already attached.

There is another approach to making it compelling. Compelling comes from a leader's personal energy to win; your belief, determination, and then instilling that in others. Executives determined to have successful breakthroughs take personal charge of instilling the compelling nature in others. Your personal energy is the catalyst for releasing and harnessing the energy in others. Leaders don't launch a breakthrough from the comfort of the executive suite. Executives determined to have successful breakthroughs make sure that the hands-on project leader has the same degree of 'fire-in-the-belly'.

Innovators make the opportunity compelling.

3. Push the Thinking

Successful breakthroughs push the thinking before pushing the action. The rush to action has you feel that progress is being made. Usually it is progress along the traditional trajectory. Pushing the thinking includes:

  • discovering the limits of current thinking
  • exploring new areas and what it would take
  • exploring what could go wrong and what you would do if it did

Pushing the thinking does not let you off with ready-made answers.

One executive had his management team exploring acquisition targets that were not in-play. This broadened the thinking on what makes a business valuable and sought after. They explored how they would integrate an acquisition before knowing if it would ever be in-play. This endeavor caused them to think about and lead their existing businesses differently, even before their first acquisition.

Breakthrough thinking addresses uncertainty by asking different questions.

  • What specifically is uncertain? What makes it uncertain?
  • How can we use that uncertainty to be successful?
  • What needs to be true for the venture to succeed? What can we do about that?
  • What, if true, will cause us to fail? What could we do to preclude that from happening?
  • What should we be on the lookout for?

Innovators push the thinking throughout planning and execution.

4.  Cultivate People

In achieving any business objective, you should expect people to be competent. If however, attaining the goal requires that people be:

  • Determined . resourceful . unstoppable . inventive
  • Inflexible on the results; flexible on the course to get there
  • Straight-forward in communication at times of difficulty
  • Honest about what you know and what you don't know
  • Go outside the usual organization boundaries

Now, we are talking about commitment and not competence! Commitment isn't an attitude; it is a state of mind and a readiness for action. Commitment describes people when they are at their best. If you want or need people's commitment, you have to go out of your way to encourage it and earn it. New growth trajectories can't succeed without both an entrepreneurial spirit and the commitment of key people in and around the venture. The leadership team is selected as much for its passion as for its competence.

Attributes of commitment can be cultivated. Great leaders do it intentionally. How? Find people who see the potential in the new growth area, both for the company and for themselves, or help them see it . Support their actions. Welcome their insights and dilemmas ... Work with them to resolve challenges and overcome obstacles ... Help them discover other potential obstacles early. Stay committed to them.

Innovators win and win often, not solely by what they accomplish, but through what they enable others to accomplish.

5.   Increasing the People You Reach Over Time

The following statement is obvious: at the outset, most people introduced to a new direction will not leap at the opportunity. Does this mean they are resisting? . No. The advertising and marketing industries plan for this. It is no different with people in a company. Each key stakeholder will begin at his or her starting point somewhere on the Continuum of Acceptance. Integral to new trajectory growth is moving key people along that Continuum.

Another aspect of human nature: People over-estimate those they can reach in the short-term, and under-estimate the reach of their influence in the long-term.

Innovators have a game plan for moving people along the Continuum.

Champions first go after the people they can reach. Who can you reach
early on?

  1. People who have been waiting for this.
  2. People who get on board when they see YOU are visibly behind it.

  3. Once the initiative is in action, you open possibilities not previously
    available. How?

  4. People get on board when they see YOU are persistently behind it.
  5. People are engaged through others in your 1st wave - by seeing who else is behind it.
  6. People become engaged when working on a project.

  7. Momentum opens further possibilities for reaching people. When?

  8. People get on board when they see progress.
  9. Some people won't get on board, but they will stop resisting.

Enrollment

One senior manager was about to make a fatal mistake. He was personally determined to open a new growth area for the business. The company had been successful in a few individual projects, but hadn't decided to take the step to a funded line of business. He was about to begin a conversation with the Marketing EVP by asking what the VP thought of a new growth area . WRONG.

People want to know that you are really behind it. Enrollment begins with a champion beginning each and every conversation with their personal conviction about the venture and its benefit to the company. Only then do you solicit other people's engagement. Why? Human nature is to moderate what you say based upon what has just been said. If you make no opening remarks, you leave it up to chance. If you make your stand clear . your commitment to it. it elevates and energizes the conversation to an entirely different plane.

Innovators reach the people they can and build momentum where they can.

The key is

Speak your idea

Speak it well

Speak it often

Take ground where you can.

The Velcro Point

Breakthrough Growth happens in and through the people of your enterprise. The very principles that give business enterprises consistency and reliability stand in the way of realizing Breakthrough Growth. Breakthrough Growth requires that we:

  • Aim high . seek out and actively assist others to aim high.
  • Use existing processes as tools . not as straightjackets.
  • Push the thinking.
  • Be on the lookout for the hidden flaw, and find ways to use it to accelerate your breakthrough.
  • Move people along the Continuum of Acceptance.

(1) Sources of facts include:
Clayton Christensen, "The Innovations Solution"
James Collins, "Good to Great"
Bain & Company study

Doug Berger is Managing Partner with Innovate (www.Innovate1st.com). Innovate specializes in large-scale systemic innovation and breakthrough initiatives across a variety of industries. Doug can be reached at doug@Innovate1st.com or tel +1.732.564.0945

©2004 Innovate LLC (all rights reserved)

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