What's Your Growth Challenge?

"Be not afraid of growing slowly, be afraid only of standing still."
Chinese proverb

Despite today's challenging economic environment, forward-looking business leaders can't forget about growth. Why?

• There are still pockets of growth in the economy (e.g., pharmaceuticals, clean tech)
• If your balance sheet is strong, this is an ideal time to make strategic moves to enhance future growth prospects
• If your balance sheet is weak, remember that the objective of a turnaround isn't just survival -- it's the resumption of sustainable, profitable growth.
  

However, growth is not homogeneous. As companies mature (see technology adaption life cycle and product life cycle) they face six discrete growth challenges. The chart below provides a brief overview of each growth challenge and a sample of the associated issues and pitfalls. (Note: while the chart frames growth from a product perspective, it applies equally to services.)

Challenge	Description	Common issues	Common pitfalls
1. Creation	Creating a new product and/or business model that provides a compelling value proposition to a target customer / market space Relevant to both start-ups and turnarounds Example: Aquarius Consulting Group	Capturing unarticulated customer requirements Acquiring initial customers Maintaining market (vs. technology) focus	Overemphasis on product (e.g., technology) at the expense of customer needs Failure to envision / develop a sustainable business model
2. Breaking out	Transitioning from early adapters (visionaries and tech enthusiasts) to fast followers (pragmatists) Particularly relevant for discontinuous innovation (i.e., Crossing the Chasm) Example: Tealeaf Technology Customer Experience Management Solutions	Adjusting to changes in customer purchase criteria Completing the “whole product” Maintaining market focus, not sales focus	Failure to target a specific (and strategic) market niche (i.e., pursue any sale at any cost) Refusal to adjust sales model (e.g., direct consultative sales)
3. Scaling	“Stepping on the accelerator” by selling more products (including product extensions and platforms) to existing customer segments within existing geographies Examples: Google AdSense; BMC Service Resource Planning	Formalizing processes Attracting talent Maintaining core elements of culture Upgrading infrastructure	Failure to adjust leadership and management styles Underinvestment in post-sales customer support Channel conflict as market saturation increases
4. Replication	Replicating existing product portfolio and business model in a new geographical area Examples: McDonald’s franchise; new consulting office	Developing extensive documentation on business model / processes Replicating culture in new locations Maintaining product consistency	Replication before readiness Lack of tailoring for local requirements Failure to leverage legacy talent in new locations
5. Stepping out	Establishing a presence in a new market segment (e.g., new product in a related market, derivative product in a new market) Examples: Cisco blade servers; Oracle database 11g Enterprise vs. Standard vs. Express	Tailoring existing go-to-market strategy Positioning product against entrenched competitors Sustaining commitment (e.g., budget, leadership bandwidth) for new market segments	Attempt to step out on 2 or more dimensions at once Reflexively applying legacy business model to new segment Failure to gain support of sales force / channel
6. Cross-selling	Capturing synergies by bundling or cross-selling related products to existing customers Examples: Solution selling; cable television and VoIP	Overcoming resistance of incumbent account owner Navigating customer accounts with multiple points of purchase Providing incentives to sales channel to overcome inertia	Insufficient incentives for channel Failure to frame value proposition from customers’ perspective

Start-ups typically face the growth challenges sequentially. However, mature companies pursuing simultaneous growth initiatives will likely encounter more than one challenge at a time.

For all challenges, growth is not just about hiring more people and pumping more product through the system. More often than not, there are material issues the business must overcome and pitfalls that must be avoided. Despite the current economic environment, it's our job as business leaders to overcome these challenges and position our companies for future growth.

Monday Morning Actions

• Identify in which phase(s) of the growth life cycle your company is operating. What systemic issues are you facing that jeopardize success?
  
• Drill down on key challenges. What current initiatives are addressing these areas? If possible, incorporate growth elements into these initiatives.
  
• If your balance sheet is healthy, launch initiatives to address key challenges that have been neglected.

Organization Lessons from March Madness

"A player that makes a team great is more valuable than a great player."
John Wooden
Legendary UCLA basketball coach

The traditional approach to evaluating a basketball player focuses on key offensive and defensive statistics such as a player's points per game, field goal percentage, assists, rebounds, and blocked shots. These are undoubtedly important metrics, but they only tell part of the story.

Besides the typical statistics, players that make a team great provide many of the following intangibles:

• Leadership: inspiring, motivating, and driving the team to bring out their best
  
• Team orientation: willingness to sacrifice personal statistics and do what it takes (even the unglamorous dirty work) to maximize team performance
  
• Competitive drive: never-say-die attitude to overcome obstacles, perform when the chips are down, and achieve the team's goals
  
• Hustle: aggressive, high-energy pursuit of objectives
  
• Fungibility: flexible skill set and playing style that is adaptable to the competitive dynamics of the game
  

Talent and individual performances are necessary, but not sufficient, for a great team. Highly skilled teams without the intangibles are likely to resemble the 2004 US Men's Olympic basketball team (5-3 record, Bronze medal). Reducing the talent -- but adding the intangibles -- leads to the NBA champion 2007-08 Boston Celtics. Which team do you want your business to emulate?

Are you doing enough to hire, develop, evaluate, reward, and retain the employees that make your company great?

Monday Morning Actions

• Evaluate your project teams' intangible assets; add / subtract team members as required to fill gaps.
  
• Review hiring criteria and ensure candidates' intangible assets are explored during the recruiting process.
  
• Provide positive reinforcement to a subordinate or colleague that demonstrates intangible value; select mentoring candidates based on intangible assets.
  
• Incorporate softer intangibles into formal review processes. Ensure spikes / deficiencies are noted and impact final evaluations.
  
• Create a reward specifically for intangible assets (e.g., traveling "teamwork" award, spot bonuses).
  
• Incorporate intangibles into promotion and job assignment decisions (the more senior the role, the more important this becomes).
  

Critical Catalysts for Effective Organization Change

In these challenging times, executive teams must frequently drive quantum-leap changes in business performance. Unfortunately, these change efforts frequently fall short of their objectives.

To maximize the chance of success, executives must ensure six critical change catalysts are in place:

1. Vision: Where are you trying to go with the organization? A vision provides a rallying cry for the organization and provides necessary context for the strategy.
   
2. Strategy: What is the strategy for getting there? A pragmatic strategy provides focus, a basic business model construct, and critical boundaries for the desired changes.
   
3. Action plan: What specific steps are required? To create value, strategies must be broken down into discrete steps required to accomplish the goal. Ideally, these steps should be aligned with other change initiatives across the organization.
   
4. Skills: What skill set (e.g., functional, analytical, political, IT, collaboration) is required to successfully execute the action plan? For significant change efforts, holistic skills are just as important as more tactical skills.
   
5. Resources: Are the right resources (e.g., personnel, capital, leadership bandwidth) at the right magnitude allocated to the effort? Are they actually being applied? To enable change, an appropriate level of resources must be budgeted and applied to the change effort. While all companies are resource constrained (particularly those involved in a turn-around), starving a change effort for resources is usually a quick path to failure.
   
6. Incentives: Are incentives in place to properly motivate the organization? The full spectrum of incentives should be considered (e.g., monetary, promotion, recognition). For intensive change efforts, significant incentives for key personnel may be warranted.
   

For incremental change efforts, most companies rely upon their existing policies, processes, and organizations to drive change. However, major change efforts (e.g., restructuring, turn-around) typically require substantial deviations from a company's norm.

Without a tailored approach, major change efforts frequently fall short due to a handful of missing catalysts:

• Strategies and operating plans incorporate over-optimistic assumptions.
  
• The team's skill set lacks holistic perspectives leading to (i) missed critical interdependencies in the action plan, (ii) mis-aligned policies, processes, or goals (e.g., sales comp plan vs. margin target, cost reduction vs. retention of key talent), and (iii) wide-spread sub-optimization in project execution.
• Budgeted resources (i) are not applied in a timely matter due to over-commitment or excessively long transition-times, (ii) do not match the required skill sets (e.g., stretched "development opportunity"), or (iii) lack sufficient leadership bandwidth to provide appropriate guidance and "air cover."

While change introduces many unknowns, the six catalysts underpin all successful change efforts. Fortunately, these catalysts are largely within the control of the executive team.

Monday Morning Actions

• Select a key change effort that is currently underway and identify deficiencies in the effort's critical change catalysts.
• Pursue external assistance where critical skills or resources are not available within the organization.
• Incorporate a catalyst assessment into the project approval/funding process.