Thursday, December 13, 2007

Growing Big, Staying Fresh

Published: NYT, December 8, 2007

I would like to welcome the new alumni of our Driving Organic Growth Executive education program Kellogg’s Miami campus and the Indian school of Business (what an incredible place) in Hyderabad)
This is a great blurb on an issue facing most large companies. It is a profound challenge.
From India…….

The law of large numbers is frustrating for big companies.

A $100 million company whose sales climb by $50 million has increased revenue by 50 percent. A $10 billion company, with the same $50 million gain, has bumped up sales only one half of one percent.

As a result, argues Andrew S. Grove, the former chief executive of Intel, huge companies end up paying for their success.
“The reward is that they get big,” he writes in Portfolio magazine. “The punishment is that when they get big, it gets harder and harder for them to grow. And then their investors pile on the abuse.”
Mr. Grove, now a lecturer at Stanford’s business school and a senior adviser at Intel, suggests an antidote: large, successful firms can engage in what he calls “cross-boundary disruption.”

“Under certain conditions a firm can create a new growth spurt for itself by entering an entirely different industry,” he writes. “The target industry must be stagnant (I am not sure I agree with this) and populated with companies that cling to doing business the way they always have.”(This is inherent in Clayton Christensen’s work)

MANAGEMENT MODELS Is there a formal model that companies can follow to grow internally? Robert C. Wolcott and Michael J. Lippitz, both associated with Northwestern University’s business school, list in an article in the M.I.T. Sloan Management Review the following four models (These our guys at Kellogg and is a great article)

¶Opportunist. The company provides no formal process to follow. Various departments and individuals work on their own ideas and then seek corporate financing. This is what happens at Zimmer Holdings, a medical device company with more than $3 billion in sales.
Enabler. The company provides clear criteria for the sorts of things it would like developed, application guidelines for financing and support from senior management, then leaves it to employees to come up with new ideas. This, the authors say, is the model Google employs.
Producer. “A few companies such as I.B.M., Motorola and Cargill pursue corporate entrepreneurship by establishing and supporting formal organizations with significant dedicated funds or active influence over business unit funding.”
Advocate.(This was the model we used at DuPont where we developed and deployed the Market Driven Growth process) A company “strongly evangelizes” for corporate entrepreneurship but, as is the case at DuPont, leaves it up to the individual business units to provide financing and manage the process.

CHANGED FOR GOOD Radical transformation efforts inside big companies fail for any number of reasons, among them insufficient resources devoted to the task, a loss of interest by the chief executive or naysayer who are allowed to stay in place.

Two McKinsey consultants argue that focusing on two areas can improve the chances that a company will change for the better. The chief executive should set “an appropriate and inspiring aspiration” and then help mobilize “the flow of energy and ideas needed to drive the organization forward,” .(this is a critical leadership role) argue Josep Isern and Caroline Pung, writing in The McKinsey Quarterly.
Leaders must define the objective at the outset, delineating clear initiatives and painting a vivid picture of what success will look like, they contend.
“A good transformation story bridges the gap between top management and the rest of the organization,” they write. “Typically, using metaphor and analogies to explain what is at stake, it addresses three key aspects: the case for change, the challenges and opportunities ahead and the impact of change on the individuals.”
FINAL TAKE Marketers take note: Some 77 percent of Americans ages 49 to 55, Prevention writes — citing research from the McNeil Consumer Healthcare division of Johnson & Johnson — believe that “50 is the new 40.” PAUL B. BROWN, 53 (I prefer that “60 is the new 40”, Bob Cooper, 62)

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