by Donald L. Laurie and J. Bruce Harreld
HBR reprint: R1307G
This is an excellent article that I would definitely read. The content mirrors very closely to our Org. Growth Ex. Ed class where we discuss the barriers to growth within medium to large companies. BTW, the class is scheduled for September 15, 2013. Also, those who have taken our class will recognize that one of the authors—Bruce Harreld—played a critical role in turning around IBM in the case we discuss in class.
All too often CEOs and their senior teams see managing today’s earnings as their main job and don’t spend enough time on the pursuit of growth and building the kind of learning organization and culture that growth requires. They fail to identify specific policies and actions that only they can take to create the conditions for success and signal to the organization the seriousness of their commitment to growth. In this article we explore six common mistakes that executives make in this arena and offer guidelines for leading growth initiatives:
1. Failing to Provide the Right Kind of Oversight (they ask the wrong questions and don’t dedicate the time): at a time when a team should be trying to listen to customers in order to define a new market and determine what the most powerful business model might be, they asked questions such as How fast is the market growing? What revenue can we anticipate in 18 months? What does the pro forma P&L look like?
2. Not Putting the Best, Most Experienced Talent in Charge…a company’s best, most experienced general managers should lead these initiatives. A start-up will almost certainly have to tap capabilities residing in the established operations, and these individuals have the internal networks and the understanding of the organization’s culture needed to obtain them.
3. Assembling the Wrong Team and Staffing Up Prematurely: Senior executives charged with assembling a team often grab the personnel who happen to be available….More often than not, these people are not company stars. Furthermore, the team is created before anyone has determined exactly what needs to be done and what skills will be required.
4. Taking the Wrong Approach to Performance Assessment (we call this being ambidextrous) : Big companies often apply the same metrics and milestones to running their early-stage businesses that they use in managing their mature businesses. These are worse than useless to start-ups—they are harmful
5. Not Knowing How to Fund and Govern a Start-Up: An amazing number of big companies force their early-stage growth initiatives to follow the annual budgeting cycle of their established businesses, even though start-ups’ needs are not predictable. It’s also common for operating executives to reallocate funding earmarked for those ventures to finance the needs of their mature operations. Both mistakes kill start-ups.
6. Failing to Leverage the Organization’s Core Capabilities: For the past two or three decades the conventional wisdom has been that new ventures within large, mature organizations must be isolated to prevent the established businesses from stifling them. We believe this is wrong.