Taking a Portfolio Approach to Growth Investments
JULY 22, 2014by Sebastian Stange, Alexander Roos, Jeffrey Kotzen, and Ulrich Pidun

https://www.bcgperspectives.com/content/articles/growth_corporate_strategy_portfolio_managment_taking_portfolio_approach_growth_investment/?utm_source=2014Aug&utm_medium=Email&utm_campaign=Ealert

This will resonate with those readers who took our Driving Organic Growth and Innovation class at Kellogg. Capitol allocation is truly "walking your talk" o growth and is often driven by archaic processes (remember the Danaka case study)

One of the most powerful tools available to CEOs and CFOs to drive growth is their company’s approach to capital allocation across its portfolio of businesses. Unlike more operational levers for growth, decisions about capital allocation are fundamentally strategic: they determine the long-term asset base on which future value creation depends. Done correctly, capital allocation can be a highly effective means of delivering on the corporate growth ambition. 

And yet, despite its importance, the way many companies allocate capital is remarkably haphazard. In our work with clients, we often encounter a variety of ineffective practices: “Democratic” capital allocation. The organization spreads investments more or less equally across business units, irrespective of their previous performance or future growth prospects.        “The biggest children get the most food.” The organization allocates capital on the basis of the business unit’s size, with the biggest units in the portfolio getting the most cash, even though such businesses often have the least growth potential. “We’ve always done it this way.” The organization sets a given year’s investment budget on the basis of what was done the previous year, looking backward to past internal practice rather than forward to future business potential. 

There is a better way. Research by The Boston Consulting Group and client experience suggest that capital allocation at the top value creators is characterized by two distinctive practices. First, these companies take a highly differentiated approach to allocating capital among business units in the corporate portfolio. Second, they translate strategy into action by linking strategic priorities to capital allocation, financial plans, and specific growth initiatives and by actively managing the corporate investment portfolio from the top. This approach has four steps: 

Prioritizing Growth Among Business UnitsNearly all businesses grow to some extent, but not every business unit can be a corporate growth engine. The first step, therefore, is to understand the different roles of different units in the company’s overall growth portfolio and strategy 

Translating Roles into ActionsIt’s one thing to define the different strategic roles of the different business units in the corporate portfolio. It is quite another to translate those roles into actions through the establishment of KPIs, performance targets, capital budgets, and, ultimately, detailed business and financial plans. 

 
Differentiating Among Types of Growth InvestmentsWhen it comes to translating such high-level rules into the details of financial plans and budgets, different types of growth investments also need to be evaluated differently. Too often, companies evaluate every potential growth initiative in terms of NPV. But that approach can lead to an overemphasis on clearly defined, incremental short-term investments—at the cost of neglecting more long-term but strategically important investments whose NPV is uncertain or difficult to calculate. 

Actively Managing the Investment PortfolioFinally, once capital allocation decisions are made, the corporate center must actively manage the investment portfolio over time to make sure that initiatives stay on track and to maximize flexibility. 

The Go-to-Market Revolution
Igniting Growth with Marketing, Sales, and Pricing

MAY 02, 2014by Rich Hutchinson

https://www.bcgperspectives.com/content/articles/go_to_market_strategy_growth_go_to_market_revolution_igniting_growth_marketing_sales_pricing/

Great way of understanding how you should consider redesigning your fundamental capabilities.

Whether you ask a company’s CEO or its investors, they’ll likely identify revenue growth as the single biggest driver of corporate profit and shareholder value. 

Over the long term, revenue growth powers 75 percent of total shareholder return (TSR) for the upper-quartile value creators of the S&P 500. Even in the short term, growth accounts for nearly a third of TSR for these out-performers—double the boost from improving margins or cash flow. A growing business also empowers employees, attracts top talent, and helps fund expansion, transformation, and more growth. 

Growth is an imperative. But it needs to be profitable growth—and that is not a given… 

… In the recent era of uncertainty and financial constraint, many companies have focused on efficiency. They have energetically cut costs, even in the “go-to-market” commercial functions crucial to driving revenue—sales, marketing, pricing, branding, and customer insight. These companies have achieved productivity gains, but they've reached the point of diminishing returns. We’re learning again that we can’t cut our way to growth…. 

…A small set of successful companies are taking a different path. They are transforming their commercial functions and capabilities to create an engine of short-term revenue growth and long-term profit. They are doing so with little risk. These near-term victories are “self-funding” the creation of strategic capabilities. 

These leading companies are taking advantage of what The Boston Consulting Group calls the “Go-to-Market Revolution…
…The rich opportunities—and the perils of failing to act—emerge in the details of the three historic and concurrent tides of change driving the Go-to-Market Revolution:
Customer PathwaysThe first tide is the rapid recent evolution of what BCG calls customer pathways. The ways consumers learn about and buy products have shifted dramatically and quickly, triggered by changes in technology, communications, and media.
Advanced Data and AnalyticsThe second driver of change could be called the go-to-market arsenal. It is the rapid and transformative evolution of “smart” data, advanced analytics and modeling, and other tools capable of increasingly sophisticated approaches in segmenting and analyzing information and reaching customers.
Global and Emerging Markets
The final driver of the Go-to-Market Revolution is globalization, which creates two fundamental commercial challenges: 

....First, globalization has changed the competitive landscape in every market…

.. ....Second, globalization in emerging economies has been accompanied by rapidly expanding wealth. Consequently, emerging markets represent a huge source of growth.

How to Find your Unique Innovation Mindset
Posted on August 12, 2014 by Mark E Miller
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http://www.innovationexcellence.com/blog/2014/08/12/how-to-find-your-unique-innovation-mindset/

Very interesting insight. Start with yourself

What makes certain people and certain companies truly innovative? Is it a process? Is it natural ability? Learned behavior and practice, practice, practice? 

It’s most likely all of the above. And undoubtedly, as companies like Ideo with design thinking or Google with their Google X Innovation Lab, there is a cultural element that drives people and employees to utilize all of those qualities in an environment that is unequivocally accepting an open to this kind of production. 

What’s challenging about the question of how to be truly innovative is to dig deeper to understand where innovation failure occurs. Brilliant people and incredibly sound companies have failed to either foresee innovation needs (Blackberry or Kodak spring to mind) or be able to innovate effectively enough to compete (too many companies to mention in this category…since we can’t all be Amazon or Apple). 

So what is that innovation X-Factor? Before anything else, is what actually drives ideas in one’s own mind. On a basic level, there’s what happens from a scientific perspective, which actually has been proven to be much more complex than previous research had claimed. This blog from Scientific American, by Scott Barry Kaufman, of the Positive Psychology Center at the University of Pennsylvania highlights a range of new thinking on the brain and creativity. 

The biggest takeaway? There’s no such thing as the right-brain being the “creative” or “innovative” part of the brain. Creativity is driven by the dynamic interaction of a person’s brain; developing innovative ideas is a complex process that involves different neural networks and thinking patterns. 

In practice this makes sense and it is also empowering. No longer are the innovators simply those who work in a creative field. Nor do you have to be a big-picture, visionary thinker to be innovative. 

We see this in our work all the time. One of our clients is a large electronics manufacturing company. They move at speeds that most businesses can hardly comprehend. My client Chris said that essentially, every 9 months technology would need to be improved and revamped simply in order to keep pace. 

Imagine reinventing what you thought possible from an output level more than once a year…it is intimidating and exciting all at the same time. No matter what your thoughts are on this, whether you’d be energized or drained by this thought, what is needed without a doubt is a continual mindset of innovation. 

Because the need for innovation in this case is so pervasive, its helpful to take it down to an individual level. Each and every employee needs to contribute to the innovation pipeline in their own way. What they’ve done is to underscore how this is possible on an incremental level…and it has major ramifications for anyone who wants to be an innovator. 

Its about finding a person’s unique innovation mindset. Here’s what I mean…the way you intake information, process that information and produce an idea is distinctive and special to you. That may be very different from the supposed “innovators” in your organization…but you’ve got a contribution to make to innovation.
Think about your own way of thinking and behavior.
Analytical: Are you driven by logic, data and information? Your innovation mindset is probably built from researching what’s been done and finding how to improve it.
Structural: Are you driven by process and details? Your innovation mindset could be driven from trying things and seeing what works. Recording successes and learning from failures.
Social: Are you driven by relationships and empathy? Your innovation mindset probably begins with the end-user in mind. This is at the heart of design thinking – how can we make this better for a person?
Conceptual: Are you driven by the big-picture and visioning? Your innovation mindset is likely driven by thinking into the future, connecting dots in new ways and brainstorming ideas. 

Notice anything? Every single innovation mindset has the capacity to product big ideas. Every single innovation mindset will make the process more complete. You know who you are…now you have to own it. 

Owning it is about behavior, so thinking about the way you are being Expressive, Assertive and Flexible in how you’re communicating innovation.
• Not every person will respond to a gregarious presentation…it make take a one-on-one meeting.
• Not every situation calls for pushing things forward…consensus may carry the day.
• Not every idea should be open to change and nor is every path is defined.
The innovation mindset is innate and we all have the capacity to innovate – but you need to find it in yourself.

Navigating Innovation’s Perilous First Mile

More than 50 percent of companies don’t survive to their sixth birthday.

http://www.strategy-business.com/blog/Navigating-Innovations-Perilous-First-Mile?gko=3f4be

Sobering insight into the challenge of innovation.

The Challenge:

According to the statistics Anthony cites, 75 percent of VC-backed start-ups fail to return their investor’s capital; 95 percent fail to hit their financial targets. Of more than 10,000 VC-financed software start-ups since 2003, only 40 are worth more than US$1 billion. More than 50 percent of companies don’t survive to their sixth birthday.
I asked the innovation expert to describe the biggest pothole in this stretch of road. “The single biggest challenge facing innovators in the first mile is maintaining the appropriate balance between thinking and doing,” he replied…. 

….“Either end of the spectrum is dangerous. At one extreme is ‘paralysis by analysis.’ Too many innovators create elegant pieces of Microsoft fiction. The Excel spreadsheet features ‘what if’ analyses and pivot tables that would rival those created by a seasoned investment banker. The PowerPoint document is stunning, with charts and visuals comparable to Al Gore’s award-winning presentation on climate change. And the Word memo summarizing it all features prose that is so lucid that somewhere Malcolm Gladwell is shedding a tear. The plan looks airtight on paper, but in reality, it is incredibly brittle. As Intuit’s Scott Cook once quipped, ‘For every one of our failures, we had spreadsheets that looked awesome.’

The Balance:

Success in the first mile comes from striking a balance between the two extremes of thinking and doing,” Anthony concludes. “Innovators should be structured and thoughtful, but with a clear bias to action. The overarching goal is to find the magic ingredients behind every great idea: a compelling solution that targets a deep need in a way that creates value. The first mile can be both promising and perilous. The right approach makes all the difference.”