Smart Growth Ed Hess Professor of Business Administration Batten Executive-in- Residence [email protected]. Leading Edge Executive Forum London September 6, 2012
Feb 24, 2016
Smart Growth
Ed HessProfessor of Business AdministrationBatten [email protected]
Leading Edge Executive Forum
LondonSeptember 6,
2012
GOALSDiscuss the science of business growth
Discuss the historical role of technology in creating growth
Explore the future role of technology in creating growth
Growth or Austerity is a FALSE choice: technology can enable both simulataneously
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10 YEARS OF RESEARCH
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MY THEMES
To be a high performance global business of the future one must
have two world-class competencies:
Human Capital and Technology Capital
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MY THEMESTechnology diminishes the competitive advantage
of size and scale
Technology diminishes the power of the mass production business model
Technology enables the mass collaboration and mass customization business model
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LEADING EDGE TECHNOLOGY BASED ORGANIZATIONS
One can see these themes playing out today in the quant hedge funds like Renaissance Technologies, LLC
One can see these themes playing out today in military special ops and the intelligence community
Technology based “new growth” companies: Amazon, Google, SalesForce.com
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TRADITIONALLY The fields of strategy, finance & economics have dominated
growth thinking:
Sustainable competitive advantage
Unique products or services
Japanese production model or High value - add niche model
Growth is a linear reductionist production model
ROI, ROA, EVA, IRR
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WHAT IS SMART GROWTH?
Research-based : What we really know about growth and how it occurs
What do the following disciplines say about growth ?
Neoclassical, new growth, industrial, ecological, and behavioral economics; strategy, finance, OB, OD, innovation, biology & complexity theory
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7 SMART GROWTH FINDINGS1) Growth is not a linear reductionist process
2) Biology & complexity theory model growth better than economics, finance, and business disciplines
3) Consistent growth is rare
4) Consistent organic growth is learning-based
5) Growth requires the Right Mindsets, System & Processes
6) High employee engagement & customer-centricity drive growth and innovation
7) Growth is behavioral- financial results come from behaviors
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WHY IS CONSISTENT GROWTH SO HARD?Individuals are hard-wired to be anti-growth:
Cognitive Blindness & Cognitive Dissonance
The reasons organizations exist are anti-thetical to growth:
To produce reliable, predictable, standardized results with low variance and low risks
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DNA OF GROWTHMost consistent high growth companies
Do not sell unique products or services
Do not have the best talent
Do not have visionary leaders
Are not the most innovative
Do not have the lowest costs
Do not have complex diversified strategies
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HPOS: 30 YEARS OF RESEARCHThe “best” 8 studies:
1982, Peters &Waterman, The Search for Excellence1994, Collins & Porras, Built to Last1997, DeGeus, The Living Company2000, O’Reilly & Pfeffer, Hidden Value2001, Collins, Good to Great2003, Joyce, et. al., What Really Works2007, Hess, The Road to Organic Growth2009, Simon, Hidden Champions
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9 CONSISTENT FINDINGSThe “Not so secret sauce”:
1) Simple focused strategy- an “elevator pitch” business model
2) Structures that enable entrepreneurial behavior- “Small company soul in a large company body”
3) Higher purpose than shareholder value/profit- Money is not enough
4) Culture of relentless constant improvement- better, faster, cheaper
5) High employee engagement- an implied social contract – an accountable “family”
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6) Customer centricity – Inside the customer-
7) Humble passionate value-based leaders
8) Execution & service champions- excellence everyday every way by everyone enabled by technology- TECHNOLOGY LEADERS in Their industry
9) An Internal aligned self-reinforcing System that enables, motivates, and rewards desired behaviors
9 CONSISTENT FINDINGS (CONT.)
GROWTH IS Growth is a dynamic iterative ziz-zag feedback-
double loop learning process
Growth is a bottom-up & top-down process
Growth results from experimental learning
Growth requires constructive inquiry, critical thinking, diversity of views, a tolerance for failure, permission to speak freely
Growth requires flexibility, adaptability, speed, and organizational agility and ambidexterity
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FORMULA FOR GROWTH
Growth = Mindsets + System + Processes
A Growth Mindset : Individuals & Organizationally
An internal enabling System linking in a consistent seamless self-reinforcing manner strategy, structure, culture, leadership behavior, HR policies & processes, measurements, & rewards to drive growth BEHAVIORS
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GROWTH PROCESSES
Dynamic strategy making
Ideation
Opportunity exploration- what if
Customer co-creation
“Learning Launches”: Business’s scientific method
Growth Portfolio creation & management
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THE COMMON GROWTH PROGRESSION*Geographical expansion
Sell complementary products to existing customers
Expand to new customer segments
Add complementary services
Cost efficiencies
Technological productivity in supply chain, logistics, & manufacturing
Strategic acquisitions (small)
Move to solutions selling
* McKinsey and Hess Research Projects 18
TECHNOLOGY’S HISTORICAL ROLE IN CREATING GROWTH
1) Driving efficiencies & productivity
Manufacturing
Supply chain
JIT Inventory
Logistics & distribution
2) Providing financial & performance data to manage variances
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TECHNOLOGY IS THE COMPETITIVE ADVANTAGE AT
Wal-MartUPSGoogleSyscoPaccarADPWalgreenAmazon
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TECHNOLOGY HASDecreased response timesDecreased the importance of physical proximityIncreased the reach of every businessDecreased the power of physical & financial scaleDestroyed the false choice of size v. niche playerDemocratized business globallyGiven customers more powerChanged the velocity of product lifecyclesMade mass speedy customization possible
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TECHNOLOGY NOW IS A GROWTH ENGINEWHY?
Technology is moving from the “back of the house” to the “front of the house”:
Technology now makes scenario planning ( 40+ years old) and knowledge management ( 30 + years old) and organizational learning ( 40+ years old) realizable
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TECHNOLOGY CAN DRIVE
Growth Experimentation
Evidence-based management Analytics into dynamic strategy making,
marketing, customer engagement, and human capital recruitment, training, and engagement
Technology can make employee and customer co-creation realizable on a broad scale
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TECHNOLOGY ENABLES
1) A Learning Culture – A data-driven decision system at all levels
2) Early warning risks management systems
3) Mass collaboration with customers
4) Open innovation
5) Higher employee engagement
6) Destruction of business silos
7) Agility, adaptability, and makes speed a competitive differentiator
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THE ROLE OF THE CIO
Prediction: In great growth companies of the future, the CIO will report directly to the CEO.
Technology is a growth engine- both top-line & bottom-line
Ladies & Gentlemen: Start Your Engines !
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