 |
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The 7Ss of
exponential business growth 10+
are
Strategic intent,
Systemic innovation,
Synergies,
Simulation games, Scaling
up, Speed, and
Sustained effort |
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Exponential Growth:
Business Strategies, Keys, Tools, Examples
Exponential business
growth refers to a rapid increase in overall
business performance, revenue, and market share. It
is often characterized by a compounding effect over
time.
| |
This type of growth typically
occurs when a company
establishes an exponential
business model that leverages
people, strategies, innovation,
intrapreneurship, marketing, or
expands into new markets
effectively, leading to
skyrocketing profits and
operational efficiency.
|
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Rapid-Growth Company
Exponential Business Model |
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For companies
operating in mature sectors driving growth is a
perpetual challenge. Radical business-model
innovation is often required to achieving or
maintaining market leadership.
The 7Ss of Exponential
Business Growth are Strategic Intent, Systemic
Innovation, Simulation, Scaling Up, Synergizing,
Speed, Sustained Effort
Exponential business
growth refers to a rapid increase in a company's
revenue or customer base that occurs at an
accelerating rate, often driven by leveraging
resources effectively rather than simply increasing
effort or time. Strategies for achieving this growth
can include utilizing the flywheel effect, which
focuses on building momentum through customer
satisfaction and referrals, and implementing
leverage tactics that maximize output without a
proportional increase in input.
An exponential business model is one that leverages
resources, capabilities and innovation to scale
operations quickly and efficiently, aiming for
growth and impact that are significantly larger than
traditional models – often by a factor of ten or
more. This model focuses on achieving high return on
investment – high output with a relatively low input
– by utilizing high-impact tools and scalable
systems.
Scaling up means expanding or replicating an
innovative pilot or a small-scale project to boost
and broaden the effectiveness and impact of the
innovation.
"Scaling Up" refers to a business growth methodology
developed by Verne Harnish, which focuses on
optimizing four key areas: People, Strategy,
Execution, and Cash. The approach utilizes various
tools, including One-Page plans, to help companies
grow effectively. The methodology has a strong track
record, demonstrating significant results in
developing businesses globally.
Sustained effort means that it is not enough to
start something; it must be carried forward towards
the best-possible results and beyond.
"Sustained" means constant, continuous, nonstop,
perpetual, prolonged, steady, unremitting.
"Sustained effort" means maintained at length
without interruption or weakening.
Sustained effort refers to continuous and persistent
work or commitment towards a goal, often involving
significant time and resources. It is crucial in
contexts such as social reintegration programs for
ex-combatants and in the development of agreements
or projects.
Attitude of relentless growth
Continuous Innovation
Continuous improvement culture
Scaling Up Radical Innovation
Scaling Up Disruptive Innovation
***
Scaling Up Transformational Innovations
Lessons for the C-suite by Peter Koen, Ananya Sheth,
Mike DiPaola and Linda A. Hill
Summary:
For large companies operating in mature sectors—such
as Procter & Gamble in consumer goods, Apple in
consumer electronics, and Adobe in cloud
software—driving growth is a perennial challenge.
Growth through acquisition is always an option, but
companies often quickly find that the costs outweigh
the benefits. According to the authors, the only
reliable path to maintaining market leadership is
transformational innovation: major changes to
products and services that redefine what customers
expect by delivering significantly improved
performance, providing new kinds of value, resolving
long-standing trade-offs, and/or radically reducing
manufacturing costs.
To understand what
makes transformational innovations successful, the
authors studied two of them at Procter & Gamble:
Oral-B iO, a “smart” electric toothbrush that
step-changed the experience of oral hygiene, and
Always Infinity, a best-in-class menstrual pad that
resolved the long-standing tension between comfort
and protection.
In this article the
authors present a playbook for scaling up
transformational innovation, organized around
four major challenges:
providing sufficient
leadership, building the right team, mobilizing
resources and capabilities, and making big-bet
decisions.
For large companies operating in mature sectors—such
as Procter & Gamble in consumer goods, Apple in
consumer electronics, and Adobe in cloud
software—driving growth is a perennial challenge.
Growth through acquisition is always an option, but
many companies quickly find that the costs outweigh
the benefits.
The only reliable path to maintaining market
leadership is what is widely known as
transformational innovation—major changes in
products and services that redefine customers’
expectations by delivering significantly improved
performance, providing new kinds of value, resolving
long-standing trade-offs, and/or radically reducing
manufacturing costs. Think P&G’s Tide Pods laundry
detergent, the Apple iPod, and Adobe’s subscription
software as a service.
But innovation of this type is not only difficult to
envision; it is also extremely challenging to
develop and scale up. Even companies that invest in
R&D on transformational innovations often terminate
projects with compelling value propositions during
the expansion phase because they are reluctant to
commit the necessary resources. Many that invest to
scale up big-bet innovation projects do so only to
see them fail.
Articles such as “The Ambidextrous Organization” (HBR,
April 2004) and “How P&G Tripled Its Innovation
Success Rate” (HBR, June 2011) have sketched out a
solution to the development challenge: Large
companies should separate innovation units from the
core business, and senior executives from the core
business should maintain strategic synergy with the
new units but keep their incentives and cultures
separate. Research has shown that such ambidextrous
organizations are 90% more effective at achieving
transformational innovations than either fully
integrated or totally separate organizational
structures are. But scaling up within the
ambidextrous model has proved difficult. In our work
researching and practicing corporate innovation, we
repeatedly find that companies struggle to allocate
leadership attention, personnel, capital, and other
resources between the core business and a
transformational effort.
To gain insight into these challenges, we completed
a detailed study of two Procter & Gamble
transformational innovations: Oral-B iO, a
high-performance electric toothbrush that
step-changed consumers’ brushing habits to enable
better oral health, and Always Infinity, a
best-in-class menstrual pad that resolved the
long-standing tension between comfort and
protection. Although very different in nature, both
products required investments that were material to
the company’s overall operations, and both are major
successes in mature, highly competitive markets.
Both iO and Infinity provided transformational
experiences for consumers—supporting premium pricing
and enlarging their respective categories.
The two examples represent views of P&G’s strategy
and innovation practices at different points in
time: Always Infinity was launched in 2008, and
Oral-B iO in 2020. Procter & Gamble’s strategy and
practices have evolved since then. Nonetheless,
studying how a complex organization persevered to
create transformational innovations can be
instructive for managers in many industries—and adds
to the body of knowledge about innovation practices.
We looked at what worked in the scaling up of these
projects—and what did not—from the perspectives of
the managers, technology experts, and senior leaders
involved in them. We then validated our findings
across a range of industries by conducting 40
qualitative interviews with innovation practitioners
and senior leaders from a large medical-device
manufacturing company, a large integrated petroleum
company, and a large manufacturer of construction
and mining equipment.
In the following pages we draw on the experiences of
Procter & Gamble and other big companies to present
a playbook for scaling up transformational
innovation. It’s organized around four major
challenges: providing sufficient leadership,
building the right team, unlocking resources, and
making big-bet decisions.
Providing Sufficient Leadership
The leader of a business in which a transformational
innovation is taking shape—typically the CEO or a
business unit president (we’ll refer to this role as
the CEO hereafter)—has a formidable responsibility:
to manage the current business, which generates
significant revenue and needs continual incremental
innovation to hit short-term growth targets, while
championing the transformational innovation that
will lead to future growth, which requires large
investments in resources and leadership attention.
Unfortunately, many CEOs are biased toward focusing
on the current business.
A quick scan of a typical CEO calendar supports this
claim: Most of the scheduled time is allocated for
managing current business operations and incremental
innovations. Activities related to transformational
innovations rarely appear except on special
occasions, such as “Innovation Day.” It doesn’t help
that CEOs can often meet near-term goals (and secure
performance bonuses) by relying on incremental
innovations. The result is that they usually have
less mind space for the efforts that a
transformational innovation requires, from
developing an effective leadership team for the
project to managing disagreements among stakeholders
while encouraging active, open debate.
And although the senior R&D executive in a business
unit will often initiate and sponsor
transformational innovation projects during the
ideation and development phases, our research makes
clear that the CEO and the executive must partner
closely to successfully drive these projects through
the scaling up and launch phases. We have observed
that CEOs can carve out time for those efforts in
three ways.
Delegate operating decisions. Leaders like making
decisions—after all, to some extent it’s the ability
to do so that won them their roles. Whether they
started their careers in marketing, finance, or
design, it is human nature to resist delegating
decisions in their personal areas of expertise. That
behavior is reinforced by another common
bias—putting the urgent ahead of the important.
Leaders who successfully scale up transformational
innovations fight both biases in order to give a
project the leadership bandwidth it will demand. A
now-retired CEO of P&G’s Oral Care business, whose
background was in marketing, told us, “If you
compared my calendar to those of others in my role,
you would find I spent way less time on the
marketing. It is probably in some ways the most
substantial choice I made.”Articulate a purpose.
Changing existing work processes and cultural norms
to accommodate transformational innovation is
challenging in any large organization in which
functional leaders have differing goals and
performance scorecards. That creates a great deal of
distraction for the CEO. Smart CEOs recognize that
much conflict can be avoided by clearly
communicating from the start why this innovation is
worth it—how it will have an impact on (or make a
difference in) consumers’ lives. A former leader of
P&G’s Feminine Care business brought a sense of
purpose to the organization: “to create products
that women love every day, in every way, and all
around the world, both functionally and
emotionally.” Believing that “there was no other
business in P&G where one could transform girls’ and
women’s lives the way one could in Feminine Care,”
the executive communicated that sense of purpose to
the organization in a way that led to its being
passionately embraced.Establish the right cadence
for project stakeholder meetings. Once a vision has
been communicated, the CEO will need to manage
stakeholder alignment by holding regular meetings
over the course of the project. For Oral-B iO,
project leaders, functional leaders on the executive
team (from HR, R&D, finance, design, manufacturing,
marketing, and so on), and regional business leaders
came together monthly. Those gatherings helped
surface and address differences and disagreements
quickly. As one P&G senior brand director put it,
“Preparing for the regular meetings was a lot of
work, but we realized that it took out a lot of
subsequent swirl.” They also provided a forum where
all leaders could voice their concerns and ensure
that their needs were considered, which enabled
global buy-in for the project. And regional leaders
could clearly articulate and publicly commit to
their success criteria.
Building the Right Team
A CEO’s primary role in a transformational
innovation is to partner with the senior R&D
executive on the lead team to ensure that the
organization gives the project the space and
resources it needs to expand. But that does not mean
that either person should become the project’s
leader. Both have many other responsibilities. At
the same time, the project team is unlikely to have
all the capabilities needed to develop and scale up
the innovation by itself, let alone to win buy-in
from other parts of the business. R&D’s critical
role in understanding consumer needs and leading
product and technology development has been well
documented; its role in transformational innovations
is even more critical. To give the team the
expertise it needs to scale up a transformational
innovation, the CEO should make two key
appointments.
The integration leader. This person is the CEO’s
representative on the project team and is
responsible for ensuring that the CEO is aware of
progress, obstacles, resource needs, and upcoming
decisions across all aspects of the project. Thus a
busy CEO can be confident of making informed
decisions. The integration leader also serves as a
go-between for the project team and other functional
and regional stakeholders on issues that don’t
require the CEO’s direct involvement. An integration
leader must be able to identify and call out “issues
that don’t get discussed,” such as organizational
politics, functional conflicts, and roadblocks that
may be difficult to perceive and that only a senior
executive can address.
The integration leader is process- and
organization-oriented, focused on identifying risks
and prioritizing issues for leadership’s attention.
This person will complement the product owner, who
is the champion of the product and the consumer,
focused on vision, technology, design, and
development and on managing the project team. In a
well-functioning transformational innovation
program, the two will work closely together. For
example, in the Oral-B iO project the product owner
was an experienced and technology-focused senior
director of R&D who had personally led work on
innovative power-toothbrush designs and technologies
for many years. The integration leader, by contrast,
had significant experience working directly with the
CEO as a program and portfolio manager in various
P&G business units but had only limited experience
with power toothbrushes. Their respective skills and
experiences helped them jointly navigate the iO
project through development, expansion, and launch.
The commercial leader. Transformational consumer
experiences are often rooted in technological
advances. It is tempting (and typical at large
companies) to wait for R&D to develop the product
and then assign commercial resources later in the
program, once expansion is underway—and possibly
after the launch has already been announced to
retailers, customers, and investors. But that is a
recipe for failure, as the well-documented case of
Google Glass illustrates. Despite a huge investment
in the technology and the product, it was a
commercial flop, launched without a clear commercial
strategy or understanding of who would want it, how
they would use it, and how much they would be
willing to pay for it.
To avoid a similar outcome, the CEO should appoint
an experienced and fully dedicated commercial leader
to the project team. This person’s responsibility is
to lead early work assessing the commercial
readiness of the offering, to ensure that the
technical design reflects a deep understanding of
consumers’ needs, and to develop innovations in
consumer communications and the business model that
will support and reinforce the technical innovation.
For example, iO’s dedicated commercial leader
partnered closely with R&D on foundational consumer
research early in the project, identifying
previously unarticulated emotional and social needs.
That led to chartering three separate projects that
shaped the product’s design to more fully deliver
superior oral-health outcomes for consumers. One
notable finding was that although customers
appreciated the superior cleaning of Oral-B’s
previous-generation power brushes, they also wanted
minimal vibration and noise, which is technically
difficult to achieve. That insight supported the
investment of significant capital in upgrading the
brush’s technology with a linear magnetic drive that
R&D had developed. The foundational research also
informed the commercial leader’s development of a
tiered product and pricing strategy designed to grow
the category by appealing to both existing
power-brush users and current manual-brush users,
justifying investments for the magnetic drive and
premium design elements. Within its first three
years on the market, iO contributed to 70% of its
category’s growth, with about 30% of its users
trading up from a manual brush.
Unlocking Resources
Scaling up transformational innovations requires the
whole organization to do substantially more work,
typically with no increase in total resources. Two
approaches are useful here: leveraging centralized
sources of funding and staffing and finding ways to
free up resources within the business unit.
Leveraging corporate resources. Both Feminine Care
and Oral Care successfully partnered with P&G’s
corporate R&D and tapped into central sources of
innovation funding to supplement the development of
Always Infinity and Oral-B iO. Although many large
companies have such centralized resources, business
units often struggle to access them.
To begin with, significant cultural differences may
exist between the business unit and the corporate
teams, along with differences in operating practices
and reward systems. For example, a corporate
innovation organization is usually focused on
developing a portfolio of breakthrough technologies
or a series of patent filings that have a long time
horizon. The business unit, by contrast, is usually
tasked with delivering a specific project on a
specific schedule in order to hit a specific revenue
target. Business unit employees also tend to be
skeptical of technologies from “outside,” such as
those that the corporate R&D group may have
developed or recommended.
One approach to addressing this common problem is to
have the business unit CEO and the senior R&D
executive initiate contact. At P&G decisions about
distributing corporate R&D funding and support were
made by the chief R&D and innovation officer (who
was the chief technology officer). In the Always
project the business unit leader and the senior R&D
executive reached out to the CTO early on to define
Infinity’s consumer value proposition. As a result,
central R&D experts and funding augmented Feminine
Care’s resources in the product’s development. This
partnership enabled the unit to build prototypes and
test them with consumers to evaluate their potential
for a superior experience—which, in turn, would
support premium status and category growth and would
build broad stakeholder confidence that P&G should
invest to scale up the innovation.
Members of a project team should also reach out to
their corporate counterparts, not only for help with
the development of new technologies but also, when
possible, for help applying existing technologies in
product designs. For example, the iO program
involved significant replatforming of the
electronics system for the brush. Oral Care’s senior
R&D executive identified a group of experts in
electronics and “smart” products in P&G’s central
R&D organization who were interested in
demonstrating the potential of their technologies.
The executive then worked with a counterpart in
central R&D to design a win-win collaboration,
offering iO as a platform for demonstrating the
value of the connected technologies and the
more-advanced user-experience techniques that were
already in the pipeline to delight the consumer and
create new opportunities for category growth.
Redistributing workloads.
Shifting work internally can be an effective way to
free up resources. To ensure sufficient resources
for the Oral-B iO project, Oral Care’s leaders moved
responsibility for much of their incremental work to
tech hubs in the manufacturing organization. Because
the manufacturing teams were intimately familiar
with how the production lines worked, they could
efficiently design and execute incremental changes.
That staffing decision did add costs to the
manufacturing organization and required an
adjustment of its performance goals—but the ability
to redeploy R&D resources to consumer-focused
transformational innovation was deemed worth it.
The tactics just outlined require the encouragement,
backing, and intervention of a business unit’s
leadership. For example, at the monthly meetings for
the iO project, the CEO would acknowledge
disagreements and tensions, reiterate the vision and
opportunity to grow the power-brush category, and
personally facilitate problem-solving discussions on
how to meet the various needs.
Making Big-Bet Decisions
Decision-making for transformational innovations
requires projecting into an uncertain future.
Business leaders need to agree on relevant measures
that will dictate the decisions to scale up and
launch. They must also avoid falling back on an
overly cautious approach. A relatively recent HBR
article, “Drive Innovation with Better
Decision-Making” (November–December 2021), discusses
how leaders can make more-effective decisions during
the innovation journey. Here we apply those findings
to making the big bets associated with
transformational innovations.
Focus on forward-looking metrics.
When determining performance metrics, innovation
leaders obviously need to include conventional
lagging indicators such as sales, market share, and
ROI. But for transformational innovations they must
also consider leading indicators, such as changing
demographics and consumer attitudes. Although these
indicators are often difficult to estimate
precisely, they are more likely to suggest an
innovative product’s ability to capitalize on
consumer and market trends—such as the growth of
e-retail, mass customization and personalization,
and increasing awareness of environmental and social
sustainability.
During the scaling up of a transformational
innovation, lagging and leading data may conflict,
complicating decision-making. An example is the
decision to scale up the Infinity project. To do so,
Feminine Care needed to develop, build, and operate
then new-to-the-world manufacturing facilities. But
traditional operating and capital cost projections
in a quantitative financial model could not fully
capture the uncertainties of making a
transformational product. And managers could not
easily project demand for a superior consumer
experience that would be offered at a premium price.
Therefore they tested a series of hand-assembled
menstrual-pad prototypes with consumers, which
elicited an extraordinarily positive response: Some
consumers claimed they would pay twice as much as
they paid for the product they currently used. That
validation of a superior experience gave Feminine
Care’s leaders confidence in the product’s readiness
for the market. It also helped after the product
launch, when the fledgling manufacturing process
struggled to deliver the product reliably. The
incoming business unit leader considered writing off
the entire project but decided to persevere,
primarily because of the compelling consumer
evidence.
(Stretch, Simplicity),
Scaling Up radical
innovations has trend-creation potential.
