Posts Tagged ‘growth’

Move over, CSR. It’s time for New Capitalism

Tuesday, January 25th, 2011

There’s been something new happening around what is called “corporate social responsibility,” a term that emphasized how distant caring about its social impact was from a company’s core mission. The new thinking is this: is it possible to integrate positive social impact (or, at least, much-reduced negative impact) into the very fabric of a profit-making business?

Examples are popping up more frequently. Wal-mart has received attention for its initiatives promoting compact-fluorescent lighting and its recent effort to improve the nutrition of the food it sells.

Already in 2011, two important works have emerged in this area of thought. First, Umair Haque’s book “The New Capitalist Manifesto,” and, in the Jan-Feb Harvard Business Review, “Creating Shared Value,” by Michael Porter and Mark Kramer. Of the two, “Manifesto” is more brightly written and attention-grabbing, while “Shared Value” is solider, with more salient examples.

Haque in particular has a way with a metaphor. For example,

Imagine two worlds: The first is a big world of abundant resources and raw materials, an empty world where demand is infrequent and easily satiated, and a stable world where disasters are infrequent and weak. The second is a tiny world, emptying of raw resources, a crowded world where demand is always hungry, and a fragile world, where contagion of every kind can flow across the globe in a matter of minutes, days, or weeks. A big, empty stable world is like a vast, placid, untouched game reserve.

But a tiny, crowded, and fragile world is like an ark. Industrial-era capitalism was built for a big, empty, stable world.

But at the dawn of the twenty-first century, the world is more like an ark – tiny, fragile, and crowded.

Consuming, borrowing, and utilizing are the engines of prosperity in a big, empty, stable world, but the engines of crisis in a tiny, fragile, and crowded one.

Porter and Kramer traffic in more ground-level thinking, but with the same aim in mind:

The traditional playbook calls for companies to commoditize and exert maximum bargaining power on suppliers to drive down prices – even when purchasing from small businesses or subsistence-level farmers.

[By contrast,] Nestle worked intensively with its [coffee] growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides and fertilizers. Nestle established local facilities to measure the quality of the coffee at point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield…and higher production quality increased growers’ incomes, and the environmental impact of farms shrank. Meanwhile, Nestle’s reliable supply of good coffee grew significantly. Shared value was created.

This is the key thread connecting “Manifesto” and “Shared Value.” Neither is proposing offsetting bad actions with some related or unrelated good actions. Rather they both advocate creating profits and benefiting the planet through “ark management.” Recognizing and capitalizing on the interdependence of people/resources/governments; regaining a focus on the welfare of the communities in which a company does business; and planning, not just for the next quarter, but decades into the future.

Mistake Bank Video Podcast #7 – Sue Pera on opening a second store

Wednesday, September 8th, 2010

Sue Pera and her husband Al own the Cornerstone Coffeehouse in Camp Hill, PA (where I live). Sue was very gracious to sit down and talk about an important mistake they made while considering expansion and what they learned from it.

Download: Sue Pera Mistake Bank Podcast (4:36)

To find other podcasts in this series, please visit http://mistakebank.com.

If you are an entrepreneur or know an entrepreneur who should be interviewed for this podcast series, please email me at john (at) caddellinsightgroup (dot) com. Thank you!

When innovating, seek out more, and more varied, ideas

Wednesday, November 18th, 2009

innovation tournamentsI’ve been reading the book “Innovation Tournaments” by Christian Terwiesch and Karl Ulrich of the Wharton School. The book sets out a methodology (the “tournament” of the title) for companies to generate and systematically winnow down innovation ideas to eliminate all but the most exceptional opportunities.

Two brief observations:

One, the authors suggest that almost any company’s innovation performance would be helped by increasing the number of ideas going into the top of the funnel. Early-stage evaluation (a la “Discovery-Driven Growth“) is cheap and fast, so the cost of, say, doubling the number of ideas reviewed isn’t significant when compared with an overall innovation budget.

[It was interesting to read today's post by tech venture capitalist Fred Wilson, in which he outlined his approach to finding new opportunities: (1) making public his strategies, ideas, and passions so that entrepreneurs know in advance what he's looking for, and (2) meeting with as many people as he can, every day. In short, a strategy to add lots of opportunities to the top of his funnel.]

Two, along with the sheer number of ideas, the variability of the ideas is important. High variability increases the possibility that a truly outstanding idea is found (given that truly outstanding ideas, like 7-footers with great athletic ability, are few and far between). In that event, increasing the number of ideas coming into the funnel increases the likelihood that a truly outstanding idea is looked at.

Ironically, methodologies like Six Sigma seek to limit the variability of processes. When (mis)applied to disciplines like innovation, they are very successful at impeding the success of the effort.

Related post:
On Discovery-Driven Growth
Processes as art and science

Downturn is costing companies their adventurousness

Tuesday, June 16th, 2009

You can’t see much from a foxhole.

I’ve talked to dozens of companies in the past six months, and one pattern is coming clear: the downturn has put them on the defensive, at the cost of their adventurousness.

CFOs are stopping new investment to save cash. Layoffs are decimating teams and executive departures (voluntary and otherwise) are halting sponsorship of ongoing projects. Middle managers are stuck in the, well, middle: knowing what they need to do but lacking the wherewithal to get it done. And employees up and down the line are keeping their heads down, hoping to avoid the ax when/if it falls again.

And, while there may be long-term virtues in a more frugal approach to managing businesses (especially financial businesses), this hunkering down is a bad thing for corporate America.

So, here’s a plea to every company out there: stop worrying for a few moments and try something new. You might make a mistake, but you might hit a home run, too. At minimum, you’ll be able to peek your head out of the foxhole and begin the process of healing and recovery.

Start now.

Related post:
Selling today: casting a wide net and going for the “no.”

An innovation hero exits

Tuesday, June 9th, 2009

I was surprised to read about P&G replacing AG Lafley as CEO with current COO Robert McDonald. The WSJ article was not explicit as to the reasons, but it appeared that the timing had been accelerated from a planned transition to occur later, perhaps due to lower-than-expected results P&G was expected to announce.

Lafley is one of the few star CEOs this decade who seemed to deserve the status. Remember P&G 10 years ago? Durk Jager was CEO. Lafley led the company through the acquisition of Gillette, an aggressive move into cosmetics, and innumerable product innovations (SpinBrush, Febreze, etc., etc.), and successfully competing with a wave of private-label competitors.

Lafley was perhaps the pre-eminent innovation CEO of his era–focused on the customer and the job she was trying to do, open to collaboration and ideas from the outside, committed to growing in emerging markets.

There are horses for courses, and perhaps the board felt that McDonald was better to lead the company through the tough times ahead. But Lafley’s contributions shouldn’t be forgotten. I, for one, am interested to see what he decides to do next. And if I was on the board of a consumer packaged goods company, I might want to give him a call.

Previous posts about AG Lafley:
Innovation: doing it all yourself is so twentieth-century
Complex business problems need diagnosis, not packaged solutions
The first great business book of 2008
“The consumer is boss”
“Sesame Street simple” – communication with a story

NFL’s Patriots use “Discovery-Driven Growth” formulas

Monday, April 27th, 2009

Despite an overfull schedule and helping get the house prepared for our 8-yr-old’s first Communion next Sunday, I watched bits and pieces of the NFL Draft as it unfolded. It’s a fascinating spectacle and completely dependent on speculation–by the teams, the announcers and fans. Which selections will be great players, which will be OK, and which will be busts? Will the first pick, a quarterback, live up to his signing bonus?

There are two flavors of strategy that teams deploy in the draft. One is the standard approach. Try to pick the perfect star or the perfect player to fill the gap you have in your roster. Exhibit A: The Washington Redskins (who rely on expensive free agents more than the draft). Exhibit B: the New York Jets–who usually draft high and who always disappoint. (Honorable mention: Dallas Cowboys.) Teams in this model often have salary-cap difficulties, given the large contracts their stars command.

The other approach is gaining traction but is still principally practiced by three teams: the New York Giants, the Pittsburgh Steelers and especially the New England Patriots. They eschew high picks and expensive free agents. Instead they stockpile talent, especially in the lower rounds of the draft and with low- and mid-priced free agents. These teams run into salary-cap difficulties much less frequently, and can often keep a stronger team together because they are not devoting a disproportionate amount of their salary cap to a few players.

It occurred to me this weekend that the Patriots’ approach is very much in line with the principles of “Discovery-Driven Growth” by Rita McGrath and Ian MacMillan. The Patriots presume they can’t perfectly identify which players will turn into great pros, so they make a host of small bets and expect some (many) of them not to work out. Yet some will, and some of those will turn out to be good or great players (say Matt Cassel and Tom Brady, both very low-round picks).

This year the Patriots traded their first-round pick for a lower first-rounder, then traded that one for a second-round pick. The Patriots ended up with no first-round picks but four second-rounders.

As prescribed in “Discovery-Driven Growth,” the Patriots are also ruthless in separating from players who aren’t paying off. It’s not nice, but it’s effective. They also experiment with shifting a player’s position, in order to find the best place for a particular talent. (Dan Klecko, a Patriots draftee at defensive line, started at fullback for the Philadelphia Eagles last season.)

All the above is dependent, of course, on the Patriots having a strong vision of the kind of players that work in their system. For example, they look for athletes on the offensive line, even if they lack football experience (Stephen Neal, a former wrestler, or this year’s pick Sebastian Vollmer). Within that system, though, there are many different types of players that can excel.

The Patriots cast a wide net, make lots of cheap bets, don’t stay too long with something that’s not working. What do you say, Rita? Are they a “Discovery-Driven Growth” exemplar?

From “The Catalyst” – a different kind of speed

Monday, April 20th, 2009

This is (I think) the last post on the new book “The Catalyst: How You Can Become an Extraordinary Growth Leader,” by Liedtka, Rosen and Wiltbank, which describes the mindset required to effectively grow new businesses within established organizations, and a lot more. In surveying the behavior and practices of effective new business developers, the book touches on many of my favorite subjects and engages with the tension between the human-ness of organizations and the mechanical inclinations of an embedded culture.

Chapter 7 of “The Catalyst” discusses the need for speed. The authors neatly contrast the kind of speed required for the execution of a standard process with the speed required to build a new business unit–scan the environment, spot opportunities, collect resources, probe and move ahead toward a solution. As an example of the first type of speed, they refer to fast-food preparation. For the second, the TV show “Iron Chef.”

[In]…Iron Chef…competing chefs are given just an hour to create a unique multicourse meal, improvising around a set of ingredients they are given to work with. Achieving speed in this world requires elements very different from those at work in fast food. It relies on repertoire, deep knowledge of ingredients and how they work together, and the ability to improvise. Preparing the mind to see opportunity, as well as the talent to act on that opportunity quickly, is the key.

“Catalyst” speed reminds me of Kotter’s arguments in “A Sense of Urgency” and the Cynefin framework. Fast-food processes are stable, repeatable; they reside in the Known/Simple domain of Cynefin. “Iron Chef” processes are emergent–in the Complex domain–they depend on the ingredients of the moment, inspiration, and a “sense of urgency” to put them to use quickly.

This is a very useful way to think of new business development. Speed doesn’t mean the fastest, most efficient execution of each step. It means, instead, that capabilities are assessed quickly, first steps are taken without delay, and that missteps are recognized quickly, stopped and other avenues tried. It also means, a la McGrath & MacMillan’s “Discovery-Driven Growth,” that as much work as possible should be done on paper rather than in the real world, and that tests be well designed and small-scale.

In simple processes, speeding up each step necessarily speeds up the whole process. New business processes, the elapsed time from start to success is most important, and can’t be improved by focusing on optimizing one step at a time. It’s a different kind of speed, and companies need to look at it that way.

Related posts:
Thinking about processes as science and art
Talking about the Cynefin framework
On “Discovery-Driven Growth”

Catalyst #2 – launch new ventures with real customers

Thursday, April 16th, 2009

I posted earlier this week on the new book, “The Catalyst,” but there are a couple of more points I’d like to share before I leave it. The book, by Jeanne Liedtka, Robert Rosen and Robert Wiltbank, investigates the mindset needed to grow new businesses at established companies. It’s highly recommended, especially as a companion piece to McGrath and MacMillan’s “Discovery-Driven Growth,” which tackles the new-business question from a methodological perspective.

The authors assert in “The Catalyst” that successful new businesses should start with addressing a need of a real customer, one who provides a level of commitment to using the product. They call this an “early yes” and illustrate that it helps galvanize support for a fledgling project.

The customer’s commitment is important. Since launch customers have a stake in the project, they take it seriously and provide more focused and useful feedback than prospects would provide:

Demanding an early yes provides a reality check on customers and partners. Importantly, looking for an early yes minimizes the influence of potential customers. Potential customers are a false positive: They act like customers, they look like customers, but they may not be actual customers. We use the word potential in a pejorative sense here. Potential customers may lead you down a primrose path that involves investment on your part, with only the promise of future business that may or may not materialize. To weed these out, the Catalysts place some demands on those who have the privilege of influencing the growth opportunity. They want to influence and be influenced only by actual customers and actual partners.

Vitally, the close working relationship with an actual customer forces the project team to get out of theory and conjecture and get real: “They are able to work around forecasts and predictions, because direct involvement with others gives them much more specific and useful information.”

I’ve seen the problems with building new products around the need of potential customers. In the 1990’s, I was the product manager on a prepaid cellular product (before such a thing even existed). We had an important launch customer (a large market of what is now AT&T). I worked with the design team and customer to come up with specifications, test prototypes, etc. After several months of this effort, we were no closer to getting the customer committed to using the product. Yet they continued to provide feedback and we continued to rework the product in hope of getting them to install and use it in production.

Eventually the customer’s focus moved onto other projects. Our management killed the project, and we put our code on the shelf. A couple of years later, of course, this type of product emerged (from another company) and became very successful.

To this day, I believe the customer’s option (them being a potential customer, not an actual customer) prevented the product from being installed and used, which would have provided critical momentum to help us continue to develop and improve the product, and for the customer to gain revenue from their customers for this new offering.

Related posts:
“Discovery-Driven Growth” – a vital handbook for developing new business
Innovation catalysts view making mistakes as essential to growing new business

Innovation “Catalysts” view making mistakes as an essential part of the process

Tuesday, April 14th, 2009

From The Mistake Bank:


I’ve recently finished a new book, “The Catalyst,” which describes the mindsets of people who’ve successfully built new businesses inside established companies. Renewing organic growth is a difficult task, and “The Catalyst” is a very useful book for anyone working in new business development.

One point that comes out quickly in the book is the necessity to experiment, “fail fast,” learn and iterate. These points were also brought out in another excellent new book, “Discovery-Driven Growth.” I see these two books as companion volumes. Both address growing new businesses within companies. “The Catalyst” focuses on mindset, “Discovery-Driven Growth” describes the methodology.

Here is one of the “Catalysts” profiled in the book discussing mistakes. John Haugh was hired by Mars Inc. and put in charge of growing its specialty chocolate line, Ethel M.

Haugh decided to focus on creating retail “lounges” where customers could buy and enjoy the chocolates, rather than relying on the fiercely-competitive grocery channel. Haugh also carefully listened to lots of voices–customers, suppliers and partners–to learn as much as he could, fast.

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[Haugh] elected to launch with four different kinds of lounges: “We’re not going to go out and have one perfected prototype,” he explained, “because we don’t even know what that would look like.” The team checked in with consumers throughout the design process to determine the best color palettes, types of furniture, and overall ambience for the stores. They also asked suppliers, partners, and the vendors of their chocolate-making equipment for input. Their intent was to refine the new business as they went along:

We’d know within three days if a store was working. Are people coming in, are they sitting where you think they will, are they ordering what you think they will? You know very soon. And we’d test a slightly different design and layout for the next one to open. We did make errors–we knew we would. But we were prepared to react quickly and to fix them.

Indeed, Haugh viewed making mistakes as part of the process:

You know what? You’re going to make a bunch of mistakes. What you want to do is to try and correct them. When you’re younger, you don’t like to make mistakes. You think that’s the thing that is going to knock you off the track. You get a little bit older and get some gray in your hair, and then you realize it’s OK to make mistakes. It’s how you learn the most.

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From The Catalyst: How YOU Can Become an Extraordinary Growth Leader, by Jeanne Liedtka, Robert Rosen, and Robert Wiltbank, published by Crown Business. Reprinted by permission. (c) 2009. All Rights Reserved

“Discovery-Driven Growth” – a vital handbook for developing new business

Wednesday, March 18th, 2009

There’s nothing more fun for me than building a new business, whether it’s a startup or a new line of business within an existing company. New businesses are the life-energy of capitalism, the “creative” part of “creative destruction.”

But like most everyone who’s been involved in starting up new ventures, I’ve endured my share of missed opportunities, strikeouts and horror stories. Anyone who’s been in this business for a while knows there are no sure things.

As a result, it’s been gratifying to tune into the developing literature in managing innovation, whether it’s finding out how P&G does it, how to brainstorm more effectively, or the ever-expanding Clayton Christensen library. And I’ve been eagerly awaiting “Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity” by Rita McGrath and Ian MacMillan.

McGrath’s article “The Value Captor’s Process” was one of my favorite of 2007. And in “DDG” she and MacMillan describe an entire new-business development process using the same pragmatic thinking.

The book, in page after page, honors innovation as a complex process. Failure of new projects is not a result of poor planning; it is a necessary component of the uncertainty of interplaying markets, technologies, customers and competitors. The tragedy of innovation is not failure, it’s risking huge investments and careers before the business learns whether the potential in the venture can ever be realized.

The typical tools of managing innovation have been detailed, upfront planning, hurdle rates and stage gates. By contrast, McGrath and MacMillan propose an iterative prototyping approach to managing innovation: do as much on paper as possible before “breaking ground” on expensive investments; document assumptions and launch inexpensive experiments to validate or refute them; create rough financial models and refine continuously; monitor progress frequently; compare results to expectations; disengage when the likely outcome of the project falls short of alternative uses of capital and resources; extract value from the results of failed projects.

The managers who use the DDG prescription speak almost like acolytes of the Cynefin framework:

As we go into markets where we’re trying to learn, what we’ve gotten better at is trying small things. If they are successful, we spread them like wildfire. If not, we kill them quickly. (p. 162)

And, in the spirit of “giving it away,” McGrath and MacMillan offer all the tools they reference in the book on their website. This lifts “Discovery-Driven Growth” above the level of a book and into the realm of a vital business resource.

Using this approach may not increase the yield of ideas to successful initiatives–as McGrath and MacMillan write, “remember the plan was uncertain to begin with, so there can be no question of failure–how can you fail if you had no idea of the outcome to start with?” But it is certain that a company that dedicates itself to implementing “Discovery-Driven Growth”’s ideas will improve the yield–possibly dramatically–of profit to investment for new ventures.