Building a Growth Factory. David S. Duncan

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      Identifying strategic opportunity areas is particularly important at industry inflection points. In 2006, the leadership team at Turner Broadcasting System’s entertainment networks (including TBS and TNT) approached the annual strategic planning process differently. At the time, the vast majority of the company’s entertainment programs were syndicated—that is, content that had previously aired on network television that Turner rebroadcasted on its cable network. Typically, the company created five-year plans detailing incremental changes from current results (e.g., 5 percent growth in year one, 7 percent in year two, 3 percent in years three through five). But leadership recognized several nonlinear shifts in its market, such as changes in viewer habits and advertiser behavior driven by emerging models such as YouTube and Netflix. The team used simulation tools to understand the potential impact these changes could have on its business in 2011. Its “future-back” analysis suggested that continuing today’s strategy carried significant risks. The team leading the analysis then identified five ways in which it would respond to the change, including increasing investment in original programming and developing new advertising models such as TVinContext, a marriage of Google’s online contextual search advertising and traditional thirty-second television advertisements. Today, Turner’s entertainment networks feature a range of original content, and its business has surged. Clarity in strategic opportunity areas served as a vital guide to these transformational efforts.

      Beyond setting goals, companies should work to share goals throughout the organization. P&G uses a range of communication tools to ensure that key leaders share a common understanding of growth targets. For example, leadership creates simple documents summarizing strategic choices and the measures it will use to track progress. It spreads these documents through the organization to build strategic alignment. This alignment helps ensure that the company’s portfolio tracking systems monitor the right things, informing critical leadership discussions about innovation. This integrated view proved critical at two junctures. In the early 2000s, P&G recognized it was in danger of missing growth targets due to its low innovation success rate; the company then approached innovation more systematically and created its Connect + Develop program to source more ideas externally. In 2008, a strategic review led by select senior leaders highlighted that P&G’s pipeline was still bogged down with too many small projects. In response, the company increased focus on the transformation-sustaining growth type. P&G also created several dedicated new-growth groups, and revamped its strategy development and review process. In both cases, an integrated view of its growth blueprint enabled P&G to identify and respond to gaps in its current pipelines.

      Finally, companies need to ensure that goals are consistent with measurement and reward systems in ways that ensure they are part of the everyday fabric of the company.

      Growth Guidelines

      In the pursuit of new growth, companies inevitably surface and explore a wide range of potential opportunities. Because it’s hard to identify tomorrow’s growth markets with precision, it pays to thoughtfully map out a set of tactical growth guidelines that can show the way to teams as they try to prioritize among different opportunities. These guidelines should include a clear articulation of what types of opportunities are off the table in order to prevent teams from wasting time on pursuits that will ultimately be shut down because they violate the company’s unstated boundaries.

      To set growth guidelines, start by identifying a long list of relevant dimensions that define potential new growth opportunities. These dimensions might include the type of target customer, the distribution channel, the required steady-state annual revenues and profit margins, target geographies, and brand strategy. Then, for each dimension, make clear:

       What is an “obvious yes”

       What would be in management’s consideration set, though it would require some discussion

       What is an “obvious no”

      This approach has two benefits. First, it helps to highlight areas that management is willing to consider that insiders might find surprising. Second, it helps to highlight strategic no-fly zones. Most organizations find it hard to take things off the table, but disciplined innovators are more explicit about what they won’t do than what they will do.

      One of the great (unintentional) lies managers tell is “we’re open to anything.” It sounds great to say it, but it feels less great when management shuts down a team that’s been exploring a space for six months that everyone thought was outside management’s comfort zone. That’s not a good use of anyone’s time. Instead, follow the guidance of Apple and its legendary focus. As CEO Tim Cook describes, “we believe in saying no to thousands of products, so that we can really focus on the few that are truly important and meaningful to us.”

      You can build general alignment around growth guidelines relatively quickly. Start by holding a series of one-on-one interviews to surface areas where there is broad agreement and areas where there are differing perspectives. Then hold a half-day session with relevant leaders to hammer out an agreed-upon set of growth guidelines. Capture those guidelines on a simple “bull’s-eye” chart displayed in figure 2 with desirable elements in a green circle in the middle, discussable elements in a yellow concentric circle, and out-of-bounds elements in a red zone at the chart’s edge.

FIGURE 2

      Detailing precise goals and guidelines is not an easy task for large, complex organizations. The investment is well worth it, however, since the strategic perspective on growth informs resource-allocation decisions, identifies capability gaps that need addressing, and serves as vital input into management control systems that keep the growth factory humming.

      Diagnostic Questions for Leaders

       Can all our leaders repeat our near-term and long-term growth goals?

       Do we know how much of this growth we expect from our core business, and how much must come from other types of growth?

       Have we agreed to and documented the highest-potential strategic opportunity areas?

       Is there a documented set of growth guidelines detailing which strategic options are most attractive and which are off the table?

      Warning Signs

       Overly vague goals that are open to interpretation

       Disconnect between top-down corporate targets and bottom-up operational goals

       Failure to make strategic choices of what not to do

      Further Reading

       Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. The Innovator’s Guide to Growth: Putting Disruptive Innovation to Work. Boston: Harvard Business School Press, 2008, chapter 1.

       Collis, David J., and Michael G. Rukstad. “Can You Say What Your Strategy Is?” Harvard Business Review, April 2008.

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