Sometimes the strategy for building growth in mature industries means more than simple product extensions or acquisitions. The answer? Develop "growth platforms" that extend your business into new domains. Researchers at Harvard Business School and INSEAD helped Boston-based consulting firm Oyster International study how executives of twenty-four successful companies achieved organic growth over time. The answer: by creating "new growth platforms, on which they could build families of products, services, and businesses and extend their capabilities into multiple new domains." eg UPS, Medtronics.
The article notes that sooner or later, most companies can't attain the growth rates expected by their boards and CEOs and demanded by investors. To some extent, such businesses are victims of their own successes. Many were able to sustain high growth rates for a long time because they were in high-growth industries. But once those industries slowed down, the businesses could no longer deliver the performance that investors had come to take for granted. Often, companies have resorted to acquisition, though this strategy has a discouraging track record. Over time, 65% of acquisitions destroy more value than they create. So where does real growth come from? The authors have researched and advised companies on this issue. With the support of researchers at Harvard Business School and INSEAD, they instituted a project titled The CEO Agenda and Growth. Their twelve year research shows that the businesses grew by creating new growth platforms (NGPs) on which they could build families of products and services and extend their capabilities into multiple new domains. Identifying NGP opportunities calls for executives to challenge conventional wisdom. In all the companies studied, top management believed that NGP innovation differed significantly from traditional product or service innovation. They had independent, senior-level units with a standing responsibility to create NGPs, and their CEOs spent as much as 50% of their time working with these units. The payoff has been spectacular and lasting.
- Platforms as Business Models require a different approach : Specifically, they:
- Put credible chief growth officers in charge.
- Believe that the team is more important than the idea.
- Have NGP units that are independent and embedded.
- Guarantee financial independence.
- Systematize the NGP creation process.
Category :Emerging Trends, Growth Platform