BackManagement Idea: Putting growth back on track
Sound management ideas that managers can adopt to put growth back on track in companies
Premium(A research points out that most value-creating growth businesses originated in disruption. )
It has been historically seen that not more than 10% of all companies are able to sustain growth for more than a few years, according to a recent research conducted by Clayton Christensen of the Harvard Business School. Once a company stops posting growth in numbers that help in boosting shareholder value, its ability to rebound is very low. Christensen lists out sound management ideas that managers can adopt to put growth back on track in such companies.
“When times are good and core businesses are growing robustly, starting new generations of growth ventures seems unnecessary; when times are bad and mature businesses are under attack, investments to create new growth businesses can’t send enough profit to the bottom line quickly enough to satisfy investor pressure for a fast turnaround," says Christensen in an article in MIT Sloan Review.
Disruptive technologies are a driver of leadership failure and the source of new growth opportunities, Christensen says. His research points out that most value-creating growth businesses originated in disruption.
Christensen does not term those innovations that comprise incremental engineering improvements, or those that lead to improved performance, but instead refers them as sustaining innovations. Disruptive innovations are those which appeal to customers though they remain unattractive to the incumbents, he says. The probability of creating a successful, new growth business is 10 times greater if the innovators pursue a disruptive strategy rather than a sustaining one, he says.
Christensen advises firms to first compete against what he calls non-consumption while looking to create disruptive growth. Non-consumption is defined as people’s inability to use available products or services because they are too expensive or too complicated. It is much easier to target potential customers who aren’t buying at all than to steal customers from an entrenched competitor. He suggests the following three litmus tests that strategies should meet while creating disruptive new market applications for new customers.
Test #1: Does the innovation target customers who in the past haven’t been able to do it themselves for lack of money or skills?
Test #2: Is the innovation aimed at customers who will welcome a simple product?
Test #3: Will the innovation help customers do more easily and effectively what they are already trying to do?
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
