Double-Digit Growth in No-Growth Times

By: Adrian Slywotzky , Richard WiseWed Dec 19, 2007 at 12:40 AM

From the book How to Grow When Markets Don't by Adrian Slywotsky and Richard Wise with Karl Weber. Copyright 2003 by Mercer Management Consulting, Inc. Reprinted by permission of Warner Books, Inc., New York, NY. All rights reserved.

It's every company's goal -- but it's one that few manage to achieve. Here are strategies and tactics to make your company grow again, drawn from in-depth research on companies that have been registering double-digit growth for years. Tired of cutting costs and downsizing dreams? This is your wake-up call.

In short, growth is everybody's business. Don't hoard responsibility at the top. Instead, distribute the responsibility for growth and opportunities to grow as widely as possible. When you do, unexpected heroes emerge from your company's ranks.

Consider Johnson Controls' approach to grassroots innovation. The firm not only encourages its people to spend time pursuing unconventional paths of inquiry but also imposes a staged evaluation that separates winning ideas from losing ones and keeps activity centered around its established business positions.

Jim Geschke, vice president and general manager of electronics integration at Johnson, describes the innovation process this way: "Think of Johnson as an innovation machine. The front end has a robust series of gates that each idea must pass through. Early on, we'll have many ideas and spend a little money on each of them. As they get more fleshed out, the ideas go through a gate where a go or no-go decision is made. A lot of ideas get filtered out, so there are far fewer items, and the spending on each goes up." (In simple terms, the gate consists of a cross-functional team, based within the business unit, that meets periodically to discuss new ideas and review the progress of every initiative. This team makes the crucial funding decisions.)

"Several months later," Geschke continues, "each idea will face another gate. If it passes, that means it's a serious idea that we are going to develop. Then the spending goes way up, and the number of ideas goes way down.

"By the time you reach the final gate, you need to have a credible business case in order to be accepted. At a certain point in the development process, we take our idea to customers and ask them what they think. Sometimes they say, 'That's a terrible idea. Forget it.' Other times they say, 'That's fabulous. I want a million of them.' "

Notice that Johnson's innovation process doesn't start with a customer survey, focus groups, or other formalized feedback. It doesn't have to. Its engineers work on-site with customers, and they receive a stream of insights from the company's Core Customer Research unit. Being steeped in customer needs means that virtually every new-growth initiative at Johnson has at least some grounding in customer reality. And that's the real secret of growth: devising imaginative products and services for the future by mastering the current problems of your most important customers.

Sidebar: Champions of Growth

Our program for growth didn't grow out of thin air. It is based on research at fast-growing companies and business units in slow-growth markets. Here are a few of those growth champions.

Cardinal Health, one of the country's top three pharmaceutical distributors, has registered compound annual growth of 40% from 1991 to 2001.

Clarke American, a leading player in the business of printing checks for banks and credit unions, used its trusted relationships to develop entirely new services. The result? Clarke American has grown its revenue in a declining market from $280 million in 1995 to $460 million today -- and maintained operating margins in the high teens.

John Deere has a rich heritage as a manufacturer of tractors, lawn mowers, and other equipment. As a result, it has great authority with landscapers, lawn contractors, and others in the green industry. So in 2001, it launched John Deere Landscapes (JDL) to leverage its hidden asset with this market. Two years later, JDL is the largest player in the industry and is meeting profitability targets.

Johnson Controls has transformed itself from a manufacturer of automobile seats into a provider of complete cockpits. Back in 1985, it was a cheap source of nonunion labor. Today, it is a $12 billion-a-year leader that registers double-digit growth.

OnStar, General Motors' in-vehicle communication service, is a classic example of a different way for giant companies to grow. In early 2002, more than 2 million vehicles (from an array of manufacturers) were equipped with OnStar. The figure is forecast to grow to more than 4 million vehicles by the end of this year.