Why do corporate growth initiatives so often founder? Why does one company succeed at opening up new markets and revenues while another company in the same industry fails? At too many companies, top decision makers don’t look beyond the “what” of a growth strategy. But these executives also need to understand the “how” — the mechanics of the growth strategy and how to put them into practice. And they need to align both “what” and “how” with their own organizational culture.
To better understand the factors underlying successful growth strategies, our research team — composed of academics and consultants — recently studied a variety of approaches to managing expansion. We conducted more than 50 in-depth interviews with managers from leading global companies, and compared our findings against the results of an extensive quantitative study of the strategic-growth practices of more than 200 firms around the world. We found four corporate growth management modes prevalent among these companies. These four growth modes are distinguished by the form of control that senior executives exert.
1. Self-organizing (low control of content and process): Companies with a laissez-faire approach give employees considerable freedom to devise and then implement new ideas. This is puzzling to many traditional managers, but it can often be very successful. Growth initiatives arise creatively from all parts of the organization; investment decisions follow a semi-democratic pattern. One example of a self-organizing growth company is the U.S. biotech firm Promega, which allows its researchers and managers to launch initiatives they deem appropriate, drawing on a substantial amount of corporate funding without board approval.
2. Agenda-setting (high control of content, low control of process): Top management establishes a clear, inspirational vision for the company’s new offerings, but stands back from the nitty-gritty of implementation. At Samsung, the Korean conglomerate, senior management challenged the staff to create “next-generation devices,” but restricted its own activities to (a) making sure that key experts within the organization connected with one another and (b) helping teams overcome organizational obstacles.
3. Context-setting (low control of content, high control of process): Top executives create a framework that nurtures the emergence of new ideas. The senior management of Allianz Global Risk, an international corporate insurance firm, invited 100 high-level managers to propose growth initiatives fulfilling certain financial targets. The most promising ideas received funding and were carefully monitored by the core through to fruition.
4. Directing (high control of content and process): Top management acts as the primary generator of growth. The corporate strategy team at Liberty Global, an international cable broadband company, determines all corporate development initiatives, reviews initiatives proposed by subsidiaries, and closely oversees execution.
According to our findings, no single growth mode consistently outperforms all others. Focus and consistency in all four modes are vital to performance. Companies that oscillate between modes or that cherry-pick elements from different modes perform less well than firms with a disciplined approach. Moreover, different growth modes fit better with certain companies, depending on their culture, their capabilities, and the needs of their industry.
A company that recognizes and develops its own preferred mode can significantly improve the likelihood of realizing its growth potential. If the growth mode is a natural fit, then specific processes — the “how” of shaping, staffing, funding, embedding, and governing an initiative — should deliberately reflect that particular growth mode. Examples of such growth-conscious best practices include:
• Shaping. Directing companies maintain a tight grip on initiative creation and development. This works well, as long as they avoid senior-management groupthink and pay sustained attention to outside perspectives. In self-organizing and agenda-setting modes, executives benefit from the energy of many minds, but need to keep ideas rigorously market-focused and coherent. In the context-setting mode — in which the corporate center retains control over idea generation while encouraging the wider organization to implement growth — best practices involve careful attention to financial guidance and measurement. SES, a worldwide television satellite services provider, granted significant leeway to its regional operating companies to pursue strategic initiatives, including mergers and acquisitions. But each initiative was measured against a defined internal rate of return overseen by the core.