Global competition and a weak economy have made growth challenging. But, some organizations like Apple, Amazon, and Starbucks defy the laws of economic gravity. Dave Power, president of Power Strategy, shared four best practices of the most successful innovation growth companies with Harvard.
Find the Next S-Curve. The best business models go through a predictable cycle of growth, often depicted as an S-curve. Diminishing returns set in as the most attractive customers are reached, price competition emerges, the product loses its luster, customer support challenges emerge, and new skills are required.
Unfortunately, once the reality of the S-curve becomes apparent, it may be too late to design the next growth strategy. The innovation window is when the first curve hits an inflection point. Steve Jobs understood this when he returned to Apple. In 2002, he challenged his company to break out of the mature computer industry where Apple had never had over 10 percent market share. Eight years later, said Power, after introducing the iPod, iPhone, and iPad, Apple Computer became Apple Inc.
Lean On Customers. Successful growth companies have a holistic understanding of their customers’ problems. Many are embracing tools to uncover opportunities to create value. This insight is the foundation for their approach to product innovation: rapid prototyping, design partnerships with lead users, and pivoting to improve their business model.
According to Power, during the turnaround of IBM, Lou Gerstner launched Operation Bear Hug to get the company back in touch with its customers. So, IBM’s top 50 executives had to visit five customers per week and deliver a write-up to Gerstner.
Think Like a Designer. Managers are trained to make choices, but they don’t always have good options. Innovation involves creating new options, which is where designers excel. Apple’s exceptional user experiences were largely the creation of Jonathan Ive, a professional designer.
Design thinking requires a different set of tools. Growth company strategists have abandoned Porter’s Five Forces Analysis because it assumes that markets have well-defined boundaries and competitors must fight for market share.
Lead the Way. The CEO must make innovation a priority, or it won’t happen. It requires a level of risk-taking that’s impossible without executive air cover. The best growth companies create a culture of innovation.
According to Power, Howard Schultz decided Starbucks had lost its way, so he flew in every store manager from around the world to redesign the café experience. Similarly, on a weekly basis, Google encourages its employees to spend one day coming up with new ideas.