Milestone Group Quarterly: July 2006
Articles
Leading Through A New Growth Platform:
By Professor Yves Doz of INSEAD
When we research high growth, very successful companies in the technology industry, as well as a number of other industries such as logistics services, medical systems, or specialty chemicals, we discover a common pattern both in what they do and how they do it.
In short, they are able to leverage their resources, skills and investments – getting more “bang for the buck” via a strategy of building on new growth platforms.
A new growth platform is not just – nor even necessarily – a “platform” in the commonly understood sense of the technology industry.
Let’s take an example. Cisco has developed a growth platform strategy over time by identifying the Internet as a disruptive technology for various segments of the communication industry – an enabling discontinuity – from Cisco’s standpoint. Second, since its first success in e-mail, Cisco has identified unmet customer needs, and new potential markets. Thirdly, Cisco has cultivated over time generative dynamic capabilities around the integration of technological acquisitions, sales and marketing, the retention and development of entrepreneurial talent (including the leaders of acquired companies), which can be redeployed flexibly from application area to application area. Cisco sees itself as a serial disruptor, market-wise, and a serial replicator, competence-wise.
Of course growth platforms cannot keep spanning new business forever, in particular when selection criteria for new businesses are set at a very demanding level, as with Cisco. Thus, Cisco has started a second-consumer-oriented-growth platform with the acquisitions of Linksys and Scientific Atlanta, and provides support to this new growth platform by mobilizing and sharing competencies from the established “B2B” growth platform.
In sum, a growth platform is the combination of a strategic enabler – typically a discontinuity or a disruption – that will create multiple opportunities, characterized by a set of principles for creating and selecting business domains, and of generative capabilities that can be leveraged from opportunity to opportunity and then better honed with each application.
Of course, in most companies, growth platforms are not the dominant thought on day one, they emerge and evolve from the interaction between action and reflection. When it first developed “combo-chips” (as they then called them) for Seagate’s disk drive controllers, ST Microelectronics’ (another growth platform company) management viewed it as a means to integrate power and signal, and analogue and digital circuits on a single chip to solve Seagate’s challenge. Only later, with a growing series of customer partnerships in different application areas, did the concept of a “system-on-a-chip”, as a growth platform, become clear.
A few companies, though, start deliberately as new growth platforms. Take the easy Group, for instance. Founder Stelios Haji-Ioannou, an economics graduate, saw the potential of dynamic yield management for a whole range of service businesses, starting with the easyJet airline, and conceived of building a growth platform around yield management capabilities.
Cisco, or even ST Micro were new ventures, or deeply rejuvenated companies, how can incumbent leaders, many of the companies we researched, develop new growth platforms?
First, and perhaps most critically, new growth platforms need to be given attention and commitment by top management. Bill George at Medtronics focused most of his time on growth, and appointed the company’s Vice Chairman, physician Glen Nelson, to be chief growth officer. Business Group or Division Heads, with heavy operating responsibilities, and quarterly results to deliver are not likely to focus on growth, except perhaps within their existing core business. Yet, new growth platforms should not be confused with new venture organizations. These seldom succeed in developing major new growth opportunities, and after that stay too far from core business activities to maintain their support.
Second, the new growth platform needs, paradoxically, to be both independent from core businesses, in terms of funding, measurement, and success criteria, and yet embedded in and interdependent with core businesses in terms of capabilities and competencies. When UPS renewed itself, and developed a new growth platform around synchronized commerce, it set up a distinct team headed by Mike Eskew (now UPS’ CEO), but was also careful to assemble capabilities already present in UPS’s businesses rather than re-invent them. Only when it needed new capabilities did it go outside through acquisitions or alliances.
Thirdly, because the full span of new growth platforms can seldom be anticipated at the outset, flexibility and adaptability need to be preserved. For instance, IBM has put in place an entrepreneurial venture process to pursue “emerging business opportunities” (EBOs). Some of these become new growth platforms – the whole life science business group of IBM has its origins in that type of process: some are folded into existing businesses -they renewed client-server computing, for instance – some are dissolved, thus not creating a new growth platform, nor even a single business, but having had a strong impact on multiple business by providing new core technology areas (e.g. RFID) or encouraging and focusing attention on major new capabilities (e.g., mobility).
Fourth, the team and the process are more important than the initial idea. In fact, from a corporate standpoint, the CEO should frame growth not as single new business ideas, but as a process to create a stream, or a pipeline of potential new growth platforms. Ideas evolve, change, some die, some develop into a new growth platforms, a high-quality, high-intensity team is needed to lead that process and get the most from potential growth platform ideas. The New Growth Platforms team should include a few senior executives who not only have a good understanding of the companies capabilities and markets, but also an entrepreneurial attitude and a maverick mindset. Also, they need to make quick connections and be able to make resource commitment decisions.
Fifth, the most successful companies we researched, P&G and Medtronics for instance, built a stable process from their new platform growth experiences. Such a process not only defines roles and contributions to the development of New Growth Platforms, but also builds company-wide commitment to their importance. Unless the activities involved in New Growth Platforms are defined, talent business unit level executives will neither see how nor why they need to be different from their day to day innovation processes, or will gladly delegate them to a new venture organization and leave them there.
As the analysis of a few key priorities outlined above shows, Creating New Platforms is demanding: it is not something a CEO can delegate, nor something the CEO can do from the loftiness of the “C-suite”. It requires the whole organization, but needs to be led by the CEO personally.
Yves Doz is the Timken Chaired Professor of Global Technology and Innovation at INSEAD, where he was Dean of Executive Education (1998-2002) and Associate Dean for Research and Development (1990-1995). Professor Doz was also Director of the Management of Technology and Innovation programme at INSEAD, a multi-disciplinary effort involving about 20 faculty members and researchers (1987-1994). Yves Doz received his PhD from Harvard University and graduated from the Ecole des Hautes Etudes Commerciales (France). He has also taught at the Harvard Business School, Stanford's Graduate School of Business and Aoyama Gakuin University, Tokyo.
His research on the strategy and organization of multinational companies, examining specifically high-technology industries, led to numerous publications, including "The Multinational Mission: Balancing Local Demands and Global Vision", co-authored with CK. Prahalad (1987) and "From Global to Metanational: How Companies Win in the Knowledge Economy" co-authored with José Santos and Peter Williamson (Harvard Business School Press, 2001) which shows how companies can mobilize dispersed knowledge to learn from the world. His research on strategic alliances has been summarized in "Alliance Advantage" (1998), co-authored with Gary Hamel. He won numerous awards: a Distinguished Scholar Award from the Academy of Management (2003) and an appointment as "Inaugural Fellow of the Strategic Management Society" (2005). Prof. Doz was most recently elected Fellow of the Academy of Management (2006), and was nominated by The Economist as one of a handful of European 'Management Gurus'.
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