How many companies are able to secure a 5% growth rates for 10 consecutive years? This is a question that Tony and I discussed when I met with him in my last trip in the Silicon Valley.
I/ Presentation of Tony Ulwick
Tony Ulwick is a product innovation expert and consultant. He is the pioneer of jobs-to-be-done theory and the inventor of the Outcome-Driven Innovation (ODI) process. In 1991, he founded Strategyn, which today is the leading innovation consulting firm.
Ulwick’s first major success using ODI came in 1994 when he helped Cordis Corporation (now a J&J company) create a new line of angioplasty balloons. They released 19 new products, all of which became number one or two in the market. Their market share increased from 1% to over 20%. This was the first of hundreds of successful ODI applications, and the successes continue today. Over the past 22 years, Tony has generated billions of dollars in revenue growth for over 1/3 of the Fortune 100 firms, including Microsoft, Johnson & Johnson, GM, and Motorola.
II/ Sustaining growth is challenging
This is a question that was addressed by Rita McGrath, a professor of management at Columbia University. 2347 companies were surveyed, each of them having a market capitalization of 1 billion dollars or more. Many top managers pride themselves on their ability to secure double-digit growth rates year after year. One would expect that a significant portion of them would be able to secure a 5% growth rates for 10 consecutive years.
And yet, according to the study, only 10 companies of the 2347 are able to secure a 5% growth rate for 10 consecutive years. This is surprisingly low.
III/ Failing fast and pivoting are not an innovation strategy: why is it proving so difficult for large companies to sustain growth ?
The reason is not that companies fail to manage their product portfolio. They are usually quite good at tweaking their products along the way and keeping their market share. But, things change drastically when companies witness a dramatic change in their competitive environment such as technology change and/or new entrants boasting a different value proposition. In a more turbulent competitive environment, companies have greater difficulty in maintaning sustainable growth rates.. In other words, securing growth proves harder when there’s a change in the competitive environment. When companies have to reinvent themselves, they fail to keep their 5% growth rate. In other words, companies fail to sustain growth because they fail to innovate.
The fact is that the success rate of inventing new products is much lower than one would expect. Indeed, only 5% of new products turn out to be a success. This means that companies need to invest in 20 innovation projects if they want just one to perform correctly. What is it that is making innovation so hard?
This is a question that Tony and I addressed in a follow-up conversation.
Further readings :
- For more information on why companies maintain sustainable growth, please refer to Rita McGrath’s article on HBR, here
- For more information on Tony Ulwick, please refer to Strategyn’s website, here