DISCIPLINED GROWTH STRATEGIES

Transcription

1 DISCIPLINED GROWTH STRATEGIES INSIGHTS FROM THE GROWTH TRAJECTORIES OF SUCCESSFUL AND UNSUCCESSFUL COMPANIES Peter S. Cohan

2 Disciplined Growth Strategies: Insights from the Growth Trajectories of Successful and Unsuccessful Companies Peter S. Cohan Marlborough, Massachusetts, USA ISBN-13 (pbk): ISBN-13 (electronic): DOI / Library of Congress Control Number: Copyright 2017 by Peter S. Cohan This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Trademarked names, logos, and images may appear in this book. Rather than use a trademark symbol with every occurrence of a trademarked name, logo, or image we use the names, logos, and images only in an editorial fashion and to the benefit of the trademark owner, with no intention of infringement of the trademark. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Managing Director: Welmoed Spahr Editorial Director: Todd Green Acquisitions Editor: Robert Hutchinson Development Editor: Laura Berendson Coordinating Editor: Rita Fernando Copy Editor: Karen Jameson Compositor: SPi Global Indexer: SPi Global Cover image designed by estudio Calamar Distributed to the book trade worldwide by Springer Science+Business Media New York, 233 Spring Street, 6th Floor, New York, NY Phone SPRINGER, fax (201) , orders-ny@springer-sbm.com, or visit Apress Media, LLC is a California LLC and the sole member (owner) is Springer Science + Business Media Finance Inc (SSBM Finance Inc). SSBM Finance Inc is a Delaware corporation. For information on translations, please rights@apress.com, or visit Apress titles may be purchased in bulk for academic, corporate, or promotional use. ebook versions and licenses are also available for most titles. For more information, reference our Print and ebook Bulk Sales web page at Any source code or other supplementary material referenced by the author in this book is available to readers on GitHub via the book s product page, located at For more detailed information, please visit Printed on acid-free paper

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4 To Robin, Sarah, and Adam

5 Contents About the Author ix Acknowledgments xi Introduction xiii Chapter 1: Introduction 1 Part I: Exploring the Five Dimensions of Growth 21 Chapter 2: Growth via New or Current Customers 23 Chapter 3: Growth via New or Current Geographies 57 Chapter 4: Growth via Building or Acquiring New Products 89 Chapter 5: Growth from Current or New Capabilities 123 Chapter 6: Growth via Culture 165 Part II: Constructing Growth Trajectories 187 Chapter 7: Growth Trajectories 189 Chapter 8: Growth Road Maps 211 Chapter 9: Notes 241 Index 269

6 About the Author Peter S. Cohan is a Lecturer of Strategy at Babson College where he teaches strategy and entrepreneurship to undergraduate and MBA students. He is the founder and president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He has completed over 150 growth strategy consulting projects for global technology companies and invested in 7 start-ups 3 of which were sold for over $2 billion. He has written 11 books and writes columns on economic policy, stocks, and entrepreneurship for Forbes, Inc., and the Worcester Telegram & Gazette. Prior to starting his firm, he worked as a case team leader for Harvard Business School professor Michael Porter s consulting firm and taught at MIT, Stanford, and the University of Hong Kong. Since 2001, he has taught undergraduates and MBA students at Babson College. He earned an MBA from Wharton, did graduate work in computer science at MIT, and holds a BS in Electrical Engineering from Swarthmore College.

7 Acknowledgments This book has benefited greatly from the help of many people. I could not have embarked on this project without the enthusiastic support of Keith Rollag who chairs the Management Division at Babson. Len Schlesinger, former Babson College president and currently Baker Foundation Professor at Harvard Business School was particularly helpful in providing insightful suggestions about how to structure the chapters. My Management Division colleagues Dwight Gertz, Wendy Murphy, and Jonathan Sims all provided helpful suggestions. Thanks also go to my college classmate, Chris Lamb, for his insightful feedback on many chapter drafts. Finally, thanks go to my Babson students who inspired this book with their struggles to develop effective growth strategies for the many companies we studied. Without Apress this book would not exist. I am most grateful to Robert Hutchison for his enthusiastic support of the idea for this book and for the outstanding project management and editing help from Rita Fernando Kim and Laura Berendson. Finally, I could not have completed this book without the help of my wife, Robin, who patiently read and commented on many of the chapters; and my children, Sarah and Adam, who always make me proud.

8 Introduction I was the poster child for a confused adolescent. In college, I stumbled through a series of seemingly random career aspirations concert pianist, poet (my father dissuaded me from this career choice by asking to look up poet in the Yellow Pages), and architect before realizing in my senior year that I wanted a career that combined my interests in computers and business strategy. So I set my sites on becoming a strategy consultant helping companies identify, evaluate and profit from growth opportunities which I have done in various guises ever since. Back then, consulting firms hired newly minted MBAs, rather than college graduates as they do these days. While doing graduate studies in computer science at MIT, I met with the director of career counseling at its Sloan School of Management who introduced me to Index Systems, a consulting firm founded by four former Sloan School professors. I found out that consulting firms hired very talented people and provided opportunities for traveling and working on a variety of interesting projects. Index focused on helping managers use technology to boost business performance. I decided that I was most interested in strategy work, so after earning an MBA at The Wharton School, I went to work for Monitor Company a strategy consulting firm cofounded by Harvard Business School strategy guru, Michael Porter. My years there were a supremely intense learning experience. Thanks to what partners saw as a talent for turning Porter s ideas into processes for leading client teams, I was quickly promoted to managing consultant teams. Ultimately, the demanding travel burned me out and I spent the next few years working as an internal consultant in the banking and insurance industries. In 1994, I took a chance and started my own consulting firm that provided strategy consulting for large, high-technology companies. This happened at a lucky time in economic history the Internet was emerging as a major force for business growth.

9 xiv Introduction My consulting business boomed, I wrote several books including Net Profit which made me a regular on TV networks such as CNBC and an in-demand speaker at business conferences around the world. I also began investing in start-ups since then, I have funded seven private companies. Three of those were sold for over $2 billion. In 2001, I began teaching at Babson College which U.S. News and World Report has ranked the top U.S. entrepreneurship school for the last two decades. After teaching part time, I became a full-time lecturer in 2014 and was promoted to a Lecturer of Strategy in I teach MBA and undergraduate courses such as Strategy and the CEO, Strategic Decision Making, Strategic Problem Solving, and Foundations of Entrepreneurial Management. I also created and lead offshore Start-Up Strategy electives to Hong Kong and Singapore, Israel, Spain and Portugal, and Paris. In these courses, students visit with start-ups, venture capitalists, and accelerators and conduct six-week consulting projects for start-ups. This brings me to why I wrote this book. In almost every course, I assign students the challenge of analyzing a company s problems and figuring out how to solve them. By far the most frequent problem they encounter is that the company is not growing profitably. Sadly, their solutions to that problem are at best uneven in their originality and likely effectiveness. This problem is not limited to students the vast majority of CEOs struggle unsuccessfully with the challenge of how to revive a moribund company or how to sustain the growth of a company that has done well in the past. I realized that it s unfair to expect students to come up with great growth strategies unless they have a practical road map for doing so. In February 2016, I wrote a Note on Growing Faster to help remedy the problem. A more concise version of the Note was published as Five Commandments for Faster Growth. 1 But I concluded that in order to provide sufficient depth into how to craft successful growth strategies, I should write a book. Disciplined Growth Strategies Road Map If your organization needs disciplined growth, this book will explain how to achieve it in two parts.

10 Introduction xv Part I. Exploring the Five Dimensions of Growth Chapters 2 through 6 examine how companies pursue growth along each of the five dimensions of growth customers, geographies, products, capabilities, and culture. For each of these chapters, Part I covers the following topics: Definitions of key terms and concepts, where appropriate. Summary of key principles for achieving growth through the dimension addressed in the chapter. Case studies of successful and unsuccessful large and small companies pursuing growth from the current or a new growth vector. Lessons learned from the cases about what to do and what to avoid. Part II. Constructing Growth Trajectories This second part of the book consists of its concluding chapter in which we will explore how companies chain together some or all of these dimensions into growth trajectories. Drawing on an analysis of Forbes 2000 companies, Chapter 7 does the following: Identifies the fastest and slowest growing companies. Describes the growth trajectories of the fastest and slowest growing companies. Analyzes the logic underlying the decisions to follow those growth trajectories. Highlights the most useful takeaways for leaders in what principles to pursue and which to avoid in constructing growth trajectories. Chapter 8. Road Maps Road maps for leaders to capture growth from each dimension using examples from the cases in the chapter. 1 Peter S. Cohan, Five Commandments for Faster Growth, Knowledge@Wharton, May 9, 2016,