001 three strategiesformanagingfastgrowth_ver1.0

Three Strategies for

Managing Fast Growth
Georg von Krogh and Michael A. Cusumano

【Three Strategies for Managing Fast Growth】

Introduction
Many companies approach growth management with no strategy
other than to do what they did when they were new

According to a 1998 survey

 Companies that enjoyed greater than 10% sales growth per year, about 78% were still
around six years after starting.
 Companies with flat or decreasing sales, only 27.5% survived for six years.
1


Contents
① Growing Strategically
② Scaling
③ Duplication
④ Granulation
⑤ Combining Strategies 2


Contents

② Scaling
③ Duplication
④ Granulation


To grow steadily and avoid stagnation

4


A good growth plan

Internal focus

5


Ex. Netigy

Netigy has only 650 employees, but I alｒeady has invested in

a chief knowledge officer
and

knowledge-management system for 20,000 people.
Netigy is prepared to handle its vision for growth.

6


What dose drive the growth plan

Company’s set of capabilities

The organization possesses or plans to develop

7


Companies grow using three basic strategies
The important things is to include principles of

organizational learning,
knowledge acquisition and
knowledge transfer.

Three strategies

 There is no one best strategy.
 A growth plan may end up taping more than one.

8


Contents

③ Duplication
④ Granulation


Image of Three Strategies

Geographical Duplication
expansion limit Granulation

Scaling Scaling limit
Growing them aggressively
Duplication
Disinguished cells
This Smaller granules
[of the business]
Chapter

10


Scaling : Doing More of What You’re Good At
Scaling starts with acoherent vision of products, technologies and customers.
The vision is the foundation for growth.

The vision should

The focus should

11


Scaling requires a company to implement its vision quickly

An axiom of motorcycle racing applies
precisely to the technology business

 Move fast, keep going – or end up on your butt.
 Slow down on the throttle and you’ll be off the road
and into the trees.

Ex. Netscape

Adding a variety of servers, then opening up new Adding new servers and applications tools
markets for corporate intranets and extranets 12


Invest Aggressively

 Expands product development around  Expands product lines and increases the
core technology and offerings intensity of marketing by using existing
distribution channels to reach new customer
groups with related needs

Expands Product line
Expands
Cora New
tecnology customer
and Existing groups
offerings customer with
related
Using needs
existing
distribution

13


Invest Aggressively
Companies must pursue aggressive investment
– often before sales growth becomes apparent.

 Netscape invested in growth, knowing that without growth, it would face far more serious
problems than overinvesting.
 And Netscape grew – even more quickly than it anticipated.

14


Specialize and Standardize
Initially : simple functional structures

Finance
Product
Manufa- Marke- and
Sales Develop
cturing ting accoun-
-ment
ting

As the grow : duplicate the functional
departments within divisions

Product
Manufa- Marke-
Sales Develop
cturing ting
-ment
Finance
and
Divisions tied to particular Accoun-
ting
products or geographic markets. Manufa- Marke-
Product
Sales Develop
cturing ting
-ment

15


Hire the Right Mix

16


Adapt the Structures

17


Find Ways To Learn From Customers Early
Netscape discovered the intranet market by learning from its customer

A bank in Switzerland

A new
opportunity

 Netscape quickly identified intranets as a new opportunity and extended the idea to create
extranets

18


column : Is Scaling the Right Strategy?

19


column : Is Scaling the Right Strategy?

learn about mass manufacturing and
Scaling requires a company to
new manufacturing techniques.
Knowledge of mass marketing is important, but when competition intensifies,
individualized customer information becomes the
strategic weapon.

Learning how to offer technical support for an
increasing customer group is critical for companies that are scaling.

20


Contents
② Scaling

④ Granulation




Scaling limit Scaling limit
Duplication
Disinguished cells
This Smaller granules
[of the business]
Chapter

22


Duplication : Repeat the Business Model in New Regions
Like scaling duplication starts with a coherent vision of products, technologies
and customers.
But unlike scaling the vision must include goals for geographical
expansion.

Coherent vision

Like scaling

23


Balance Standardization and Adaptation

 Keeping processes and organizational  Changing the organization and
details close to the way they are done in processes to address the needs of the
the original location. local region.
A carefully
orchestrated tension
balances

Marketing
 Duplicating marketing is important but responsiveness to local market conditions is
key to long-term success.

Manufacturing
 Centralized manufacturing reduces manufacturing costs, but duplicated manufacturing
increases flexibility

24


Similar human-resource-management practices
Duplicated businesses should follow similar human-resource-management practices.

Geographical
expansion

subsidiary

Duplication

 By standardizing staffing, training and remuneration plans, a company can rotate
employees among subsidiaries instead of having to hire and train new people.
 With HR duplication employees also share new ideas and experience smoothly while
providing consistent service to customer
25


Hire Flexible, Independent Managers

26


Duplicate Key Parts of the infrastructure
Informal sharing of experience usually is not the best learning mechanism.
Senior managers have less control.
Growing by duplication requires that a company externalize, or transfer, key
elements of its infrastructure

Geographical expansion calls for

27


Black-Boxing
Black Boxes must be available at a moment’s notice to help
employees and managers worldwide to accomplish important tasks

Black-Box for Black-Box for
Establishing a new subsidiary Instructions

Choosing a site How to service clients
outside business hours
Using leagal counsel
How to set up a store-
Selecting and training maintenance program
personnel

Laying out a store

Purchasing manuals

28


Duplicate Entrepreneurial knowledge
Kamprad(IKEA)
Duplication Black-Box

Catalog format

Local routine

Communicating the vision Use
Visiting new stores
Taking notes on store operations
Discussing procedures
Improvements

 Kamprad acted like a field commander, communicating the vision to new employees,
visiting new stores, taking notes on store operations and discussing procedures and
improvements directly with employees.
 Through such attention to detail, the black box can become a local routine.
 Employees then use it as a foundation for devising new and better solution 29


column : Is Duplication the Right Strategy?

 Home furnishings include items that customers want to see before purchasing
 Fro services such as consulting, architecture and customized software
development, personal contact and trust building are essential

 Distribution channels are underdeveloped or it can build up a unique set of local
distributors that would be costly for potential competitors to imitate.

 Unique information about local customers and new trends from foreign markets
may lead to better market segmentation and targeted marketing than smaller local
companies can offer
30


column : Is Duplication the Right Strategy?
local market
To set up new subsidiaries abroad, a company must learn about
conditions and apply the knowledge in adapting products,
marketing and operations.

Companies need to learn Communication flows

Central management Local management

Product-development
Local marketing staff
staff

Customers Sales staff

31


Contents
② Scaling
③ Duplication





Scaling Scaling limit
Duplication
Disinguished cells
Smaller granules
[of the business] This
Chapter
33


Granulation : Growing Select Business Cells
There are limits to scaling and duplicating.
A company’s product line may run out of steam, too many low-cost competitors may
copy it, or there may be no new foreign markets to conquer.
At that point the best strategy could be granulation.


Scaling limit Scaling limit
Duplication
Disinguished cells
Smaller granules
[of the business]
34


Coherent vision for Granulation
Like the other strategies granulation with a strong coherent vision for
growth.
But its focus is on developing unique capabilities and creating new
businesses.
A company uses its resource and knowledge to explore new territory with
new, autonomous business units, independent subsidiaries or corporate spinoffs.

Coherent vision for growth

unlike the other strategies
35


Balance the Old and New
Granulation is risky;
Business units may not leverage fully the company’s existing knowledge and
asset base.

 Learn from working on local
 Expertise and resources from other
technologies with local customer and
parts of the company
local staff

They should not only reuse the
old one but also combine
those assets in new ways

36


Balance the informal and formal
Both informal and formal methods are required for knowledge to flow between
entrepreneurial cells.

 Strategic planning processes that
encourage regular discussions among
 Help people in different groups establish
managers and employees from different
trust and share experiences
cells.
 Ties generally center on short-term
 Hold periodic conferences or rotate
issues.
experienced personnel among company
units

Formal methods complement
informal mechanisms

37


Evaluate and Monitor
Companies benefit from selectively evaluating and monitoring new business opportunities.

Local entrepreneurs Senior-management
Monitoring
Advising

 Conceive business ideas  Act as investors, with both a
 Draft business plans monitoring and advising roll.
 Organize a venture team
 Form entrepreneurial cells

38


Learn From Customers, Partners and Competitors
Often knowledge comes from customer feedback or lead users.
gather and analyze intelligence on
The Company must establish systems to
existing and potential competitors.
Acquiring smaller companies with expertise in the new technology and forming alliances
are two ways to acquire external knowledge.
Both need routines for sharing knowledge between the acquisition or alliance
partner and the rest of the company

39


column : Is Granulation the Right Strategy?

 The company has conquered all relevant markets, product demand is flattening out
 Customers are changing their preferences
 Increasing competition for market share makes further growth too expensive

 Companies must explore and experiment with new technologies that are adjacent
but outside current knowledge areas, routines and capabilities

40


column : Is Granulation the Right Strategy?
Granulation requires that a company obtain knowledge outside itself
and operations, especially about its industry.

Company’s industry
Knowledge
Ex. New technologies

Company

41


Contents
② Scaling
③ Duplication
④ Granulation
42


Combining Strategies
To identify the strategy with the best fit, a company should start with a bird’s eye
of the comparative strengths of scaling, duplicating, granulating.(See “Strategies
for Growing and Learning,” next page)

 A company merely learns how to do more of what it already does.

 Requiring a company to learn how to apply what it knows to new geographical markets

 Requires a company to gather substantial information about new competitors and new
product and market opportunities
 But also enables gradual diversification from related businesses into unrelated
technologies, products and market
43


Strategies for Growing and Learning

44


Combining Strategies
managers implement the
For most early-stage companies, it is best if
three growth strategies sequentially, with some overlapping.

Overlapping

45


Closing

Managing and sharing knowledge is vital.
However a company chooses to apply its
knowledge and whatever strategy it chooses, it
must be committed to continued growth.
It can’t afford to become complacent.
Companies that aren’t steadily growing might
very well be on their way to steadily dying.

46

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