Growth should be the number one priority for CEOs, but about 90% of companies fail in sustaining growth over the long-term. The definition of what constitutes growth varies, depending on the organisation. Growth can mean increasing revenue and shareholder value, boosting market share, or even enhancing customer retention – which increases the lifetime value of each acquired customer.

For some organisations, growth is measured in terms of the expansion in their impact and influence. Not all growth is useful. An organisation can spend inordinate amounts of money to gain new customers, with the net result that they make losses on each new account. Our focus is on sustainable, value-added growth, which is one that advances the organisation’s mission, moves the company in the direction of its stated goals and objectives and enhances shareholder value.

What level of growth is appropriate? At the very minimum, a healthy organisation should be growing incrementally, which is 10-15%. This level of growth keeps the company above or at the level of inflation. Any organisation not able to achieve this could be at risk of losing value in real terms. The next level of growth is best – in – class growth, where an organisation is doing much better than its peers by applying best practices, optimising operations, utilising tried and tested tools, systems, and procedures, to obtain sustained growth of about 20-50%. The ultimate level of growth is innovation-driven growth where year on year growth in the double or even triple digits is achieved and sustained. Attaining growth at this level requires innovation, and is appropriately named innovation-driven growth.

To thrive, we must innovate. But that’s easier said than done. Many companies today are struggling with the concept of innovation—what it means to them, how to attain it, and how exactly it can contribute to their growth. Growth through innovation also appears to generate a sense of risk and uncertainty. A major reason for this is that innovation requires changes that force us out of our comfort zones and requires us to think in different ways. Innovation might require walking the unbeaten path. Fortunately, research-based and methodical data is now available to draw viable conclusions about how to accelerate growth through innovation, as well as how to mitigate the associated risks.

Innovation has been defined in multiple ways but one I find most robust is its description as the process of creating value by applying novel solutions to meaningful problems. This suggests that a truly innovative process must have an affirmative answer to three pertinent questions – (1) is it novel? (2) does it solve a meaningful problem? (3) does it create value? Research shows that an organisation’s ability to innovate impacts its long-term success, shareholder value creation, and profitability in today’s competitive and dynamic business environments.

Following are five key variables for successful innovation.

1. Think 10X: True innovation happens when you try to improve something significantly. Targeting growth that is 10 times higher than the baseline rather than a 10% increase is more likely to cause us to come up with innovative solutions. A 10x goal forces you to rethink an idea entirely. It pushes you beyond existing models and forces you to totally reimagine how to approach it. The term moonshot thinking is used within Google to refer to 10X growth, exponential growth. A self-driving car represents moonshot thinking. The Tesla – and other Electric powered cars – are moonshots. It is interesting to note that Tesla as a company started in 2003 and is now the second most valuable auto company in the world after Volkswagen which was founded in 1937 (sixty-six years earlier). It is also outperforming the Benz Motor Company (founded in 1926), Ford (founded in 1903), and Toyota (founded in 1937). A critical part of the innovative solutions that Tesla came up with went beyond the traditional focus of auto-companies on aesthetics, safety, and speed to ensure that there was a large number of fast-charging batteries and charging stations.
2. Focus on the customer: Value creation must be at the heart of the architecture of your business and innovation strategy. If you can build a robust and loyal base of people who love what you do, you’ll have something rare and valuable. It is the value proposition that gets customers to buy; it is a highly differentiated value that drives market share attainment. High-value delivery is achieved by a deep understanding of the customer needs their goals, aspirations, and the resulting opportunity space.
3. Develop a balanced portfolio of products: Strategy and tactics are two sides of the same coin. Providing incremental value enhancements to your existing customers is very important. These help to sustain the value of your existing revenue channels, ensure the ongoing profitability of the business and can provide the cash needed to fund new opportunities. However, to thrive in the long term, a company should not be solely reliant on incremental growth. In parallel with incremental improvements, companies must engage in continuous re-evaluation and innovation of their products, their services, and themselves. These two approaches – self reinvention and white space development – should be at the heart of your strategic innovation thinking. Ensuring both tactical and strategic innovation will ensure both the short-term and long-term success of your company.
4. Become an ideas capturing machine: Ideas can come from any part of the organisation and even outside the organisation. It is important to look for ideas everywhere, to encourage curiosity and solicit questions from customers and employees in all departments and at all levels. Opportunities for feedback and input should be created consciously during team meetings, leadership updates, or regular employee surveys. Assumptions should be validated by data, not opinions.
5. Develop a culture of learning: Innovation involves applying processes that promote exploration, discovery and fast, affordable experimentation. Operational excellence comes from constant improvement, which requires learning. Innovation often results from the learning derived from iterative experiments. It is important that the organisation creates an environment where it is safe to take calculated risks, explore, and learn; rather than be obsessed with avoiding failure. Innovation requires individuals to be open-minded and comfortable dealing with uncertainty and ambiguity. They view innovation failures as learning opportunities. Innovation demands an empowering work environment that drives innovative behaviors by aligning culture, structure, leadership behaviors, measurements, and rewards.

This article was originally published in The Guardian > Read here