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P&G and Citi are the two examples that we’ll draw on most extensively. Despite their long histories, they had (and have) significant challenges to overcome.

TABLE 1: Growth Factory Assessment

Component	Element	Requires attention	On the way	Desired state
Growth blueprint		Growth types	No definition of growth types	Defined growth types, at least one of which is noncore; nonspecific classification criterion	Defined growth types with simple, agreed-upon classification criteria
		Growth goals and guidelines	No clear vision	Directional vision lacking key specifics	Codified and shared growth targets with detailed on- and off-the-table strategic options
Productionsystems		Robust innovation processes	Innovation treated randomly	Innovation process defined, occasionally followed	Robust, learning-based process to conceive of and commercialize ideas routinely followed
		Idea supply chain	No systematic mechanisms to source innovative ideas	Mechanisms to source internal or external ideas	Mechanisms to source internal and external ideas at or beyond the fringes of the company and industry
		New-growth groups	No safe spaces for incubation	Informal mechanisms to shelter new ideas	Formal mechanisms serve as safe spaces for new ideas
		Little bets labs	No mechanism to design and execute strategic learning experiments	Mechanism to run single-variable experiments (e.g., product prototype)	Structured ways to rapidly and affordably run multivariable experiments (e.g., transaction test)
		M&A and partnership engines	No formal approach to acquisitions or partnerships	Acquisitions and partnerships occasionally made and in an ad hoc way	Robust process to acquire and partner with promising ventures
Governanceand controls		Idea governance systems	No disciplined approach to manage innovation	A single process to manage all types of ideas	Distinct measurement and management approaches for different types of ideas
		Portfolio tracking systems	No tracking system	Ad hoc tracking system	Formal systems produce regular snapshot report that is the basis of leadership discussion
		Resource allocation systems	“Find it when we need it” mentality	Dedicated pool of human and financial resources for innovation, with allocations reviewed episodically	Dedicated pool of human and financial resources for innovation, with allocations reviewed regularly
		Continuous improvement systems	No continuous improvement systems	Occasional SWAT teams to address identified issues	Individual or small team that “innovates the innovation systems”—specifically spotting and removing bottlenecks
Leadership, talent,and culture		Lean-forward leaders	No role modeling by leaders	Desired cultural changes identified; inconsistent role modeling by leaders	Leaders regularly role-model desired behaviors and intervene to shape the corporate culture
		Innovation talent	Growth efforts led by “usual suspects”	Identified talent plan with detailed description of desired language and skills	Established, skilled team supported by enabling language
		Measurement and reward systems	Working on new-growth efforts can negatively impact career	Working on new-growth efforts has neutral impact on career	Dual systems that reward operational excellence and innovation appropriately
		Development programs	No formal training mechanisms	Episodic, not systematic, training efforts	Formal mechanisms to teach key mind-sets and spread enabling language

The June 2011 issue of Harvard Business Review detailed P&G’s effort to systematize the pursuit of growth (“How P&G Tripled Its Innovation Success Rate”). The story begins in the year 2000, when P&G found its revenue shrinking despite a robust economy and substantial investment in research and development and consumer insight. An internal analysis showed that only 15 percent of P&G’s growth efforts were succeeding, and the ones that did were small. The analysis suggested that P&G’s growth pipeline was inadequate for its long-term aspirations. The interventions described in the article were transformational. By 2011, 50 percent of P&G’s growth efforts succeeded. Initiatives had doubled in size. That’s a sixfold boost in productivity. Most importantly, the article reported that P&G’s growth pipeline was sufficient to meet internal innovation targets. Proprietary analysis by innovation thought leaders Jeffrey Dyer and Hal Gregersen showed that in 2012 investors rated P&G as the world’s twenty-fourth most innovative company, based on the substantial “Innovation Premium” baked into its stock price.¹

Consider the very different sorts of challenges facing Citigroup, one of the world’s biggest financial institutions. In December 2007, Vikram Pandit took over as CEO after Citi reported surprisingly disappointing third-quarter earnings (Pandit stepped down as CEO in October 2012). Of course, disappointing earnings were an early sign of the financial crisis that hit the global economy with full force in 2008. One of Pandit’s first actions was to commission an in-depth look at Citi’s current situation, strengths, and gaps. One finding was that innovation was no longer viewed as a core competency. While Citi had been responsible for many “firsts” during its history, including creating the first global foreign exchange network and connecting the world by financing initiatives such as the transatlantic cable and the Panama Canal, the assessment found that the innovation pipeline had dried up and that the culture had shifted away from manifesting innovation as a core value. Don Callahan, Citi’s chief administrative officer, told Pandit, “It’s worse than we thought. We’ve lost innovation.” Pandit’s response was direct: “Get it back.” Pandit believed that for Citi to not only survive but thrive, it had to urgently reestablish innovation—and the growth that innovation creates—as a central focus.

Citi is earlier in its journey to systematize the pursuit of innovation-driven growth than P&G, but despite the 2007–2008 financial crisis, the company had enough core strength to reboot, refocus, and reenergize its pursuit of growth, and since then has made substantial progress toward revving up its own growth engine. Notably, the appointment of a chief innovation officer and the creation of a new team, Citi Ventures, which operates in close partnership with some of Citi’s most innovative business units and leaders, have had real business impact and created an innovation system that Citi has begun to scale across the enterprise.

While P&G and Citi are both giant companies that we have worked with closely (Anthony was the coauthor of the P&G article mentioned earlier), many of the lessons apply to smaller companies as well. Building a Growth Factory also includes a handful of illustrative examples extracted from our firsthand experience at Innosight, an eighty-person professional services firm where we both serve as members of the global leadership team.

Whether you are the CEO of a multinational, multibillion-dollar company or the head of a three-person enterprise, we hope detailing the components of a functioning growth factory will help you to achieve the results you seek.

1. “The World’s Most Innovative Companies,” Forbes.com, http://www.forbes.com/special-features/innovative-companies-list.html, accessed September 17, 2012.