Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity

by Rita Gunther McGrath

You've been charged with growing your business. Incremental growth can no longer deliver the results you need. You need truly dynamic growth - and you need to achieve it without risking a hugely expensive gamble. How can you encourage innovative new ventures and pursue ambitious growth while minimizing risk? In Discovery-Driven Growth, authors McGrath and MacMillan show how companies can plan and pursue an aggressive growth agenda with confidence. By carefully framing their strategic growth opportunities, testing each project assumption against a series of checkpoints, and creating a culture that acts on evidence and learning instead of blind stumbling, companies can better control their costs, minimize surprises, and know when to disengage from questionable projects--before it's too late. Providing tools that will help you select and better assess the potential of any strategic venture, from new product lines to entirely new businesses, the authors outline a comprehensive process that lets you identify, manage, and leverage your company's full portfolio of opportunities. By reducing up-front costs and eliminating unnecessary risks, you'll be able to avoid missteps and explore more options to create the breakthrough growth that your business requires.

Genres: Business, Entrepreneurship, Management, Nonfiction

256 pages, Kindle Edition

First published March 16, 2009

Reviews

[Jack · Rating 3 out of 5]

A bit dry, but it’s a foundational piece of modern business strategy literature that is constantly referenced and built on in so many consulting, strategy, and innovation pieces since its publication.

Working as a team, agree on challenging but realistic new standards of performance that you think will push your company to the edge of its capabilities, but not over the edge. Set standards for increased revenues and increased profitability. What would success look like? Now, working backward, analyze your existing portfotio to determine whether there is enough in your pipeline of initiatives to deliver the levels of performance required by your new frame. if not, try to specify the number and type of new initiatives (both efficiency oriented and growth oriented) that would roughly get you to the right performance level. Specify, as best you can, what core value you think you bring to customers and the domains (geographic, technological, etc.) that you'd like to participate in. Try to make these statements fairly specific, so that it is clear what kinds of projects will be in, or desirable, and which will be out or undesirable. Agree as a team on a set of screening statements that you can commit to using. Test the screens on a few of your proposed initiatives and then refine them. You'll be using the screens to make some important portfolio decisions in the next part of the process, so it makes sense to take this exercise extremely seriously. Go back to the frame developed, which should provide a sense of the projects' size and scope necessary to address the growth challenges as the senior team currently sees them. Collect information on the major initiatives currently underway at your firm. You'll have to decide what counts as major, as opposed to business-as-usual. At a minimum, you'll want to know the potential upside of each initiative when it is mature (in terms of either revenue growth, profit growth, efficiency gains, or operational savings), You'll also want to know what resources need to go into the initiative. Then, map them onto a portfolio map so you can see how your portfolio looks. Ask yourself: is the portfolio of projects we're working on consistent with your strategy; will the current portfolio be adequate to achieve our growth goats; are sufficient resources being dedicated to platform launches and options; are sufficient resources being dedicated to making sure the core is developing well-becoming more efficient and entering into new growth opportunities? Given these insights, decide what proportion of resources you wish to allocate to each area in the opportunity map. There is no one best allocation of resources-it's a function of your strategy. The golden rule, however, is that resources allocated to options stay with options, those allocated to platforms stay with platforms, etc. You want your very best options to compete with one another for funding and attention, not options competing with core enhancements. Think through what 5 - 7 initiatives would be necessary to achieve the strategic objectives. Ideally, map these onto the opportunity map so that you can see what proportion of the future effort will come from core enhancements, new platforms, or the conversion of options to platforms. A corporate-level initiative might comprise a number.of projects, but at the senior level, you must be clear on the initiatives you intend to support. Some of these might stem from organic growth. Others might involve acquisitions. Since the availability of attractively priced acquisition targets can be unpredictable, it's worth considering how an initiative could be accomplished both ways. Decide on a growth target for each initiative. Each initiative should be someone's responsibility. Major platforms need dedicated resources to be managed; core enhancements and some options might be able to make progress with part-time statt. Assign responsibility for keeping track of the entire portfolio of opportunities and managing the innovation and growth pipeline, and specity as a senior team how you want to be kept up-to-date on the portfolio's progress. Determine where you are going to locate your projects and what governance structure you plan to use for them. Pull together the team that will serve as the planning body for your project. Charge specific managers with the responsibility for the execution of each project plan. Make clear who must monitor, redirect, and report on the progress of their individual plan as it unfolds. Major platforms require a dedicated resource, more modest core enhancement and some options projects can be done on a part-time basis. For all projects, each team should obtain specification of success developed for them at a corporate level. Your strategy should clearly specity the initiatives (both for growth and for productivity enhancements) that are desirable. You shoutd have separate initiatives to grow platforms, enhance core businesses, and create options for future growth. Work through the five steps of putting together a hypothetical frame - what you want is a clear understanding of required profits, ROl, and allowable costs. For each project, do a Bare Bones NPV calculation (key variables include launch time, ramp-up time, competitive response time, competitive erosion time, total investment, and discount rate)-if it isn't positive, consider replacing the original project with one that might have higher potential or spend some time imagining what it would take to enhance the BareBones NPV. If enough of the projects don't look as though they will sum up the corporate growth challenge, you may need to loop back with the executive team to revisit the corporate-level frame. Nearest Competitive Offer analysis - forces you to identify how you'll truly differentiate; there is always competition or an alternative way customers meet their needs; true breakthrough products must meet at least these three tests: they differentiate massively on some dimensions of performance that enough customers really care about (even if they are worse on others); they radically change the cost-benefitratio for customers; they change the criteria that customers use to judge value. Five links in a typical customers' experience: awareness, purchase, usage, service, and disposal. Portfolio management needs to accomplish three things: capture updated into about initiatives and their progress (with appropriate redirection), actively engage the senior team as the portfolio unfolds and strategy is redirected in the face of unfolding reality, and foster momentum. New ventures must be managed by a different group than an existing business. They must have a leader who is well networked horizontally across the firm as well as outside the firm; this person can not only identify where ideas and resources are but also bring them together fruitfully. The groups must have a diverse membership: sales and operations experience is important; some venture groups: employ people who would not fit the model of the established business but who can provide great insight into new businesses. Membership is temporary but not a revolving door; high-potential future leaders should spend ~3 years in it, but you don't want it to be a career destination, the lessons learned about growth and change should be applied elsewhere. Venture groups should be kept lean in terms of resources to avoid letting things get too big too fast. Venture groups should be connected to other parts of the company to facilitate the flow of ideas, people, capabilities, and technologies.

[Nanda · Rating 3 out of 5]

Discovery-Driven Growth should be a must for leaders new and old to make way for a new way of thinking about Growth. However, this book is not easy for anyone starting at a level-1 on growth. This book offers insight and tools, which is practically hard to implement.

[Rahul Amarasinghe · Rating 5 out of 5]

Extremely helpful for planning a new business. The hard part is actually following up on the strategies employed and getting back into a strategic mindset after being consumed with day-to-day operations within the venture.

[Jimmy · Rating 5 out of 5]

Sorry for the harsh criticism below, I reread this book and find it to be a great book. Concrete steps to manage something full of uncertainty, very insightful.

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Close to complete crap. This is one of the most disordered book I have ever read.
Random advices here and there. Useless case studies.
Basically it just says, initiate small projects, calculate risk and gain, make sure it worth it and helps your goal, experiment, test your assumptions, if you fail, learn and move on. Nothing more. No need to write such a long book and so many cases, ma'am. These babbling are unbearable and the claim of a breakthrough is shameful. The problem is, this whole process is just what a normal person will do. Why do we need to read a book for this, just because you create a new concept?

The only interesting point is the opportunity portfolio in Chapter Three, however, it still makes no foundation for making such a graph.

If you do need to read this book, just read the action steps at the end of the chapters.

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1. Classify the book according to kind and subject.
Practical book with emphasis on rules.
2. State what the whole book is about with the utmost brevity.
How to use discovery-driven growth to reduce risk and sieze opportunity?
3. Enumerate its major parts in their order and relation, and outline these parts as you have outlined the whole.
a. What is DDG and why it works.
b. Make a goal and align resources.
c. Manage DDG projects.
d. Build DDG into your culture.
4. Define the problem or problems the author is trying to solve.
What is DDP? Why DDP works? How to use DDP? How to implement DDP?

[Paul]

"Acknowledging that innovation is a tricky beast to implement even at the best of times, McGrath, from Columbia Business School, and MacMillan, professor of entrepreneurship and innovation at the Wharton School, offer a guide for executives looking to focus on growth while minimizing risk. With a wealth of examples showing the diversity of potential approaches—from top-down, CEO-driven innovation to stealthy, guerrilla-style initiatives—this is a smart, supremely practical guide."

http://images.businessweek.com/ss/09/...

[Raveen · Rating 4 out of 5]

This is a definite read, combine it with Eric Reis's Lean Startup to get the full juice an fun of starting your company.

Rita's blogs are even more interesting, she has a direct to the point way which takes out all assumptions, and she is big on making and evaluating assumptions.

I will in the near future get a chance to meet Ian, the co author of this book, i will post more on it when i get to it.

[Kris · Rating 4 out of 5]

This book has some fantastic business insights for companies looking for a way to encourage innovation within their organization. I personally work for a team based on the DDG model and find it incredibly useful when tackling projects with a lot of unknowns. The only reason I give it 4 stars instead of 5 is that the book isn't an easy read. I wish a better writer was employed to bring this book to the next level.

[Jose Papo · Rating 5 out of 5]

This book should be required reading to all Lean Startuppers and to all executives in big companies. This book, according even to Steve Blank, was the inspiration for the Lean Startup and Customer Development methods. And it has some very good financial tools not available in other Lean Startup books.

[Tammie · Rating 3 out of 5]

Common sense approach to managing business investment portfolios.