Is Your Organization Measuring Growth Incorrectly?

Is Your Organization Measuring Growth Incorrectly?

Most measure only hard growth numbers, but soft growth is the real indicator of future success.

The business world traditionally sees growth as limited to in-market success. The prevailing belief is that the only true ways to measure business growth are in top-line sales, market shares, share prices, market capitalization and the like. These are hard growth numbers. They exist in your financial statements and reflect what your business has already produced and launched in the market.

But what about growth that has been achieved but that isn’t yet in the market? What about growth in knowledge and intellectual capital that will fuel market results for many years to come—but not immediately?

Soft growth measures clarity of purpose and alignment, acquired knowledge, intellectual or technical capital, and the strengths of your innovation process and pipeline.

This is soft growth: the foundation that enables future hard growth, through investments in people, processes and technology. Often-overlooked, soft growth measures clarity of purpose and alignment, acquired knowledge, intellectual or technical capital, and the strengths of your innovation process and pipeline. By looking at soft growth, you can assess whether and which of your current investments will produce financial growth in the future. If you don’t measure soft growth, it’ll be hard to determine if your business will see hard growth, soon and in the long term.

We recently spoke with a Head of Innovation at a leading bank who was at risk of focusing too closely on hard growth, and inadvertently committing the hasty errors that come with it. This recently appointed leader was heading up a team of researchers, designers and engineers, and was tasked with identifying novel growth opportunities for the business, proving the ideas, and prototyping them for launch readiness. The intent was to act as an idea engine for new growth at the bank. This individual was given carte blanche in terms of industries and customers to go after. The only limitation to their mandate was their budget, which had been set at the beginning of the fiscal year.

As we probed further, we understood that this Head of Innovation’s predecessor was ousted for not producing results fast enough. The pressure was on our client to demonstrate a highly successful first year in the role. The goal was clear: grow the business by 10%, with nearly half of this growth coming from new ideas. A hard growth metric. Our client was fixated on getting their team to move from idea to prototype as fast as possible.

Given the target set and the pressure applied, they naturally worried about haste. Yet their focus on time-to-market and hard growth was distracting them from the soft, more sustainable growth targets that they could achieve. For many of the leaders we work with, these fundamental steps are skipped in an effort to show impressive results quickly. Unfortunately, such approaches usually lead to churn and burn, taking innovators down a well-worn path that leads them to trouble as they run up costs in exchange for minimal growth. Before fixating on hard growth numbers, they should assess soft growth indicators of progress.

Before fixating on hard growth numbers, assess soft growth indicators of progress.

We recommend two ways of assessing your potential for growth. These two assessments will help you to determine if your growth mandate and team are set up for success.

1. Assess the quality of the growth mandate

  • How does the growth target tie in with the overall business purpose?

  • What is the mandate of the strategy or innovation division vis-à-vis overall growth?

  • What is your strategic direction? Do you have a target market or consumer in mind, or do you need to create one?

  • How aligned is the organization on this growth target and direction?

2. Assess the aptitude for handling growth setbacks

  • What strategies have not worked in the past? Were these discussed and understood?

  • If your team hasn’t talked about previous unsuccessful strategies, then consider:

    • What would motivate teams and leaders to discuss strategic misdirections?

    • Do teams feel they have a stake in the success (or misdirection) of the strategic direction?

  • What would happen if the strategic direction is off by a couple degrees? Is that permissible? How will that be addressed?

Once you’ve thought through these first two assessments, you’re then ready to determine what you and your team will need to be successful and create growth:

3. Measure progress toward hard growth

  • Quantify the often-ignored effort that goes into creating growth by finding the:

    • Number of new customer or market challenges identified and targets explored
    • Percentage of challenges, and proposed solutions, moved to prototype
    • Rate of idea turnover—that is, the time it takes the team to get from idea to business case, especially if this decreases over time
    • Costs saved by rejecting nonviable ideas for further development
  • Quantify the future growth potential of ideas in the prototyping phase by finding the projected earning potential

4. Measure the soft growth you’ve achieved

  • Quantify the increase in the collective knowledge of your team and by extension, your organization, by finding the:
    • Number of new or adjacent markets the team has an expertise in
    • Number of new or target client segments researched and insights derived
    • Number of external expert collaborators
    • Number of internal expert collaborators or cross-functional groups that have contributed

Soft growth gives context, guidance and progress toward hard growth numbers, and helps to determine whether hard growth is part of a trajectory or if it is about to level off. It’s critical to align a team’s responsibilities with the right measures for their success.

If you’re responsible for teams driving soft growth, don’t measure their success—and celebrate or penalize their leadership—using metrics they don’t directly control.

If you need help assessing whether you have the right direction and metrics to sustainably achieve your mandate, get in touch.

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