(For many top-level business leaders, business growth is a gamble they aren't sure how to approach. Professors Ed Hess and Jeanne Liedtka provide insight on how to think differently about this essential aspect of running a business.)
         
In their book, Hess and Liedtka present more than 17 years' worth of research on how successful new growth actually happens in organizations. The Physics of Business Growth helps readers understand how to create growth in today’s business environment, providing them a roadmap and a set of practical tools to navigate its challenges.
 
Readers learn to create the right mindsets and an enabling internal system that aligns culture, structure, leadership behaviors, measurements and rewards, to drive the right growth behaviors. Just as importantly, they set forth proven growth opportunity identification, experimentation, and portfolio design processes.
         
It's a quick and easy read by design, created for busy C-level executives to use as a how-to guide as they seek to infuse their organizations with an entrepreneurial spirit — "a small company soul in a large company body" — with a focus on organic growth.
         
The first thing top-level leaders need to understand about growth, notes Hess and Liedtka, is that the only certainty about growth is its uncertainty. Growth takes people into unchartered waters, and the processes used for daily operational excellence do not work. Likewise, the management mindset to eliminate variance and to strive for standardization is counterproductive to growth and innovation.
         
"Venture capitalists seem to be the most comfortable taking on the gambler mentality needed to grow successfully," says Hess. "They understand that the force at play here is uncertainty. They see themselves as managing portfolios of growth opportunities. They also know that their ability to predict at the early stages which of two ventures will succeed is poor. They do not attribute this to their personal failings; instead, they recognize that the inability to predict is a property of the uncertainty surrounding any new business.
         
"Like professional gamblers, they develop a set of practices that acknowledge this reality," he adds. "They bet heavily on the individual leader of a new business and look for people with experience; they try to keep their bets small and affordable until they have better data; and they develop approaches that help them get in and out of new ventures intelligently and swiftly. Their goal, in other words, is to either succeed or to fail — in a fast and cheap manner."
         
Hess points out a few important factors about the growth gamble to keep in mind:
 
Growth, and particularly innovation, is a probability game. 
When large organizations pursue growth, their mindsets are often completely out of sync with the reality that guides professional gamblers and VCs. Chances are that these organizations expect ten out of ten projects not only to win — but to win big. They demand that their managers and employees produce growth, inadvertently thwart their attempts, and uphold a system in which pulling the plug on a failed growth opportunity is a career-threatening act.
 
"The reality is," explains Hess, "that 100 growth experiments may produce 10 viable growth initiatives worth investing in. Growth is an iterative learning process characterized by detours, zigzags, and remakes."
 
Growth is a learning process. 
Good growth companies understand the realities of growth. Growth requires the right mindset — a learning mindset — and the right processes designed to make small bets, learn critical information quickly, and then assess next steps.
 
"We call that process Learning Launches," says Hess. "Not only is the right learning mindset needed, but also the right attitude is needed individually and organizationally about failure. By definition, you will make mistakes and have failures. Remember, so long as you make small bets and use the right rigorous process, there is no real failure so long as you are learning."
 
Growth can be messy and inefficient. 
Most companies can't stomach the uncertainty that comes with growth. It violates their dominant no-variance operational mindset. Well, guess what — growth and innovation are high-variance processes by their nature. If you do not accept that fact, then your growth initiatives will be limited to small incremental improvements, which at some point will not produce enough growth to keep your supporters happy.
 
"Operational excellence strives for 99-percent defect-free performance," says Hess. "Contrast this to growth experimentation that can result in failure rates of 90-percent. In operational excellence environments, managers are rewarded for stamping out variance. Yet, in growth environments, variance is the norm."
 
"Don’t be afraid to step up to the challenge," says Hess. "Having a growth mindset, using the right growth experimentation process, and having a culture that understands that managing both growth and innovation initiatives is different from managing daily operations."

(Edward D. Hess is professor of business administration and Batten Executive-in-Residence at the Darden Graduate School of Business, University of Virginia. He is the author of ten books, over 60 cases, and over 60 articles. His work has appeared in over 200 media outlets around the world.
 
Jeanne Liedtka is the United Technologies Corporation's Professor of Business Administration at the Darden Graduate School of Business and former strategy consultant at Boston Consulting Group. She is the author of two recent books, and a leading expert on the use of design thinking tools to create growth strategies and opportunities.)

Is Your Trade Exchange Missing Out On Valuable New Business?