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The Growth Gamble: Why Business Leaders Need a Vegas-Mindset to Successfully Grow

Sep 12, 2012
IPFrontline

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

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Have you ever watched a professional blackjack player in Las Vegas? They usually have a specific process they use to up their chances of winning big. First, they pick the right table. Then, they test the waters. They make small bets to see where the game is going. As they watch the cards and learn more about the game and their opponents, they periodically increase their bets or they fold certain hands. It all happens fast, and they understand that they’ll lose a lot of hands in this “testing the waters” phase of play. But the information they gain during the process allows them to increase their bets and win big later on.

Business growth, says Ed Hess, is a lot like playing blackjack. But unfortunately, he notes, most top-level CEOs don’t realize it.

“When it comes to growth, most managers, sadly, are like the little old lady with a cup of quarters playing the slots,” says Hess, coauthor along with Jeanne Liedtka of the new book The Physics of Business Growth: Mindsets, System, and Processes (Stanford University Press, 2012, ISBN: 978-0-8047753-4-2, $12.99, www.EDHLTD.com). “They just pull the handle and hope for the best. Sure, they may spend millions of dollars on consultants trying to create the right strategies, but in most cases the results are anemic. Strategies by themselves are not enough. What we’ve learned about business growth in our research is that what many CEOs and leaders think they know about growth is wrong.”

In their new 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. The book helps readers 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, note 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

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