Technology and Innovation

TECHNOLOGY AND OPERATIONS MANAGEMENT

PART 1: THE QUEST FOR GROWTH

The most important aspect of managing a business firm or company is growth. Once growth stalls, companies find it nearly impossible to restart it and get brutally punished by the capital market (Microsoft, Nokia).

The challenge for business firms is to survive and outperform the market. In order to do so, companies need to grow at double-digit every year. However, hardly any company is able to grow at double-digit rates over a sustained period of time.

Growth through diversification and/or in existing businesses is hard to accomplish. Investors are better at diversification than managers, and companies will find it difficult to continuously outperform sector/investor expectations. So how do firms incorporate new sources of value creation in a systematic manner? In order to attain such a result, managers must pursue the two following routes:

* opening up new value trajectories (discontinuous innovation archetype)

* governing and innovating existing value trajectories (steady-state archetype)

However, managers provide two reasons why it is unreasonable to require them to deliver double-digit growth on an annual rate: size and industry. Are these reasons valid?

Size matters. The larger the company, the higher the growth required to expand or maintain market capitalization. The larger you are, the more doubtful will be investors in believing you will repeat your success. Bottom line, the larger the company, the more difficult to grow. But the larger the company, the more imperative to grow. However, empirical results show that it is reasonable to require managers to deliver double-digit growth on an annual rate. Size matters, but management matters more.

In the same context, management matters more than industry. A good manager in a bad performing industry performs better than a bad manager in a good performing industry. Performance depends on management and not the...