Remembering How to Grow Again

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By: Grant Duncan

Duncan serves as Consumer Practice lead in the UK and Ireland for Korn Ferry.

Recently a CEO from a global consumer business came to me, exasperated: His company was producing almost nothing new. He didn’t think it was for lack of trying, either. The company had set up and supported, with both people and finances, a division expressly tasked to drive innovation and excite customers with new services and products. And yet, the division wasn’t producing anything meaningful. If it weren’t for inflation, this director’s company wouldn’t be showing any sales growth at all.

If no other consumer companies were experiencing this, maybe I’d suggest it was a specific leadership problem, but my colleagues and I are hearing similar stories from companies in every industry, across every market. Outside of some subsectors within technology and life sciences, there’s been a lot of renovation, but very little innovation. Where are the breakthrough manufacturing processes? Why are there no fantastic new household cleaners or other consumer products? It’s as if companies have collectively forgotten how to grow.

Some big-picture numbers bear this out. Twenty years ago, the world’s advanced economies grew, after accounting for inflation, at a 3.3 percent annual pace, according to the International Monetary Fund. In 2023, they grew barely half as fast, at 1.6 percent, and—barring some massive jump in the last two months of the year—2024 isn’t going to be much different. Developing economies have seen growth dissipate, too. In 2004, real GDP grew 7.9 percent. Last year, it was 4.3 percent, with not much change expected in 2024. In this world where uncertainty is the norm, innovation becomes the critical driver of  success.

Sure, since COVID-19 many firms have grown revenues, but much of this has been thanks to inflation. Sales volumes for many products and services have stagnated, or even declined. At some point, rising prices will stop helping. Either inflation will ease, as it already has in some parts of the world, consumers will balk at paying so much for the same products, or both. The rest of the top-line growth has come mostly from iterating—a package redesign here, an engineering workaround that marginally enhances productivity there. For organizations to receive—or even continue receiving—loyalty from their employees, accolades from their customers, and applause from their investors, they need to consistently produce breakthroughs.

So how can organizations accelerate innovation and creative thinking? Much of it has to do with culture. Leaders should encourage—and reward—employees for coming up with creative ways of solving problems. Companies should prioritize hiring people who have a growth mindset and are intensely curious. Those employees should want to learn about customer needs, then work with colleagues to develop ways to meet them.

There’s a financial commitment, too. There are only a few firms on Korn Ferry’s World’s Most Admired Companies with 10 percent growth over the past few years, but they share some common traits. They have committed far more resources as a percentage of revenues to research and development than their slower-growing peers. But more importantly, these firms accept that innovating runs the risk of failing, and that risk should be embraced. Innovative firms embrace tough challenges, learn from failures, refine their processes, and then, quite often, come up with breakthrough products and services. 

That’s what my consumer CEO figured out. They didn’t have the right mindset to truly innovate. Their internal return-on-investment benchmarks were so high that their innovation division was never going to take the risks needed to come up with big breakthroughs. They’re trying again, but not before doing some internal innovating, rejiggering processes and metrics, and bringing in talent with a slightly different mindset. I’m optimistic they’ll grow again.

Photo Credits: Leremy/Getty Images