The Six Principles of the Psychology of Growth
Nov 28, 2018
At the start of 2007, the business status quo was disrupted by what has now come to be known as the Great Recession. The ripples from this event are still impacting economies and businesses across the globe and have created “a new business normal.”
Constrained consumer demand, limited investment capital, powerful globalization forces, and uncertain fiscal policies define this new normal. These seismic shifts mandate business strategy, operations, and culture. This is not hyperbole.
Nokia, for example, had a dominant 49% share of the mobile phone market in 2007. The company tested touch screen and smartphone technology before ultimately abandoning the technology and missing the explosion in the smartphone market. As of 2013, Nokia had 15% share of the mobile phone market.
In 2010, we launched a comprehensive research initiative to explore the 500 largest companies in the world. In our data collection, interviews, and analysis, we sought to identify patterns and methods related to growth rates. One of the patterns that we found was that growing companies had instilled a strong company culture and mindset surrounding growth strategy, corporate entrepreneurship, and business innovation.
Affecting the mindset of a company has implications at the organizational DNA level. Naturally, implementing such deep organizational transformations and creating a unique source of competitive advantage do not happen on their own. Rather, they require the deliberate adoption of principles that promote new organizational behavior, norms, and instincts that lead to new mental models that are more conducive to business growth. We call this the Psychology of Growth.
Principle No. 1: Convert Knowledge into Growth
Modern companies compete and ultimately win based on their ability to create and exploit unique insights into their industries, markets, and customers. When combined with experiential knowledge of internal corporate assets, resources, and strengths and weaknesses, these insights become distinctive sources of competitive advantage.
Companies must consider the pursuit of growth as a knowledge-based organizational competency that should be treated no differently from other corporate functions such as marketing, sales, or manufacturing. Growth-focused competencies must be incorporated into job descriptions, leadership development, corporate training, and performance assessments.
Principle No. 2: Engage the Critical Mass of the Organization
“Engaged employees are a rare and precious resource. Only 29% of U.S. employees are engaged in their work, while the remaining workers are just marking time.”—The Gallup Organization
All too often, major organizational transformation initiatives focus only on senior leadership, “corporate elites,” and selected middle managers. To create vibrant, growth-focused enterprises, it becomes essential for organizations to engage a critical mass of the organization in growth learning, collaboration, and activity.
Critical mass does not necessarily mean the majority of the organization, but the right number and types of employees necessary to diffuse organizational thinking, maintain momentum, and influence others.
Companies can achieve these outcomes by establishing a broad social engagement infrastructure to foster collaboration, catalyze conversations, and share knowledge at all levels of the organization.
Principle No. 3: Engage the “Whole Brain”
Traditional companies have developed strong competencies in analytical or systems thinking. MBA and corporate training programs emphasize finance and operational excellence to further reinforce these “left brain” skills.
High-performance growth enterprises should identify and tap into “right brain” employees to unlock new areas of insight, perspectives, and sources of growth. This can be achieved through the formation of multidisciplinary teams comprised of members from diverse groups, multiple levels, and all corners of the company. An example of this is Whirlpool's Global Consumer Design, which supports 14 major brands and 30 sub-brands with a 150-person, multidisciplinary team of executives, engineers, product developers, and managers.
Principle No. 4: Make Growth Visual
Humans are visual creatures. By telling visual stories that clarify the complexity and unknowns that can surround future growth, companies can generate dialog, create alignment, and articulate a vision. However, all too often today’s strategic and business planning is dominated by spreadsheets, slide decks, and documents with long narratives. These tools are useful for basic communication purposes, but not as useful for inspiring new thinking and ideas.
Incorporating visualization into growth strategy and business innovation activities creates powerful informatics to help companies establish common metaphors and imagery. These tools can facilitate the improved group memory, collaboration, and ideation needed to generate breakthrough ideas and differentiated growth strategies.
As companies look for new markets and new customers, visualizations can reveal trends, dislocations, and gaps that can be exploited. In the competitive space, visualizations can give companies early warning indicators of competitive thrusts and reveal ways to counteract them.
Principle No. 5: Space and Environment Matter
Traditional business environments and corporate settings, such as corporate conference rooms, hotel conference centers, or corporate off-sites, lack the most basic tools for fostering the entrepreneurial behaviors, creativity, and collaboration that are critical for growth. Following the adage “It’s hard to think outside the box when you’re in the box,” growth enterprises must create spaces and environments that are best suited to the collaboration and creativity that are hallmarks of entrepreneurship.
Take, for example, high-tech leader Citrix. At its Silicon Valley headquarters, the company created a 2,000 square-foot collaboration space fully equipped with advanced interactive technologies to encourage innovative thinking. Collaborating in immersive, growth-focused virtual or physical work environments helps companies disengage the powerful status quo forces that hinder growth.
Principle No. 6: Compensation Matters
One of the initial assumptions regarding compensation is that large corporations have no metric to compensate their entrepreneurial employees. Indeed, existing corporate compensation models are often governed by drivers such as tenure, title, or education, which have no direct or sustained correlation to growth.
While small and large companies alike may not be in a position to offer entrepreneurial incentives such as stock options, they must establish compensation and rewards programs that are based on motivating and promoting growth-focused behaviors and outcomes.
This compensation does not have to be financial in nature and may include benefits such as work environment, work schedule, creative latitude, and nonfinancial, public recognition by leadership. These reward packages can vary from the standard corporate remuneration to venture capital-style packages with a higher bonus and carried interest in the spinoff.
For example, Unilever, the British-Dutch multinational consumer goods group, promotes corporate entrepreneurship by allowing its scientists and inventors to nurture innovative ideas from early development stage and spin them off as separate internal ventures. While financial rewards are not necessarily the main motivation for researchers in this particular model, Unilever has a set of reward and compensation metrics in place to retain these employees as ideas move from the business plan through to the investment stage.
Once these six principles are implemented, companies can align their dominant mental models and mindsets to promote entrepreneurship, growth strategy, and business innovation—the Psychology of Growth—the key elements to achieving and sustaining business growth.
In order to grow your company, you have to cultivate an environment where your employees can thrive. Check out this free AMA webcast on becoming a better leader and keeping your career on an upward path.