Here is an excerpt from an article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.
This post is part of the HBR Insight Center Growing the Top Line.
The biggest enemy of top-line growth is analysis and its best friend is appreciation.
Sure, in a small minority of companies and industries, like the smartphone business these days, there is explosive growth, and if an analysis is done of past trends, it shows lots of opportunity for top-line growth.
But in the majority of businesses, if the available data are crunched, it shows a slowly growing industry — one growing with GDP or population. That generally convinces the company in question that there aren’t really opportunities for top-line growth, and that in turn becomes a self-fulfilling prophecy.
The fundamental reason is that analysis of data is all about the past. Data analysis crunches the past and extrapolates it into the future. And the past does not include opportunities that exist but have not yet happened. So, analysis conspicuously excludes ways to serve customers that have not been tried or imagined or ways to turn non-customers into customers.
Thus the more we rely on data analysis, the more it will tell a dour story on top-line growth — and not give particularly useful insights. The data analysis of P&G’s home care business — hard surface cleaners, dish and dishwater detergents — would have indicated that there weren’t many opportunities for top-line growth circa 2000. These categories were growing at something between population growth and GDP growth, clearly candidates for harvesting or maybe sale.
If instead, the core tool is not analysis but rather appreciation —deep appreciation of the consumer’s life — what makes it hard or easy; what makes her (in this category) happy or sad — there is the opportunity to imagine possibilities that do not exist.
For instance, suppose your consumers have to clean floors. It’s easy enough to appreciate that mopping a floor is a fairly miserable task. Think about what it involves: getting out and filling a bucket, dragging the bucket around and repeatedly jamming the mop in and out of it, and then dumping out and cleaning the bucket. If you appreciate your floor-cleaning customers, you’ll be looking to help them avoid having to go through this experience every time they have to clean a floor — because not every floor will need such a heavy-duty approach. It was out of this appreciation-triggered insight that the electrostatic Swiffer anti-mop was born and produced massive top-line growth, approaching $1 billion in sales in a decade.
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Organizationally and behaviorally, analysis and appreciation are two very different things. Analysis is distant, done in office towers far from the consumer. It requires lots of quantitative proficiency but very little experience in the business in question. It depends on data-mining: finding data sources to crunch, often from data suppliers to the industry. Appreciation is intimate, done in close proximity to the consumer. It requires qualitative proficiency and deeper experience in the business. It requires the manufacture of unique data, rather than the use of data that already exists.
In my experience, most organizations have more of the former capabilities and behaviors than of the latter and hence most struggle with top-line growth. The biggest issue isn’t the absence of top-line growth opportunities but rather the lack of belief that they exist. And that is driven by the dominance of analysis over appreciation.
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To read the complete artricle, please click here.
Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author, most recently, of Fixing the Game. For more information, including events with Roger, click here.