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Delivering profitable growth year after year is the number-one, non-negotiable imperative facing today's business leaders. Many firms struggle to meet it, others achieve it in fits and starts, but only a select few consistently exceed itsometimes extravagantly. How do these world-beaters do it?
The answer lies in the momentum effect.1
The momentum effect is a tremendously potent phenomenon by which, under specific conditions, exceptional organic growth is createdgrowth that feeds on itself. Momentum accumulates energy from its own success and provides ever-increasing acceleration for firms smart enough to build and harness it. These firms go from success to success, buoyed by a self-sustaining growth which sweeps all before them with disconcerting ease.
Momentum allows you to deliver exceptional growth without the stupendous efforts most firms are forced to make every day. It is this self-fueling characteristic of the growth produced by the momentum effect that leads us to call it momentum growth and to use the word exceptional. Momentum growth is exceptional for two reasons. First, because it is characterized by an exceptional rate of growthexceptional, that is, compared to normal expectations based on history, market trends, or competition. Second, it offers an exceptional quality of growth, one that both generates higher profits and consumes fewer resources.
This book reveals evidence for the momentum effect, demonstrates how it works, and then offers you a pathway to harnessing its power.
The first inkling that a force such as momentum might explain some firms' exceptional growth occurred during my business studies at Stanford University. There, in the heart of Silicon Valley, I became fascinated by the way some businesses suddenly took off, experiencing almost unimaginable growth, whereas others, with what appeared to be technologically superior offerings, sank without a trace. Since then, I have sought out the engines of growth that help companies to create superior value, aided in this endeavor by different teams over time. We began by investigating marketing excellence. We examined customer focus. We scrutinized innovation. Each of these is a useful tool with an undeniable impact on growth, but painful experience over the years has taught us that marketing excellence by itself does not create sustained growth any more than does customer focus or innovation in isolation. We discovered that momentum growth requires a delicate combination of a number of specific elements, working cooperatively and simultaneously. This combination can occur by chance or by design. But even with the best-laid plans, it can work its full magic only if it is executed within a special culture and under a certain type of leadership.2
The momentum that builds as a result is what drove the extraordinary performance of Microsoft, Wal-Mart, and Dell, momentum that then deserted them, and momentum they are struggling to recover. The same near-irresistible energy is powering Apple, Toyota, Virgin, First Direct, and Nintendo today. But if those companies fail to maintain it intelligently, they too could wake to find the momentum behind their growth deserting them. That's the tricky thing about momentum: It is transitory. Without constant care, its power will prove fleeting.
Momentum is dynamic. In business, success can vanish in a flash unless it is constantly renewed. Several of the firms we studied lost their momentum because their leaders failed to understand or nurture the drivers of this force. Many of the stories we tell are of firms that are no longer excellent. And, almost certainly, some of the companies whose praises we sing will lose their momentum all too soon. But all these firms have built momentum and ridden it for all it was worth, some of them for decades. The ability not only to build momentum but, more importantly, to retain your grip on it is one of this book's key takeaways.
After sketching out the first rough outlines of the momentum effect, we embarked on a systematic investigation to expand and refine our comprehension of how it worked. We confirmed its existence as a long-term phenomenon through an empirical study of the world's largest firms, examining their growth in revenues, profits, and shareholder value over 20 years. We conducted in-depth studies of a vast number of small and large firms that enjoyed periods of exceptional growth over the past 50 years. We have generally considered that if a company has sustained this growth for at least ten years, the forces behind that growth were worth investigatingeven if that growth has subsequently slumped. We often learned as much from the slump as we did from studying the initial growth. We have made exceptions to this ten-year rule only for recent ventures such as Skype, Nintendo's Wii, and Facebook. We used computerized simulations to replicate the phenomenon and to test different drivers of momentum. We advised client companies on specific aspects of momentum strategy, and tested their implementation.
What we learned was so wide-ranging that it would not sit comfortably within a single book, and we must leave many of our findings to subsequent publications. In these pages, we focus on a single purpose: to present a systematic approach for the design and execution of momentum strategy. This involves an eight-step process creating the specific conditions required to set the momentum effect in motion and to maintain it. This process integrates in a single framework a number of contributions that have emerged in the past decade, in academia and in business, mainly in the areas of customer focus, innovation, and marketing excellence.
Taken individually, each element of momentum strategy is very simple. It is part creativity, part business acumen, part psychology, and part simple common sense. You have to have smarts, not a Ph.D. Many entrepreneurs who created momentum for their firms and held it over several decades never completed university studies, either because of necessity or because they were impatient to go into businessThomas Edison, Henry Ford, Steve Jobs, Luciano Benetton, Richard Branson, Michael Dell, and Bill Gates, to name a few.
But if the concepts are simple, successfully implementing a momentum strategy is challenging. "In strategy," wrote Clausewitz, "Everything is very simple, but not on that account very easy." This is keenly pertinent to momentum strategy, where the challenge is to first build and then maintain the balance that creates momentum and sustains it over time. For this, we offer a framework that assembles the pieces of the momentum-strategy puzzle into a coherent whole.
This book is divided into four parts. The first, Discovering Momentum, provides the evidence for the momentum effect and explains the phenomenon. It then presents the concepts of momentum strategy and demonstrates its role in value creation before describing a framework for momentum. Each of the eight steps of this momentum process is then examined over the two central parts of the book: Designing Momentum and Executing Momentum. The final part, Total Momentum, closes the loop. It concentrates on the creation of internal momentum and on the leadership competences required to successfully implement momentum strategy and create exceptional growth.
Like sports, the business environment of today's globalized, hypercompetitive world will increasingly become divided into leagues. The top league will consist of momentum-powered businesses enjoying exceptional growth. All the others will be trying to play catch-up. Given the choice, wouldn't you prefer to spend your future in the excitement and accomplishments of the Momentum League? Our most sincere wish is that this book helps you to create and experience to the fullest the stimulation and rewards of momentum.
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