“Winning market share by price alone is a losing game. Innovate or die.” – quote from a CFO of a company in Professional services sector
The National Center for the Middle Market, a collaboration with The Ohio State University Fisher College of Business and GE Capital conducted comprehensive research focused on the Middle Market, defined as companies with revenues of $10MM to $1BN. Growth Champion companies achieved 10%+ revenue growth in the 2010/2011 period and project a similar rate in 2012. They represent 9% of the total Middle Market. This double-digit growth is generally not correlated with factors such as company size, industry type, or location. Rather it is linked to certain business practices and behaviors. One such behavior is a focus on innovation.
Growth Champions invest in, and see, innovation in products and services and/or in business processes as keys to their success. Innovation plants the seeds of growth. How important are investments in innovation – not just in products and services, but in business processes as well? Growth Champion firms clearly consider innovation investments as investments in revenue growth, and their attitudes are very different from the vast majority of Middle Market companies.
According to the study, Growth Champion executives are 32% more likely to feel that investments in new product/service development are essential for meeting growth targets, and 28% more likely to feel likewise about investments in new business processes. Further, having dedicated funding in these areas is considered essential by 29% more of these firms when compared with the rest of the Middle Market.
For Growth Champions, innovation is an essential part of who they are as an organization. They think of themselves as innovative companies by a factor of +40% versus others in the segment. These companies are also more likely to consider themselves to be industry leaders.
To these companies, innovation extends to developing new ways to compete and to serve customers. Growth Champions want to keep pace with a changing world and marketplace, and with the evolving needs of their customers and potential customers. To that end – 47% more than the broader Middle Market – have a digital strategy, and nearly a third more of them have a social media strategy.
How does your company stack up to the Growth Champions? Does your company allocate and protect funding for innovation? How can you strengthen your innovation capabilities – making it a repeatable and measureable process to maintain a sustained leg up on your key competition? Harvest CFO Consulting can help your company to better understand how innovation in products/services and business process will pay ongoing dividends and also put into place financial disciplines and measurements to increase ROI on these investments.
For more information on the National Center for the Middle Market and to obtain the details of its survey and findings, as well as access to a range of tools and resources, go to the Center’s website www.middlemarketcenter.org.