Although middle market companies – those with revenues between $10 million and $1 billion – make up only about 3% of American businesses, this segment is a huge economic force, accounting for roughly a third of the U.S. GDP and more than 43 million jobs. That’s according to the National Center for the Middle Market.*
Their research, as reported in the paper Blueprint for Growth, revealed that a small group of these companies has been sustaining double-digit growth. Common to this select group is a particular set of characteristics:
- A strong management culture that’s nimble, efficient, and responsive to external challenges.
- Exceptional talent management, including rewarding people for growth.
- A formal growth strategy process.
- Sharper customer focus.
- A broader geographic vision.
- Focus on innovation, in products, services, and/or business processes, as a key to success.
These factors existed in the high-growth group independent of company size, location, or industry. They also showed up to a lesser extent in companies experiencing more modest growth, suggesting a growth continuum as the characteristics become stronger. As a set, the six broad attributes provide a good starting point for executives to benchmark their own organizations’ growth capabilities.
Growth happens on purpose
If there is a key principle that encompasses all the above insights it’s this: Growth is not a happy accident. Environments that sustain innovation and growth are set up deliberately to do just that. And having a formal growth strategy process is a crucial element.
As Productivity consultant Jim Vatalaro, who has worked with companies of varying sizes on innovation and growth initiatives, put it:
“In our experience, while companies often do set specific targets for growth, they just as often fail to articulate a detailed strategy to achieve it. That’s where a systemic approach to innovation comes in, one that builds in long-term as well as short-term strategy. One that fosters innovation-friendly leadership practices and governance policies, along with the processes and infrastructure that will engage the community and make innovation a reality.”
Lessons on growth from a mid-market roadshow
As part of the ongoing exploration of growth in mid-market businesses, the Roadshow for Growth** is in the process of touring 20 cities in the U.S. over a six-month period. On the first stop, in St. Louis, some important lessons emerged in an interview with Jim McKelvey, the cofounder of Square (the innovative mobile payments company).
McKelvey sees mid-market companies as well positioned for innovation and growth; they have some established products but are still small enough to move quickly. He makes a few key observations on what drives innovation:
- On risk-taking: “if you inherit money, it’s very hard to risk it” because you “don’t want to be the generation that blows it.” Meanwhile, “if you’ve made the money yourself, you’re certainly willing to roll the dice and invest in some other stuff.” McKelvey is referring to individual and family wealth, but there’s also a caveat here for company leaders: The tendency to preserve existing forms of value can be a significant obstacle to innovation. It’s best to acknowledge that, and recognize that you’ve got to actively fight against it in order to better your chances of long-term growth and business renewal.
- On where to look for innovation: “Don’t look for opportunity, look for problems.” Problems are easy to see, and it’s easier to know when you’ve got the solution right. McKelvey says he came up with the idea for Square as a result of a problem he experienced himself -when he lost a customer order at his boutique glass-blowing company because he wasn’t able to process a credit card.
- On working under the bureaucratic radar: Whatever your idea is “build it without asking for permission.” Otherwise, you won’t build anything that’s really ground-breaking.
Taking risks, finding sweet spots for innovation, and cultivating processes that help foster the emergence of truly unique solutions are all part of an innovation system. If you’re reading this newsletter, odds are good that you too work for a mid-market company.
But regardless of your company size, it behooves you to get started on assessing your own organization and consciously building its capabilities for innovation and growth.
* The National Center for the Middle Market is a partnership of The Ohio State University Fisher College of Business and GE Capital; their research was conducted in 2011.
**The Roadshow for Growth is a national tour co-sponsored by GE Capital and Slate to raise awareness about mid-market companies.