The Secrets of Momentum Growth

Last Updated Apr 15, 2008 3:15 PM EDT

INSEAD marketing professor Jean-Claude Larréché has charted over 350 of the world's top companies that have outstripped the stockmarket for at least 10 years, finding out how they sustain growth while getting more from their marketing, R&D and even manufacturing spend.

Can you get more growth for less effort? INSEAD's Larréché thinks so. His book, "The Momentum Effect", puts forward a formula for first identifying -- then continuously building on -- a business's true value so as "to make the competition irrelevant". It's a provocative proposition.

How it started Professor Larréché, the Alfred H Heineken Chair of Marketing at INSEAD, researched the world's top 1,000 companies to find those that demonstrated at least 10 years' growth (he makes exceptions for new companies such as Facebook).
The aim was to find out how high-growth firms ('pioneers') delivered consistently better returns than those that were merely achieving the Dow Jones average ('pushers'). Pioneers demonstrate 93 per cent higher growth than pushers and 58 per cent higher earnings growth. Like Jim Collins' research-led "Good to Great", Larréché also identifies common threads among the 'great', with strong leadership an essential.

They also managed to squeeze more out of their marketing budget. How? Spending more time 'upstream', researching customers genuine wants and needs, rather than foisting products or services that they then have to convince customers to buy.

Takeaways
Value comes from the customer A product has "no intrinsic, absolute value", notes Larréché.
"Building and maintaining momentum requires a clear understanding of the emotional drives of behaviour."
Develop compelling insight into customers Find out what guides their decisions to capitalise on emotionally-led choices. Apple is a master at tapping into the "affective" decision-making that guides buyers to pay more for its comparatively pricey designs. "Compelling insights" result in compelling returns.

Less is more Make your aim to decrease cost to customers while achieving more for the business.

Don't overthink Trendwatching is useful but heavy research can slow you down. Small companies win here because they are closer to customers and can sense shifts in interest intuitively. Watch them, if necessary.

Create a 'power offer' That is something irresistible to customers - compelling proposition, power crafting, compelling target. Branchless bank First Direct excels at power crafting by ensuring every possible element has been integrated to ensure it delivers the highest possible value to highly targeted customers to whom it can cross sell.

Be a momentum leader The five-star general of leadership is the one who can sustain virtuous circles of growth within the company and externally, among customers and other stakeholders. They are a rare breed but tend to be driven more by company gains than personal ones.