Growth is always a top priority for companies, but research by Anthony Paoni at the Kellogg School of Management at Northwestern University shows that, in the end, businesses’ performance  tends to place them into one of four broad categories: Market Leaders, Value Harvesters, Growth Chasers, and Laggards.
Of course, that categorization on its own is not necessarily a problem. Which approach to purse (usually) is a very conscious and strategic decision, depending on a number of different factors. The question that’s often overlooked, however, is the impact of pursing
these different approaches, whether by design or not.
What’s Next: Innovation Index And The Market Leader FrameworkIndeed, new analysis by SAP’s Performance Benchmarking team, in partnership with Prof. Paoni, found that the difference in 2008-2011 Total Shareholder Return (TSR) for 5,000 companies across the different categories differed sharply.
Specifically, Market Leaders on average delivered TSR of 53% vs. 10% for Value Harvesters. Meanwhile, both Growth Chasers and Laggards delivered negative TSRs, -12% and -29%, respectively. Clearly, not all growth strategies are equal.
On the other hand, companies can, and often do, successfully change. For instance, when companies in the Laggard category were followed over a five-year period, the analysis showed that while the majority could not break out of the box, 7% of the companies were able to transform themselves into a Value Harvester (delivering 23% TSR) and another 7% transformed into true Market Leaders (delivering 29% TSR).
What’s Next: Innovation Index And The Market Leader FrameworkHow did they do it? To gain more insight into the issue SAP and Prof. Paoni next worked to create an Innovation Index, which attempts to measure an organization’s innovation capabilities across 4 key areas: Execution Excellence, Leadership & Talent, Customer Centricity, and Information Advantage.
Notably, the benchmarking survey they created and the analysis to date shows that Market Leaders tend to show a consistent level of performance across many of the key areas in the Index, whether compared with the overall database or their own industry. In many ways, then, these performance benchmarks can then be looked at as reference points and targets in setting and assessing growth and innovation strategies.
What’s more, any company now can take the same benchmarking assessment, free of charge, to see specifically where they stand and how they compare with other organizations. To do so, simply visit http://www.sap.com/InnovationIndex .
 Paoni’s Market Leader Framework measures performance by sales growth vs. market value.
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