LEXINGTON, MA--(Marketwired - Mar 6, 2017) - The talk of Washington and Wall Street may be "pro-growth" policies aimed at job creation. But government policy is not the real driver of job growth. Businesses create jobs by expanding existing markets and creating new ones: a powerful tool solely in the hands of CEOs and business leaders, not government policymakers.
According to the growth strategy consulting firm Innosight, business and market transformation -- bringing access to a lot more products and services, for a lot more people -- is what creates jobs. The personal computer, for example, opened up the constrained markets for mainframes and mini-computers. Entire new industries and business models sprung up to serve the exploding global demand for "computing" -- creating millions of jobs in the process.
By contrast, policy reforms enacted in Washington -- e.g., revamping America's regulatory or tax systems -- may help improve business operations, or the overall business climate, but they are not sufficient to drive the kind of job creation market watchers are hoping for.
"If all of a sudden America is flooded with repatriated capital, for example, history shows that it will most likely be used for things like stock buybacks and M&A," says Innosight Managing Partner Scott Anthony, co-author of the forthcoming book Dual Transformation: How to Reposition Today's Business While Creating the Future (Harvard Business Review Press, April 2017). "Investors and hedge funds may be happy with higher stock prices or more transaction flow, but that doesn't create jobs."
"Rapid, widespread job growth comes from the creation of entirely new markets and the transformation of businesses, even entire industries, to meet new demand," says Innosight Senior Partner, Mark Johnson, and co-author of Dual Transformation. "But transformations of that sort, occurring at that scale, can only be driven from within by business leaders themselves, not by politicians."
Among the points that Anthony, Johnson and their co-author Clark Gilbert highlight:
- Business Transformation: A Dual Agenda for CEOs. To stay competitive, enable growth and create jobs, CEOs have a dual challenge ahead: transform the core business to maximize its relevance and staying power, while creating a separate growth engine in an entirely new business. For example, Adobe Systems used a subscription model to transform its core software business, while launching a billion-dollar digital marketing business.
"Very few industries have the headroom to just keep doing what they're already doing and hope for the best, hoping that they can squeeze out growth in a traditional paradigm," says Johnson. "Corporate lifespans are shortening, and our research shows that half of the S&P 500 will be replaced within 10 years. In industry after industry, the competitive position of leading companies is increasingly precarious."
- Innovation Alone Does Not Create Growth and Jobs. "Executives often chase after 'sustaining innovations' that deliver incremental improvements to existing products and services," says Anthony. "Or they prioritize efficiency innovations that cut costs and streamline operations. While both of those may increase productivity and profitability, neither drives dramatic top-line growth -- or job creation."
- Cost Cutting Is Not Transformation. Too often, companies want to cut their way to prosperity. But simply lowering costs does not change the essence of the company in a material way -- and it won't help a company best the competition in new and rapidly changing markets. If it didn't work for industry titans like Kodak, Blackberry or Blockbuster, it likely won't work for today's leading companies either.
- Upstarts Don't Own the Future. Transformative, market-creating change is often associated with young, disruptive upstarts (e.g., Uber, Airbnb). But large organizations have unique advantages in creating such change -- they just need to see the opportunities and apply the right resources.
Anthony says that every big company has an opportunity to drive market-creating change, by focusing on areas of non-consumption, and the new market opportunities it creates. But that requires a transformation agenda, driven from the top of the organization. For example, Singpost, the Singaporean mail carrier, doubled its revenue by transforming its core business from mail delivery to logistics, while building a growth engine in e-commerce fulfillment.
- Business Transformation Can Help Minimize Capitalism's "Transaction Tax." "When a company like Kodak goes out of business it rips the soul out of a community," says Johnson. But with an aggressive transformation agenda, old-guard industry leaders can use their scale and skills to open new markets, expand existing markets and create jobs. For example, when Amazon launched Amazon Web Services (AWS), which eventually became the world's leading provider of cloud computing services, it not only created thousands of new jobs but also accelerated and encouraged entrepreneurs -- and the jobs they create -- beyond the company.
"The word 'transformation' should be on the lips of every business leader in America, as well as every policy expert looking to stimulate job growth," says Anthony. "Business transformation is what creates new markets, brings new products and services to more people, and drives the kind of job growth the country needs. But transformation is a strategic business challenge, not a policy challenge. Transformation also requires vision and persistence from today's business incumbents, who have to make a deliberate choice to disrupt the status quo."
For more information, an early copy of Dual Transformation: How to Reposition Today's Business While Creating the Future or to speak with Scott Anthony or Mark Johnson of Innosight, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at +1 (212) 255-8386 or Katarina@sommerfield.com.
Innosight, the strategy and innovation business of global professional services firm Huron, helps organizations design and create the future, instead of being disrupted by it. Acquired by Huron in 2017, Innosight is the leading authority on disruptive innovation and strategic transformation. The company collaborates with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Learn more at www.innosight.com and www.huronconsultinggroup.com.