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In the years to come, traditional product‐centered strategies alone won’t create the kind of growth companies desire. An alternative platform for driving significant, sustained new growth is demand innovation (as opposed to product innovation). Demand innovation focuses on using one’s product position as a starting point from which to do new things for customers that solve their biggest problems and improve their overall performance. Embedded in the customer’s use of your product are all kinds of hassles and inefficiencies as they buy it, use it, store it, maintain it, finance it, and eventually dispose of it. This broader web of activity represents tremendous economic activity, often 10 to 20 times greater in total value than the product market itself. Understanding and participating in this customer “value chain” is the key to demand innovation. Making demand innovation profitable means improving both your customers’ economics and capturing value for your company. Here success is rooted in putting to use a set of powerful hidden assets that your company may already have. Five types of hidden assets are described with guidelines for how to master the new discipline of demand innovation. Five principles are offered to guide managers through the challenges that arise for developing new‐growth projects into major opportunities.

A new form of business innovation, a response to the current challenges to growth initiatives, is being pioneered by a handful of farsighted companies. These companies have shifted their approach from product innovation to demand innovation. Such new‐growth businesses focus on growing new value by discovering new forms of demand. For example, in the mid‐1990s, engineers within several GM business units realized that technological advances might enable the creation of a new business focused on the needs of drivers. The crucial factors in GM’s success have been its ability to look at customers’ driving needs from a fresh perspective and its decision to serve these needs through a business design that leverages GM’s unique hidden asset – its unequaled installed base of vehicles.

This case chronicles the changing of a corporate unit’s business model, organizational model, and mindset. The reinvention process started in early 1999 when Mercer Management Consulting received a call from Bob Romasco, who had recently assumed the role as CEO of J.C. Penney’s Direct Marketing Services (DMS) unit. After completing a review of the company, he realized the need for a new vision and business design. Mercer worked closely with Romasco and his team over a two‐year period to transform many aspects of the business from its strategic direction to the implementation of sophisticated direct marketing techniques. Throughout, it was clear that a successful transformation would require more than the right vision and strategy; it also required changing the general mindset of the staff.

Many senior executives equate “going digital” with specific phenomena such as the advent of the personal computer, the proliferation of e‐mail, the growth of enterprise resource planning systems, or the popularity of the Internet. But to think of digital business design as the sum total of the high‐tech innovations multiplying around us is a fatally incomplete view. The discipline of digital business design is about serving customers, creating unique value propositions, leveraging talent, achieving order‐of‐magnitude improvements in productivity, and increasing and protecting profits. Learn from the companies that have created great value propositions for customers and employees, achieved significant improvements in productivity, created a robust profit model, and protected both their profit streams and their customer relationships from being eroded by competitors.

Investigates complacency by managers at successful organizations and how they seem to ignore warning signs of danger on the horizon. Stresses that these are the wrong reactions and recognizing the danger requires knowing what to look for, and lists three patterns, which allow for crises to afflict successful growth‐oriented companies. Extensive detail in four figures aids by way of explanation. Sums up that scepticism over growth crisis is a natural reaction for managers and investors in healthy companies, but there are benefits in the incorporation of this new way of thinking.

Globalization is changing the nature of competition and value creation in ways more subtle and fundamental than simply cost. By incubating scores of new business models that can unseat established companies, globalization is creating opportunities for new value creation and highly profitable growth at the two ends of the value chain – new customer connections at one end and new models of innovation at the other. This article discusses globalization and the changing nature of competition and value creation.

Provides a viewpoint of globalization and the changing nature of competition and value creation.

For many companies, the most powerful moves will be to take advantage of university alliances and global talent sourcing. Every company today, large or small, has to draw the global map of the key talent pools for its business, whether that talent consists of software programmers, machinists, biotechnologists, materials scientists, cinematographers, financial analysts, medical technicians, call center operators, or electronics engineers. The key point is to spend more on the highest‐impact activities. One way is to practice the “open innovation” approach as described by Henry Chesbrough of the University of California at Berkeley, which advocates building on the innovations of others. There is tremendous leverage in shifting your thinking from “not invented here” to “invented elsewhere, monetized here.”

Firms that follow the approach advocated in this paper may gain an advantage in value creation by concentrating not on being the first to deploy a technology but on being the best at designing and using their information.

In 1984, IBM was viewed as the most powerful corporation in the world. Ten years later, it was struggling to survive, while what had been an entrepreneurial curiosity—Microsoft—had become so powerful that many were concerned. Today, Microsoft finds itself fighting a rear‐guard action to hold its position in the face of Netscape and other emerging competitors.

This article urges executives to expand their view of risk. Instead of just defending against bad risk events, leading companies define and anticipate the upside risks that, when well managed, can deliver the maximum rewards. The discipline of strategic risk management allows firms to raise their growth potential in addition to reducing their economic volatility. The author shows executives how to avoid the biggest risk of all – not taking the right growth risks for the business. Businesses today are exposed to greater risks across the board, ranging from political risks to product liability and environmental hazard risks. There also are a set of strategic risks that have become increasingly disruptive. These include not just the obvious high‐probability risks that a new ad campaign or new product launch will fail, but other less‐obvious risks as well in areas such as technology and customer needs. Failure to anticipate and manage this spectrum of strategic risks can expose a company to dramatic decreases in shareholder value and severe swings in stock prices. In today’s risk‐intense environment, firms must manage their economic and risk profiles more actively. The goal is not to eradicate risk, but to deliver the maximum reward for an acceptable level of risk. The author addresses some of the most important forms of strategic risk and the countermeasures that can be used to address them.

Looks at why traditional growth tactics have become less effective and why it is necessary to balance short term moves with new business building. Looks at understanding customer priorities.

Over the next year, this column will lay out a practical growth program for managers, balancing short‐term moves with new‐business building.

Growth moves fall along a spectrum of categories ranging from traditional product innovation to longer‐term strategies such as taking core capabilities to new markets. Managing new growth requires an active feedback loop of constantly monitoring the progress of each initiative.

Provides managers with guidelines for growth action plans.

Of particular to strategic planners, CEOs, senior executives.