The conventional wisdom about how best to pursue growth--launch a slew of initiatives in high-potential areas; appoint some promising young managers to lead them; locate them safely away from the established businesses--is a recipe for failure, according to the authors. Meanwhile, CEOs spend too much time on managing today's earnings and too little time on building the kind of learning organization and culture that growth requires. This article explores six common mistakes that executives make in this arena: (1) Failing to provide the right kind of oversight. The CEO should spend meaningful time with the team and with potential customers. (2) Not putting the best, most experienced talent in charge. Seasoned executives in the core businesses, rather than ambitious young MBAs, should be assigned to growth initiatives. (3) Assembling the wrong team and staffing up prematurely. CEOs should focus on capabilities, not who's available, and staff up only when the strategy, business model, and value proposition are clear. (4) Taking the wrong approach to performance assessment. Milestones relevant to each stage of an initiative's development should be established, and key assumptions in the business plan should be linked to the financial forecast. (5) Not knowing how to fund and govern a start-up. The funding of early-stage ventures should be separated from the corporation's annual budget cycle. (6) Failing to leverage the organization's core capabilities. CEOs must play a central role in helping growth initiatives tap the resources of the core businesses.

Sooner or later, most companies can't attain the growth rates expected by their boards and CEOs and demanded by investors. To some extent, such businesses are victims of their own successes. Many were able to sustain high growth rates for a long time because they were in high-growth industries. But once those industries slowed down, the businesses could no longer deliver the performance that investors had come to take for granted. Often, companies have resorted to acquisition, though this strategy has a discouraging track record. Over time, 65% of acquisitions destroy more value than they create. So where does real growth come from? For the past 12 years, the authors have researched and advised companies on this issue. With the support of researchers at Harvard Business School and INSEAD, they instituted a project titled The CEO Agenda and Growth. They identified and approached 24 companies that had achieved significant organic growth and interviewed their CEOs, chief strategists, heads of R&D, CFOs, and top-line managers. They asked, "Where does your growth come from?" and found a consistent pattern in the answers. All the businesses grew by creating new growth platforms (NGPs) on which they could build families of products and services and extend their capabilities into multiple new domains. Identifying NGP opportunities calls for executives to challenge conventional wisdom. In all the companies studied, top management believed that NGP innovation differed significantly from traditional product or service innovation. They had independent, senior-level units with a standing responsibility to create NGPs, and their CEOs spent as much as 50% of their time working with these units. The payoff has been spectacular and lasting. For example, from 1985 to 2004, the medical device company Medtronic grew revenues at 18% per year, earnings at 20%, and market capitalization at 30%.

More and more companies today are facing adaptive challenges: Changes in societies, markets, and technologies around the globe constantly force businesses to clarify their values, develop new strategies, and learn new ways to operate. The most important task for leaders in the face of such challenges is mobilizing people throughout their organizations to do adaptive work. In this HBR article from 1997, the authors suggest that the prevailing notion that leadership consists of having a vision and aligning people with it is bankrupt; this approach ignores the fact that many work situations are adaptive rather than technical. Heifetz and Laurie instead offer six principles for leading adaptive work. The authors say leaders should be able to spot operational and strategic patterns from high within the organization and set or create a context for change rather than get caught up in the field of action. They need to pinpoint just how a company's value systems or methods of collaboration must change as well as to regulate the inevitable distress that adaptive work generates. They also need to maintain disciplined attention among employees as well as give the work back to people, letting employees take the initiative in defining and solving problems. And finally, they need to protect the voices of leadership coming from below. An example of adaptive change at KPMG Netherlands, a professional services firm, illustrates these principles.