The fourth in a series of posts based on the National Center for the Middle Market's in-depth research report, The DNA of Middle Market Growth: The Three Types of Growth Champions and the Factors that Drive Their Success, this article explores the Innovator growth typology and how this type of growth DNA drives significant success.

As a whole, the middle market outperforms all other segments of the U.S. economy. And within this small but mighty sector, some companies naturally do much better than others. In our latest research report, the Center identified three distinctive types of Growth Champions that significantly outperform their peers.

One of those typologies is Innovators, or companies that succeed by seeking—always—for what’s new. Below is a snapshot of how they operate and what sets them apart.

Innovators realize revenue growth by consistently bringing new products and services to market.

Like most growing middle market businesses, the primary route to growth for Innovators is market expansion—or the pursuit of new customers and the opening of new geographic territories. For Innovators, expanding market share results primarily from being the first to market with new or improved products or services. The majority of Innovators introduce at least one new product or service every year, and they attribute 20% or more of their annual revenues to these new offerings. It’s a strategy that works: On average, Innovators report year-over-year revenue growth of 9.4% compared to 6.5% for less innovative businesses.

VARIDESK®, which manufactures active office products to create healthier workplaces, is a case in point. The company’s founder says the business currently has more than 200 products and prototypes in the pipeline that it plans to roll out over the next 24 months. This kind of aggressive innovation has enabled the company to secure customers in 130 different countries and to do business with more than 98% of Fortune 500 firms—and VARIDESK has only been in business for five years.

Innovators are younger and smaller than other types of growers.

Innovation is often associated with start-up companies like VARIDESK. And Innovators are the youngest types of growers we found in our study. But not by much. They are 39 years old on average compared to 45 years for the overall sample. A majority (55%), however, fall into the $10-$50 million annual revenue bracket, the small end of the middle market spectrum. In addition, a third employ fewer than 100 people. They are more likely than other types of growers to be privately held or family-owned businesses.

Innovators concentrate their investments in people and technology—the sources of innovation.

They are somewhat less likely to invest in capital expenditures, and they are considerably less likely to be involved in acquisitions. Instead, Innovators pursue primarily organic growth, and they depend on the right people and the latest technologies to get them there. Perhaps by being smaller and more agile, they are able to bring products to market faster and to foster the close-knit, collaborative relationships that drive groundbreaking thinking.

Learn more about the growth DNA of Innovators and other types of Middle Market Growth Champions.

For additional details on what makes Innovators tick and insight into the other pathways to impressive growth in the middle market, download our full research report, The DNA of Middle Market Growth: The Three Types of Growth Champions and the Factors that Drive Their Success

Next in this series
Post 5: What Middle Market Growth Champions Do Best: 7 Ways the Fastest Growers Set Themselves Apart
Post 6: Efficiency Experts: Formalizing Their Pathway to Growth