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Project OG: Driving Organic Business Growth
Strategies and Techniques for Growing the Core Business
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The number-one imperative in today's business is growth - organic growth. Companies are looking for ways to grow organically primarily because there are so few attractive alternatives. The general futility of using mergers and acquisitions to grow is well accepted now: M&A most often destroys rather than creates shareholder value. Meanwhile, cost management as the means of growing profits has diminished returns. In the last few years, companies have wrung just about all of the "easy" cost savings out of their budgets, so that now each dollar of cost reduction costs more. All the "low-hanging fruit" has been picked.
In this report, we identify four paths for organic growth:
- Imitators grow by process or asset replication. They have a successful asset - for example, a store model (as in Home Depot and McDonald's) - and they become expert at reproducing that asset in ways that keep costs down.
- Inventors grow by exploiting their technological superiority. Their products and services are consistently superior to their competitors'. Invention lies not solely in capabilities, but in inventing the right products and services for customers.
- Insiders' growth is driven by customer relationships. Marketing superiority is the organic growth engine.
- Illuminators grow by seeing the gaps in the marketplace more clearly and sooner than their competitors, and filling them first. Their organic growth is driven by anticipating unspoken customer needs. Procter & Gamble calls these gaps "white spaces" - places where they can deliver new products or services that expand their core business.
We also delineate the characteristics of organic growth companies. Their strategy is long-term, with an emphasis on sustainability and focus, but they believe execution is ultimately more important than strategy. Their products and services are closely tuned to the needs of customers within serviceable market segments. They are organized around markets, not products. Their view centers on what the market needs and what their business model can deliver quickly and efficiently. Their organization and governance structures are networked rather than hierarchical, accountability is well established, and decision-making is delegated and distributed. They are decentralized, which is another way of saying they are close to the customer, with few intervening layers in the organization. Their leaders are patient, persistent, focused, and eager to learn and guide - typically not the swashbuckling type. And their business processes and information systems are highly adaptable, focused on organizational interaction and integration.
This Re.sults® report explores what it takes to drive organic business growth, including the types of growth paths, how each works, and enablers and inhibitors of organic growth. It includes case studies of organic growth companies in each of the growth paths and explains the process approach to organic growth, including sensing processes, governing processes, and customer-touching processes.
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