Some managers are lucky. They passively coast to growth inside high growth markets – the market drives their growth. Eventually they’ll fail, of course, but for now, it’s great to be them. Most managers, however, face the difficult decision of how to allocate resource between the other two available growth drivers: 1) organic growth, and 2) innovation.
Many leaders believe they must choose one or the other, that it is not possible to execute both successfully. In fact, it’s become quite fashionable to claim that only “white space strategies” – disruptive innovation – can drive growth.
How do you grow organically? Organic growth means leveraging what you’ve already got or can easily get and integrate. Existing expertise. Adjacent distribution. The same or similar customers.
It’s the opposite of hopscotch. It’s walking methodically, step by step.
Organic growth is bedrock of all sustainable growth. It takes relatively little effort. That’s not to say it’s easy, but it is always easier working with what you already know.
What happens when you do not have an organic growth strategy? The heart of your business will eventually rot from neglect. Sure, it’s tempting to believe that the status quo will endure, and thus you can focus resources on new markets. But business is never static. Competitors will eat your lunch while you are distracted. You will lose relevance to your core customers and then need to either invest in rebuilding goodwill with them, or invest in finding new customers.
Under-supporting your core business is a recipe for failure.
Want a poster child for organic growth? Try Apple. While the press fawns over their ability to create new markets, the fact is they continuously work to strengthen their position in their legacy categories, like computers and their iTunes store.
Sometimes the results of a well-designed organic growth strategy can be dramatic. A century ago, P&G leveraged its expertise in working with fats and oils for making soap into a shortening business, which organically led to peanut butter, which gave it roasting expertise, which led to coffee, which led to fragrance expertise, which helped grow the beauty care business. Similarly, by combining the company’s insights about marketing to young mothers (from its soap business) with its technical expertise in wood pulp (from its paper business), it created Pampers. Some might call that disruptive innovation, but P&G will tell you it was organic, never straying too far from their core businesses. Thus they built a remarkably diverse empire.
More often, however, organic growth is incremental. It keeps the core strong and relevant. It prevents erosion. But generally, to drive dramatic growth, you must innovate. We’ll examine innovation, and the balancing of organic growth and innovation, in a future post.
Bottom line, companies that believe they must choose between organic growth and innovation will inevitably fail. The only prudent strategy for a growth company is to strengthen their core via organic strategies while simultaneously working to obsolete it via innovation. Sustainable success is all about balance and multitasking.