Your Best Growth May Be Right Under Your Nose
Action No. 1
Be patient and diligent
Organic growth doesn’t get the respect it deserves because it’s usually delegated to lower-level management. Conventional wisdom dictates that operating units are closer to the front line and better positioned to take advantage of small-scale incremental growth. But collectively across all business units, increments can add up to significance.
Executive-level leaders need to focus on organic growth by making it a goal rather than an assumption during budget planning, and by nurturing organic growth capabilities by identifying areas of synergy across business units and markets. By giving organic growth the time and attention it deserves at the executive level, the likelihood of success will increase. Delegating organic growth sends a message that the CEO is not interested and does not challenge or hold management accountable for finding ways to grow organically.
Action No. 2
Don’t follow the herd
I trust that our readers understand that we experience fairly predictable economic cycles in our country. Many executive teams invest aggressively during growth periods and pull back when growth starts to slow down. This is a disease that we refer to as “short-termism,” which results in justifying the addition of unnecessary employees or paying too much for new equipment/acquisitions, and then at the bottom of the cycle, trying to save their way to success by not upgrading old technology or funding research for new products that would provide longer-term growth.
Executives focused on predictable and steady organic growth, however, have the internal fortitude to fight short-term pressures and invest in their organizations in ways that provide long-term organic growth in spite of these cycles. For example, outstanding leaders challenge managers to increase margins even during growth periods and then consistently re-invest those dollars into initiatives to fuel organic growth during down cycles.
Action No. 3
Field the right players
Champions of organic growth are typically not the extroverted, high-achiever types out to make a name for themselves. They exude the spirit of the underdog Oakland As, whose analytical, evidence-based approach to building a baseball team allows them to thrive by finding undervalued players.
I will never forget a lunch I had with the late, great Kirby Puckett, Minnesota Twins all-time leading hitter and Baseball Hall of Famer. I asked him if he always swung for the bleachers when he got up to bat. He said, “I just try to hit doubles, and sometimes I get lucky and it goes over the fence.” In baseball terms, organic growth is about players who get to second base, not those who get thrown out at second. The leaders who succeed at building organic growth enterprises are those talented at finding new benefits for current customers or finding new customers for the benefits the growth already provides. They excel at finding innovations and incremental enhancements that provide competitive advantage. They are the ones who get stuff done without fancy pedigrees or titles.
Over the years, I have had the opportunity to work with and advise some outstanding CEOs. Unfortunately, I have also worked with some very bad CEOs. Almost without exception, the outstanding CEOs had a clear vision of a future state of their organization and effective strategies for achieving their vision. One of the common denominators of this group is their understanding of the importance of the concept of organic growth. In how many CNBC interviews or investor conference calls have you heard a CEO say, “We are expecting an exciting 2 percent organic growth this year from our existing customer base?” I suspect it’s as many as times as you have won the lottery!
Organic growth achieved by increasing output and sales from existing customers is simply not that sexy, interesting or attention-getting. It’s the no-brainer growth area that many leaders seem to assume will just happen on its own, and therefore pay little attention to or put little investment in. Most CEOs seem to think that organic growth takes too long, is boring and unworthy of much creativity or investment—and therefore it is relegated to lower-level management or overlooked.
Need proof? Results from the 2014 Price Waterhouse Coopers 17th annual Global CEO Survey include data showing that 35 percent of CEOs believe that their main opportunity for growth this year will be in new products or services to fuel organic growth in existing markets, and another 30 percent said they plan to increase their share in existing markets. However, there’s a gap between these statements and actions, as only 27 percent had started or completed the changes they were planning in order to make this organic growth happen.
I’d bet that most time and attention is being spent on looking for more exciting inorganic growth such as mergers or acquisitions, new joint ventures and partnerships, or emerging geographic markets. Organic growth, as Rodney Dangerfield says, “gets no respect.”
It’s a shame, because sometimes the best opportunity for growth might be just under your nose (and I don’t mean your mustache). Organic growth can deliver even better growth opportunities and be the life-blood of your business, but it requires focused and engaged leadership. If you want to increase your organization’s organic growth, try the action steps at left:
All organizations should be able to find incremental growth through focused and engaged leadership. Follow these simple steps, and you may find the growth you were looking for was hiding right under your nose!
Mark W. Sheffert (email@example.com) is founder, chairman and CEO of Manchester Companies, Inc., a Minneapolis-based performance improvement, board governance, and litigation advisory firm.