Mastering three strategies of organic growth

Organic growth is key to companies’ futures. According to survey results, the best firms follow more than one path to achieve it and also are better at developing the right capabilities to support it.

Here is a brief excerpt from the results of a study featured in an issue of McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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There’s no single formula for delivering organic growth. In fact, the results from a new McKinsey Global Survey on the topic suggest that the companies that see the most growth follow diverse paths.

That insight has significant implications for a company’s health and performance. Organic growth could not be more important to companies’ survival. A look at the share-price performance of 550 US and European companies over 15 years revealed that, for all levels of revenue growth, companies with more organic growth generated higher shareholder returns than those whose growth relied more heavily on acquisitions.

We wanted to understand better how businesses consider and pursue growth along three strategies: investing in existing high-growth activities by reallocating funds from a variety of sources; creating new products, services, or business models; and performing better by constantly optimizing their core commercial capabilities, such as sales, pricing, and marketing.

First is getting alignment of the whole organization on the subject of growth and getting the whole organization aligned around that agenda. They have to believe it and live it and breathe it. The second is innovation. Innovation can happen anywhere in the business. Getting people into an innovative mode picks up the pace of the business and changes things that need to be changed. And finally, it’s just play offense all the time. It’s a lot more fun than defense. It’s a way of life. You get more externally focused when you play offense.

There are tricks of the trade, too. For example, I look at a ton of data every day, and I’ll drill down into parts of it and look for abnormalities or variances. Then I generally like to pick up the phone to two or three levels down to ask them what’s going on and why their number is different from everyone else’s. It gets people’s attention.

How have you used the three dimensions of growth: Investor, Creator, Performer?

The Investor is always looking at what else can I do with what I have? So when I came in, one of the first things I told my boss was, “We need to invest more in HSD [high-speed data]. It’s a high-margin product. We’re underpenetrated. That’s the product we have to drive the hardest.” We’d done over a million subscriptions a year for ten years, so it was crying out for investment. We’ve got the new routers coming out that are the fastest in the world. And we’ve got better Wi-Fi and better software managing the network. So we invested a lot in broadband.

As a Creator, we created the X1 voice remote, which enables you to get to your content quicker. You don’t have to go through various screens, you just speak into it, either thematically or by actor, title, or genre. We’ve got ten million of these devices out now and have seen 250 million voice commands a month. It’s a great product.

In terms of Performance, my personal favorite, we’re driving the online channel. When I got here it was growing 3 to 4 percent. It’s now pushing 20 percent. It’s the most efficient, lowest-churn channel. We also looked at the stores, and the stores were just payment centers. We weren’t doing any sales through them. So we converted 180 stores in the last couple of years, and their sales are up 20 percent year over year.

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Here is a direct link to the complete article.

Liz Hilton Segel is a senior partner in McKinsey’s New York office, and Neil Smitis the CEO of Comcast.

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