NOW NEW NEXT: How growth champions create new value

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Here is a brief excerpt from an article written by Jonathan Gordon, Nils Liedtke, and Bjorn Timelin for the McKinney 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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To generate new organic growth for both the short and long term, businesses need to explore three horizons for action.

How do companies such as LEGO, Chobani, Beats, Diageo, and Dollar Shave Club significantly outgrow their competition, and what can consumer companies learn from them?

Today, consumer-facing companies find themselves in a challenging predicament. They are investing billions of dollars in marketing and innovation to win the favor of consumers—but to seemingly little effect on market share. In fact, according to McKinsey & Company research, only 7 percent of corporate growth is driven by market-share gains, with the rest being driven by “where to play” choices: M&A and portfolio momentum. In the race to shift their momentum, many companies never quite catch up with the market, which remains a step ahead, while headwinds in their core categories hold them back.

Nevertheless, there are clearly exceptions, organic “growth champions” that create their own momentum and win the race. High-growth companies have a clear growth agenda, and they follow through on it. These companies can unlock hundreds of millions of dollars in new growth.

Improving organic growth rates begins with a shift from focusing on costs to focusing on cost and growth. In our experience, organic growth leaders exhibit at least one (though often a combination) of three profiles:

o The Investor has a clear understanding of where growth is with existing products and services and doubles down on the winners. This is often the fastest, simplest, and most effective way to grow. In retail, for example, this could mean investing in offers that increase profitable foot traffic; in direct-to-consumer businesses, it could mean increasing advertising in a successful channel.

o The Creator builds value through new products or services. Creators work at the frontiers of change to identify the white spaces—in emerging customer needs, unserved segments, or adjacent markets. They harness advanced analytics and digital to disrupt markets, not just improve existing models.

o The Performer constantly optimizes core commercial capabilities in sales, marketing, pricing, and customer experience.

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We have found that these archetypes provide a simple but effective model for business leaders to examine their commercial growth opportunities. They also provide a simple and useful way to structure business-unit growth programs.

In practice, changing a company’s commercial growth trajectory often requires some combination of the three, but successful companies master at least one. For this article, we will explore how Creator companies construct a winning portfolio of growth initiatives (Exhibit 1).

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Here is a direct link to the complete article.

Jonathan Gordon is a partner in McKinsey’s New York office, Nils Liedtke is a consultant in McKinsey’s Brussels office, and Björn Timelin is a partner in McKinsey’s London office.

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