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The roots of organic growth

 

There are many paths to growth, and high performers take more than one—supported by reinforcing capabilities such as advanced analytics and digital customer-experience management.

Here is a brief excerpt from an article written by Kabir Ahuja, Liz Hilton Segel, and Jesko Perrey for the McKinsey Quarterly, published by McKinsey & Company. They discuss several attractive, potentially profitable initiatives. 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.

To learn more about the McKinsey Quarterly, please click here.

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Growth is a tonic for most companies. It attracts talent and creates strategic options while generating financial resources to fund new moves—provided the growth is profitable. It’s also been harder to come by over the past decade, as a sluggish macroeconomic environment and accelerating, technology-driven disruption have ratcheted up pressure on businesses.

How should executives think about growth?

Digital technologies and the pace of competition, however, also open new avenues to organic growth for those companies that have the capabilities and dexterity to take advantage of them. Today’s fastest growers, for example, price products in real time; they create meaningful and positive customer experiences with digital interactions; and they refine products continually with customer feedback. To understand the relationship between organic growth approaches, capabilities, and performance in this environment, we recently surveyed approximately 600 executives at leading companies in the European Union and North America.

We found that companies exhibit three basic growth tendencies; that an approach combining two or more of these holds particular power in driving growth; that advanced analytics is an ingredient of standout growth; and that success depends on nurturing a set of reinforcing capabilities that fit the growth approach.

Three growth profiles

The corporate growth goals and the behavior tracked by our survey show that companies can be described as having three broad growth profiles. Investors have a clear understanding of sources of growth from existing products and services and squeeze funds from a variety of areas, such as low-growth initiatives or unproductive costs, to reallocate capital and double down on winners. Creators build value by developing new products, services, or business models. And Performers grow by constantly optimizing core commercial capabilities in sales, pricing, and marketing.

Understanding each profile is helpful because leaders tend to fall back on what has worked for them in the past, and this can often blind them to new growth opportunities. In our experience, companies that carefully evaluate each growth profile, and make choices based on the strategic fit, will increase their chances of achieving above-market growth rates.

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Here is a direct link to the complete article.

Kabir Ahuja is a partner in McKinsey’s Stamford office, Liz Hilton Segel is a senior partner in the New York office, and Jesko Perrey is a senior partner in the Düsseldorf office.

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