What Every CEO Should Know About Organic Growth

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What Every CEO Should Know About Organic Growth

June 24, 2019

Hewlett-Packard was a business born of and built on innovation. The tech company is among those famous early Silicon Valley businesses founded by a couple of brilliant guys tinkering in a garage. New ideas continued to drive its growth — until they didn’t.

More than a decade ago, Hewlett-Packard focused its expansion efforts on acquisitions, at the expense of investing in R&D. The company’s subsequent struggles, noted observers, could be traced to the decision to stop innovating.

“There’s nothing wrong with acquisitions or mergers,” said Pontish Yeramyan, founder and CEO of performance consulting firm Gap International. “The problem is when it becomes the only way to grow.”

WHY ORGANIC GROWTH MATTERS

Organic growth keeps companies on the cutting edge, forcing them to continuously improve — whether that’s adjusting their vision, innovating the business model or developing new products and services.

“It makes you more tuned in with the changing marketplace,” Yeramyan said. “You get more focused on what you want to do and how you want to lead the market. You end up getting caught off guard much less than companies focused on just getting bigger, being more efficient and delivering short-term results.”

Take the hotel industry. A decade ago “hotels were just being hotels,” Yeramyan said. They were growing the way they knew how: buying and merging with other hotels. Then Airbnb came along, reinventing the way people travel and disrupting the entire industry.

It’s becoming a familiar story. While legacy businesses are busy gobbling up smaller companies, some startup comes along and challenges their entire business model. A new survey of global executives by Forbes Insights and Gap International shows 57 percent of business leaders name startups as their biggest competitors.

Leaders of established companies might worry less about being disrupted by a startup if they focused more on organic growth.

“When you’re connected to organic growth and your passion is about growth, then you’re busy innovating and being in front of the marketplace, rather than being victimized by change,” Yeramyan said.

When people connect to a passion for organic growth, it creates alignment and brings out the brilliance in employees, which, in turn, promotes more growth, according to Yeramyan.

That’s how organizations can produce the next Airbnb-like idea — rather than being caught off guard when it emerges. “You become the changer, rather than the changee,” she said.

BREAKING THE FRAME

The Forbes Insights report found that 70 percent of respondents are extremely or somewhat concerned about whether their company will still be relevant and competitive in two years. Despite that deep concern, most business leaders unknowingly limit their thinking when it comes to organic growth. They tend to operate from fixed assumptions about how their marketplace works, viewing the world through what Yeramyan calls a “frame.”

According to Yeramyan, people don’t know they’re always operating inside a frame because they see it as a fixed reality, as just the way it is. “Because they don’t think they’re in a frame, they can’t challenge it,” she said.

Commoditized products are a great example. It may be challenging for a leader of a commoditized business to create growth when margins are disappearing or demand for their product is down.

Because their frame is “we are a commodity business that can only compete on price,” it’s not obvious that there is another way to compete. Organic growth becomes possible when leaders can break themselves and their businesses out of that frame.

“They might say, ‘Maybe we don’t have to be a commodity; maybe something else is possible,’” Yeramyan said. “A bottle of water and a cup of coffee used to be commodities, until someone came along and decided to compete on something other than price.”

Tactics to create organic growth could include finding new kinds of customers, developing new products and services, or innovating internal processes — even how you build employees’ capabilities to execute. It could be virtually anything.

“Once you break out of your frame, that’s the fun part,” Yeramyan said.

MAKING IT HAPPEN

When business leaders open their minds to new ways of growing, the stage may be set for organic growth, but the play hasn’t even started yet. Yeramyan highlights three critical actions leaders must take to create sustainable growth from the inside:

1. Get On The Same Page

Organizations grow when all employees work together to achieve the same end. This happens only when leaders clarify and articulate their vision, and get everyone aligned on a plan to execute it.

Too often, leaders share their vision and people nod their heads, and leaders think they have been understood. Then team members go off and execute in a way they think fulfills the leader’s intention, but end up going in a very different direction.

Leaders may have a whole different picture in their heads that their people can’t understand unless they fully articulate it. Then, and only then, can an organization move forward together to execute a plan that realizes the vision.

2. Break Down Silos

The benefits of an entire organization working toward a common vision can be reached only when everyone is working in harmony. Yet invisible silos and legacy systems often keep departments, offices and divisions from collaborating.

A whole new corporate culture may be required. But the rewards of true collaboration and cooperation — increases in the quality and speed of work — are well worth the effort.

3. Grow People To Grow The Business

An organization grows when its people grow. People grow when challenges require them to. But to push people to reach out of their comfort zones, the challenges can’t be perfunctory. For organizations to be leading-edge, leaders, front-line staff and everyone in between must be challenged to deliver far beyond what they think they can.