The Six Keys to Organic Growth

Last month I shared snippets from a book dispelling the “Myth of Market Share.” At the same time I was reading Edward Hess’ book, THE ROAD TO ORGANIC GROWTH.

As a businessperson, I much prefer using existing products and processes to drive sales through acquiring new customers and getting current customers to buy more, more often. That’s organic growth as opposed to buying growth through buying a competitor (ex. HP buying Compaq) or buying into a new market (ex. Coca-Cola buying Odwalla).

In THE ROAD TO ORGANIC GROWTH, Edward Hess takes a Jim Collins-like approach to find 22 businesses that epitomize the organic growth model. With research backed by a comprehensive study, Hess set forth to explain the underlying qualities these 22 businesses have in common. Hess whittled his findings into a list of Six Keys to Organic Growth.

Below is a cut/paste synopsis of Hess’ findings. It’s interesting fodder for all us marketers. Enjoy.

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The Six Keys to Organic Growth

“Growth achieved through a commitment to customer satisfaction, employee engagement, and core profitability—organic growth—is a smart long-term strategy for any company. Organic growth represents the underlying strength and vitality of the core business.” (p. 1)

“Our investigation found that [high-organic growth] companies generally possessed the six keys discussed below.” (p. 20)

1. An Elevator Pitch Model
“High growth companies have a simple, understandable business model that their employees can understand and execute—none has a complex or sophisticated strategy.” (p. 70)

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2. Instill a “Small Company Soul” into a “Big Company Body”
“High organic growth performers have a small-company soul housed in a big-company body. A small company soul is entrepreneurial, with employees having ownership of the customer, being held accountable for results, and sharing in the rewards of those results.” (p. 81)

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3. Measure Everything
“One of the six keys to building a consistent high organic growth company is measurement—of everything. The 22 companies on the organic growth index (OGI) list track a variety of metrics—financial, operational, behavioral—to understand which areas of their business are not performing as efficiently as possible, and then they take action to shore up those numbers.” (p. 97)

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4. Build a People Pipeline
“All the high-growth companies have a high management and employee retention, high employee loyalty, and high employee productivity as compared with their competition. Employees in these companies ‘own’ their results and their careers, and most even own part of the company. These companies’ management teams are frequently home grown, with long company tenures.” (pgs. 22, 117)

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5. Leaders: Humble, Passionate, Focused Operators
“Rather than being overly confident about their success, at high organic growth companies, leaders are frequently paranoid about complacency, arrogance, and hubris. Although many leaders are very wealthy, for the most part, you would not know this from their dress, their office, their demeanor, their attitude, or any outward appearance. Few of the leaders, if any, take credit themselves. There is a sincere respect for line workers, where many had begun their careers.” (pgs. 139, 140)

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6. Be an Execution and Technology Champion
“The high-organic companies generally do not have unique strategies, products, or services, nor are they market-leading innovators. But they are execution champions—day after day, they have figured out how to get consistent high-quality performance from their people. These companies use technology to drive efficiencies across their value chain. To them, technology is not a service function; it is an operational function.” (pgs. 23, 161)

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source: THE ROAD TO ORGANIC GROWTH (Edward D. Hess)

Comments

[Mario Vellandi]

Thanks for sharing, I will definitely read that book. It reminds me of "Small Giants" by Bo Burlingham. These types of books are very refreshing because they're storytelling, not academically stating.

[johnmoore (from Brand Autopsy)]

Mario ... Bo's book is very much a storytelling book showing how small companies can bigger by acting smaller. He tells the stories about Righteous Babe Records, Anchor Brewing, ECCO, and other "small giant" businesses. And, he always gives the "moral" to each of his stories.

Edward Hess' book isn't a storytelling book. It's based upon factual research with intrepretations. Hess is an academic but he doesn't write like an academic. However, don't expect THE ROAD TO ORGANIC GROWTH to read like SMALL GIANTS. It doesn't.

[Mark R. LePage, AIA (Entrepreneur Architect)]

John:

The topic of organic growth is very interesting to me. Architecture firms traditionally grow organically, though few firms manage their growth. It is rarely a planned or structured strategy. Most architects see themselves as artists and leave the business stuff to the ouija board.

As an Entrepreneur Architect, I am putting business success first. A vibrant growing firm will allow us to be the best artists we can be.

The Road to Organic Growth sounds like the perfect book for architects looking to succeed in business. Thanks for the preview.

[Juno888]

Organic firm can be able help some business not for some most high struture strategy of business.

[Anand Sanwal]

John,

Thanks for the interesting post, and I'm glad to see organic growth getting its due. Given it is less "sexy", it often gets overlooked in lieu of revenue growth from M&A or market growth which grab headlines. However, organic revenue is really the best testament to management's capabilities to grow based on the investments and decisions they make.

Unfortunately, however, much of the conversation around organic growth is focused on storytelling which is good for selling books but bad for actually generating organic revenue.

Most of the things we've read don't resonate with our experience generating organic growth as part of large, complex organizations. Instead of arguing for improved management processes, the arguments on organic revenue tend to gravitate around a handful of managerial beliefs, talents and behaviors. This isn't consistent with our findings that organic revenue generation is a process which can be managed like any discipline within the organization. Ultimately, organic revenue creation can be made more science and less art.

While I wouldn't argue that having capable managers at the helm of a business is not important or desirable, the idea that organic growth is dependent on the humility of leaders or recruitment of the right managers possessing vision, leadership and entrepreneurial talents makes organic growth appear much more elusive than it need be.

Based on our experience working with organizations seeking organic growth, here is what needs to happen:

1. Organizations must first understand that resource allocation decisions, e.g., investments and projects in marketing, R&D, sales, operations, innovation, etc are what drive organic growth and that they generally have too many ideas and not enough funding
2. Because of this resource constraint, they need a way to better determine the selection and prioritization of organic growth projects instead of typical personality and politically-driven decision criteria. This can be done by forcing the quantification of these investments in a more data-driven way, e.g., measure everything. By understanding the strategic, financial and risk benefits and risks of these projects in a consistent and rigorous way, the projects can be considered against one another and selections can be made that leverage data. I'm not arguing the decisions be made on the basis of a spreadsheet but am calling for decisions that balance analytical and intuition led decision making. This is very contrary to the articles & books on the topic which seems to push for more intuition-led, decibel-driven decisioning based on the prowess of managers. This is already the norm in most organizations and doesn't need to be exacerbated.
3. Creating projections for these investments is obviously not enough as creating fancy, elaborate models are always wrong. The point is not to create perfect projections which is a fool's task but to create a mechanism for always improving projections. As the business adage goes, "What gets measured gets managed" and so the critical step at this point is to actually close the loop on these investments and determine which delivered and which did not, e.g., which were achieved in the costs outlined and which delivered the financial benefits, # of customers, etc that they outlined.
4. Taking this promise versus performance data, we can use the results to inform future year projections. Our projections are still not perfect but they are continuously improving and with this, the organization's ability to select the right projects to deliver organic growth is also improving.

With all this information, we're actually able to objectively determine who the best managers are based on information and not abstract and nebulous determinations of vision and leadership capabilities. These managers' practices and ideas can be shared across the organization, and the managers themselves can be put into positions of greater responsibility. At the same time, those managers unable to deliver are exposed and corrective action can be taken.

Creating organic growth is possible in a systematic way, and it should be treated as a strategic and managerial discipline the organization can continuously improve through consistent attention and management. Pegging your hopes for organic growth on a few 'gifted' leaders and their abilities is not the way for an organization to consistently generate organic growth.

I am still excited that organic growth is coming to the forefront, but it appears that a lot more can be done to create an understanding of what drives organic growth.

Warm regards,
Anand Sanwal
www.brilliont.com
Investile Dysfunction Blog
[email protected]