Inorganic growth is an act where companies expend their business (sales) by increasing their output and business reach due to acquisition, mergers and takeovers. Whereas Organic growth is an act by which companies increase their customer base, output per customer, sales, or any combination of above by investing, improving and utilizing their own resources and capabilities. Inorganic growth is a faster process to grow as opposed to organic growth that is relatively slower process compared to inorganic growth.
General Electric (GE), under the leadership of Jack Welch, set an example to the inorganic growth. Welch created a formidable tool kit and mind-set to maintain bottom-line discipline while fueling top-line growth majorly through geographical expansion and acquisition. Jeffrey R. Immelt who succeeded GE after Welch, became the catalyst for organic growth. Under Immelt’s leadership GE is expending its ability to deliver by adding new capabilities to its operating thoroughness. Taking over GE after Welch, Immelt spearheaded “Growht as a Process”, a process that fuels GE’s ability to generate consistent organic growth. “Growth as a Process” includes six capabilities (i) Technology, (ii) Customers, (iii) Globalization, (iv) Commercial Excellence, (v) Innovation and (vi) Growth Leaders. A detailed definition of above characteristics is provided below:
Great Technology: Have the best product, content and services
Customers: Using process excellence to satisfy customers and drive growth
Globalization: Create opportunities everywhere and expend in developing global market
Commercial excellence: Develop world class sales and marketing talent, and demonstrate the company value. Even company has a wonderful differentiated product one has to be creative and skilled to obtain the right price.
Innovation: Generate new ideas and develop capabilities to make them reality. Ideas are very important for customer satisfaction as well as innovation of new product/services.
Growth leaders: Inspire and develop people who know how to help customers and company to grow.
It all starts from the verbalization of thoughts: where does company want to go? Once this is decided think of: how to achieve the above? In order to achieve consistent desired organic growth Immelt says “I make sure we fund for leadership. We’ve gotten out of business where funding for leadership couldn’t get good results”. Immelt’s process makes it very clear that company needs a very good marketing team to get desired price (Experienced Commercial Leadership).
Immelt also talks about strategic acquisition, where he says to thinks about what do you want to target and determine how far or close you are to the target? If you are far, then find other targets that are closer to the desired target and can assist you to fill the gap. While speaking about enterprise selling, Immelt emphasizes on cross training that can play a significant role. Many companies struggle with enterprise selling as the incentives of different departments in the company are not well aligned. Cross training of marketing and sales team make them capable of provide complete solution during enterprise selling.
Growth, organic or inorganic, always demands (and recommended) for setting up tangible goals. It should be formulated in a very clear and understandable way i.e. If we want to increase our revenue by 100% in 3 years, we would spend $ amount to achieve tangible difference in product portfolio”.
Clear communication, data keeping and product customization are the keys to achieve consistent growth. Any change has to be clearly translated to those who are affected by it. First, to the people those have maximum impact of the proposed change. Data keeping is important. It is essential to better serve customers and very important for push marketing. Every market is different and product customization is a challenge that needs to be overcome by innovation. Local product development is hard due to following three different reasons: (i) Different people, (ii) Different funding and (iii) It (the product) need to be better at adaptable and low-cost manufacturing.
Organic growth is highly dependent on high employee retention. Longer the people are in a position better is the domain knowledge as people with deeper domain knowledge can make good decision and good decision will catalyze the organic growth. Employees staying at the organization for long time become growth leaders. There are five main characteristics for growth leaders: (i) External focus, (ii) Imagination and creativity, (iii) Decisiveness and clear thinking, (iv) Inclusiveness and (v) Deep domain expertise.
Above five points are the drivers for employee development and in turn organization development. If an employee is lacking in some area then he/she has to improve upon that by picking one of the five points (are called as red points and everyone has to work on at least on red all the times).
By using above approach GE is breaking the barriers of organic growth and is organically growing at a rate of ~8% i.e. approximately 3 times the GDP growth. The question is what will come next? How sustainable will this growth be in future?
Great article. Despite having such huge base, GE is growth rate is quiet commendable. GE business model has always been path breaking. I hope Indian corporate too learn few things, such as how to grow ethically, how to think out of the box, how to value and reward your employees while addressing the needs of shareholders in the long run.
ReplyDelete