Organic growth is key to companies’ futures.

best firms follow more

than one path to achieve it and also are better at developing the right
capabilities to support it. Organic growth could not be more important to
companies’ survival.

How to turn a small business into a big one? Or, grow an already significant
company into market dominance? For business owners and executives, these are
the critical questions that demand sound planning, consistently astute decisions
and successful execution.

The approaches to growing businesses are as numerous and diverse as the range
of businesses themselves. While small companies tend to favor an internally
focused organic approach and large companies usually favor growth by
acquisition, both avenues are open to companies of any size. The key is
formulating an appropriate strategy, and assembling a strong business case based
on the strategy.

Build or Buy?

Either “build or buy” can be effective, but each present risks and trade-offs that
must be carefully considered and skillfully addressed if success is to be achieved.
Whether the growth strategy is introspectively organic or includes such inorganic
approaches as mergers, acquisitions, joint ventures, or organic-inorganic hybrids,
care must be taken in planning and execution to ensure the end result creates real
value and positions the business for future opportunities.

Growth From Within

Businesses that pursue organic growth – growth from within – learn that such
growth requires time and nurturing, as expanding must be done prudently, at
each point biting off only what the business can chew, and allowing each move to
digest before expanding further. The risks of organic growth lie in expansion that
outpaces the ability to effectively manage, stretches resources too thin, strains
capital, or diverts focus from the business’ core mission. Businesses that grow
organically can control their rate of growth and normally face less cultural and
integration challenges than those that choose an inorganic strategy.

Inorganic Growth-Accelerated Approach

With inorganic growth, via mergers, acquisitions, and joint ventures, market
share and assets are immediately larger, new skills and knowledge become
available, and access to capital and new markets may be easier.
But this sudden increase in size presents significant management challenges that
increase with the size and complexities of the new entity created. People and
branding issues are likely to arise. Systems, sales and support capabilities must
be scaled and positioned to meet new demands.

Mergers, acquisitions and joint ventures that, on paper, look like ideal matches,
can still fall far short of expectations if company cultures aren’t blended
effectively. Deals often fail not because of bad strategy, but by poor integration
and execution either on the back end, operationally, or on the front end in
integrating brands.

A skillfully executed growth strategy – whether buy or build -- can open the door
to increased opportunity. In the end, success comes down to skillful execution
and integration. The task can resemble a puzzle of many pieces. But when
properly assembled, what emerges is a bright picture of value creation and
accelerated growth.
(source: istock)

Tell me – what is your growth strategy for 2014?

Brad Kuntz is Americas Leader of EY's Commercial Advisory Services practice.

He’s worked extensively with companies and private equity firms for both front-
end strategic analyses and transaction related advice. He writes about
corporate growth strategy, commercial diligence, performance improvement
and operations management.