Here's How Successful Companies Use Three Growth Strategies to Grow Revenue and Make Profit.

Start-ups are essentially ‘cursed’ innovators. They either innovate or die. But needless, innovation drives growth. That means they’ve got to dig their heels in creating new products and services, new technologies, new ways to serve and delight customers. But these days even established businesses had better behave like start-ups, innovate and seek growth everywhere. Else, they would be history. As a matter of fact, growth is an agenda close to the hearts and minds of many business leaders. Why? The invasion of ‘newbies’ like Uber, AirBnB, Tesla and the likes are sending jitters down their spines. What’s more, the ever shifting behaviour of customers is also something to worry, keeping these folks on their feet and toes.

And you know it, digital technologies are allowing organizations to get agile and disrupt markets and industries far beyond their spheres of interest. Look at Amazon, in the last few years, the company has acquired Whole Food Market, Harvest.ai, Game Spark, Graphiq and more. But while you may not have as much cash to throw around as Jeff Bezos, it is in your enlightened interest to begin to ferret growth opportunities both within your industry and without. That said, organic growths have proven to be more effective than acquisition. Meaning, companies that evolve with their markets are more likely to be more profitable than those that grew through acquisition.

In a survey of 550 companies in the US and Europe, companies that grew organically generated more revenues than their acquisition-minded counterparts. According to this article, such organizations tend to master three growth strategies: invest in high-impact activities; create new products and services and business models; and perform operational activities better than the competition - marketing, sales, customer service and all.

For the sake of this article, I would refer to them as investors, creators and performers.

Investors: Typically, shrewd investors like to put their money where their mouth is. They probably won’t touch a company with no track record of profitability or a potential for growth. The basic assumption seems to be that to determine the future, you only need to look in the past. It is not only investors that think this way, businesses do too. They invest heavily in what has worked in the past as the opportunity cost of what will work in the future. They beam their attention on which product is selling fast in the market, which platforms are people shopping more on etc. You know in sport, you get to hear stuff like you don’t change a winning formula.

Needless, this has sent many companies and promising businesses into their early graves. Especially now that digital disruptions have become so widespread. Look at Nokia. The Finnish company dominated the mobile phone market like Michael Jordan did basketball. Remember the N series - N70, N80, N90. boast high-speed technologies such as WLAN and 3G, playback video and sound capabilities, gaming, internet services and so on. The model was replaced by Nokia Lumia in 2011. Here is the problem, Nokia was investing in what was working for it at the time, hardware, meanwhile consumer behavior was tending towards ‘software’ - mobile applications. That doesn’t imply in anyway that all companies that invest in current profit sanctuaries are losers. Not in the least.

Creators: They believe in making new products and services, creating new business models and tearing down the old. As a matter, they don’t mind disrupting their own products, meaning there are no sacred cows. Those in the digital or technology space are the most vulnerable. And that's not very difficult to understand. The lifespan of products in this domain is so short. For instance, the smartphone market dominated by the likes of Apple and Samsung have to keep making new models to keep pace with the volatile consumer behaviour. Another company that come to the fore is 3M that has more than 100000 patents as at 2014. These companies always have their product pipeline full. You might not be as big as 3M but if you are in an industry where the loyalty of customers is hinged on the rate of ‘new releases’, you need to employ talents such as engineers, data scientists, software developers and the like who can make this happen. Else, you might be digging your grave.

Performers: Their organic growth depends on their operational excellence. In this article, I identified one of the ways companies can create a competitive advantage is to explore and exploit relative superiority. Therefore, you can latch onto this strategy to grow your business - you might have more sales force than that the competitors or you have the experience curve in engineering. The point is, growth is a non-negotiable for any business. There is no longer any comfort zone for businesses where big players just sit back and assume they can always depend on what used to work. No way, they have to become agile, become more nimble at exploiting different growth strategies.

Combining organic growth strategies

Despite the above, experience shows that companies that use multiple growth strategies tend to record better growth outcomes such as revenue growth, market share, profits etc. than firms that rely only on one route to growth. One study shows that 44% of the companies that use multi-dimensional growth strategies are in the top-quartile in their industries. However, not all companies that use diversified strategies get the same growth outcomes. For instance, more than 3 out of every 10 firms that use multiple strategies but dominant in investing are high-growth firms. In like vein, 4 of every 10 companies that are power creators but tap other strategies are high-growth industry leaders. But when the companies pursue growth with only their creating abilities, only 3 out 10 make the high-growth industry classification.

But the nature of the market or industry also play huge roles in determining the growth strategies companies can follow. In the developed markets, such as the US and Europe, firms are more willing to be investors. And then bolstered by a creator’s mindset as they enter into new markets, creating new products and survives and building fresh business models. However, those in developing or emerging markets like Africa or Asia, are likely going to be creators.   

In the final analysis, whether startup, small to medium-sized companies or the conglomerate, pursuing growth has more or less become a must-do. Like Jeff Bezos once remarked, ‘...Amazon follows its customers’. Meaning, it keeps pushing back the innovation frontier as it seeks to wow and delight customers. But this has not really redounded into profit for the company. The last time I checked, Amazon is not as profitable as its penchant for acquisition. Needless to say, organic growth has proven to have the capabilities of generating tons of cash in terms of revenue and profitability than acquisition. My advice is, companies – big or small should look to deploying the three tried and tested growth strategies – investors, creators, and performers (But creating strategies are the best fit for startups and small-to-medium companies.)

But like opening a combination lock, you need to know the specified sequence of symbols which are usually numbers. In like vein, studies have shown that when companies combine the growth strategies - investors, creators, performers they get better results. Good luck.