August 2017
THE ROOTS OF ORGANIC GROWTH
There are many paths to growth, and high performers take more than one—
supported by reinforcing capabilities such as advanced analytics and digital
customer-experience management.
by Kabir Ahuja, Liz Hilton Segel, and Jesko Perrey
Growth is a tonic for most companies. It particular power in driving growth; that
attracts talent and creates strategic advanced analytics is an ingredient of stand-
options while generating financial resources out growth; and that success depends
to fund new moves—provided the on nurturing a set of reinforcing capabilities
growth is profitable. It’s also been harder that fit the growth approach.
to come by over the past decade, as
a sluggish macroeconomic environment Three growth profiles
and accelerating, technology-driven
disruption have ratcheted up pressure on The corporate growth goals and the
businesses. behavior tracked by our survey show that
companies can be described as having
Digital technologies and the pace of three broad growth profiles. Investors have
competition, however, also open new a clear understanding of sources of
avenues to organic growth for those growth from existing products and services
companies that have the capabilities and and squeeze funds from a variety of
dexterity to take advantage of them. areas, such as low-growth initiatives or
Today’s fastest growers, for example, price unproductive costs, to reallocate capital
products in real time; they create and double down on winners. Creators
meaningful and positive customer build value by developing new products,
experiences with digital interactions; services, or business models. And
and they refine products continually performers grow by constantly optimizing
with customer feedback. To understand core commercial capabilities in sales,
the relationship between organic pricing, and marketing.
growth approaches, capabilities, and
performance in this environment, we Understanding each profile is helpful
recently surveyed approximately 600 exec- because leaders tend to fall back on what
utives at leading companies in the has worked for them in the past, and
European Union and North America.1 We this can often blind them to new growth
found that companies exhibit three basic opportunities. In our experience,
growth tendencies; that an approach companies that carefully evaluate each
combining two or more of these holds growth profile, and make choices
based on the strategic fit, will increase the rate of their sector’s over the past
their chances of achieving above- three years—were in this group.
market growth rates.
These results make intuitive sense:
The power of the diversified approach companies creating new products or
services frequently need to reallocate
While approximately 60 percent of those capital so they can place their bets, while
surveyed identified one of the approaches an exceptional sales force or top-flight
as their primary source of growth, the marketing team can accelerate a variety
largest group in our sample—representing of new product or service initiatives. Our
about 40 percent of companies surveyed— analysis further showed that companies
were those that diversified their organic exhibiting strong investor and creator
Q3 2017
growth portfolio.
Growth Strategy A disproportionate tendencies particularly benefited from a
number
Exhibit 1ofof
the2 companies that grew diversified approach to changing their
significantly—at 4 percent greater than growth trajectory (Exhibit 1).
Exhibit 1
When creators and investors embrace one or more additional growth
profiles, they boost their odds of becoming top-tier growers.
Growth strategy Share of significant growers among …
Multiprofile
… multiprofile … companies with
1 primary dimension companies 1 primary dimension
26
Creators build
new products,
services, or
business models 74
43
31
Investors
continually
allocate funds 50 50
to areas of
proven growth
35
19
Performers
improve core 38
capabilities (eg,
sales, customer 62
experience)
34 35
Source: 2017 McKinsey survey of 573 executives in European Union and North America
2
The potential of advanced analytics The importance of reinforcing
capabilities
Across all the growth lenses, we found
significant potential for an upside in Like a triathlete who needs to develop
advanced analytics. As Exhibit 2 shows, different sets of muscles to effectively
even at today’s low levels of penetration, compete, delivering on a diversified growth
advanced-analytics capabilities were strategy requires building the right
strongly associated with the highest levels reinforcing capabilities. Our research indi-
Q3 2017 suggesting they will be a
of growth, cated that there are table stakes for
Growth Strategy
critical platform for the next generation growers across all dimensions: nimble
Exhibit 2 of
of performance.2 resource reallocation, effective branding,
Exhibit 2
Few companies have strong advanced-analytics capabilities, but those that
do exhibit higher levels of growth.
Share of significant growers1 among …
Advanced-analytics … advanced- … nonadopters
adopters in each group analytics adopters
Creators 10%
39% 32%
Investors 7%
39% 26%
Performers 5%
43%
33%
1 Companies with 4% greater growth rate than their sector’s over past 3 years.
Source: 2017 McKinsey survey of 573 executives in European Union and North America
3
and growth-oriented organizational 1 We asked companies to determine their growth strategy,
culture. There were other areas that, providing the option of choosing more than one. We
predictably, seemed more tightly linked then asked respondents to indicate how much each
strategy contributed to their growth in percentage terms.
with individual strategies. Sales and
pricing were key to faster-growing per- For more, see “Invest, Create, Perform:
formers while the ability to develop Mastering the three dimensions of growth in
the digital age,” on McKinsey.com.
products and services differentiated
investors and creators.
Kabir Ahuja is a partner in McKinsey’s Stamford
office, Liz Hilton Segel is a senior partner in the
These capabilities, combined with an New York office, and Jesko Perrey is a senior
partner in the Düsseldorf office.
understanding of the options for activating
growth, are fundamental to building up Copyright © 2017 McKinsey & Company. All rights reserved.
a company’s growth DNA. And, as our
research shows, a purposeful approach
across a diverse portfolio of growth
strategies increases the odds of success.
