Growth Strategy: Is It Organic?

I have had the awesome opportunity to meet with and speak to many small business owners over the years. It’s really interesting to hear their stories and get their views on how to be successful. One topic that comes up quite frequently is “organic growth”. This tends to come up when I ask questions in regards to how they grow the business. What I often hear is, “We don’t do a lot of traditional marketing if at all. We have grown the business organically.” Sounds interesting, but what does that actually mean? How do you define organic growth? What are the benefits? What are the downsides? Here I go again with all the questions.

Defining Organic Growth

I think there is a misconception here by a lot of small businesses owners about what organic growth really is. The common misconception is that organic growth is a word-of-mouth growth strategy that involves increases in sales and market share based almost entirely on increases in reputation over time. The business ends up selling incrementally more each year based on how customers view the product or service and how well those customers decide to recommend the business to others. The strategic focus here is producing a quality product, providing an excellent customer experience, and letting the business increase over time (hopefully).

In reality, this isn’t entirely organic growth at all. An organic growth strategy is a part of an overall growth strategy that focuses on initiatives such as:

• Expanding the range of products or services.
• Increasing market coverage by expanding into new locations.
• Intentionally selling more to your best customers.
• Pricing strategies.
• Effective media strategies.

The list could go on, but you’ll notice that the common thread in these initiatives is focusing on growth within the boundaries of the businesses’ current assets. To help make this more clear, initiatives that would be excluded from organic growth would be activities relating to mergers and acquisitions as an example. Don’t misunderstand, it’s not an either-or proposition when it comes to growth strategies. Take Apple for example.

Apple has seen tremendous organic growth through expanding its product offerings, entering new markets, optimizing its media and pricing strategies, and ultimately selling more to its best customers or fans. Apple has also grown leveraging non-organic growth strategies by buying companies with emerging technologies that help Apple expand its product offerings. This is just one example of many. An effective growth strategy could incorporate organic initiatives as well as non-organic (if that’s a term). The balance here could be any combination that is effective for each business.

I know what you’re thinking right now. I’m a small business owner, not Apple. That’s most likely true, but it’s important to understand what organic growth is so you don’t fall prey to the downsides of misunderstanding.

Hear me out on this…

In many cases, when I have asked small business owners questions regarding how they grow the business, their answer does not quite fit the definition of what I just described. As I mentioned earlier, a common view of organic growth is providing the best product or service you can and combining that with a superior customer experience. That is certainly a founding principle of enabling organic growth, or rather, the onramp to the organic growth freeway, but it is not a full strategy. Here’s what I mean:

If we could describe your company as a sailboat and market forces like the wind, basically this view of organic growth is setting your sails and expecting the winds to take you where you want to go. In a perfect situation, the wind would be a constant speed and direction and as long as you point the boat in the right direction, you will arrive at your destination. Unfortunately, the wind, just like market forces, is constantly changing. Customer needs change, new companies enter your market, supply chain issues, volatile pricing, etc. Good sailing strategy and tactics not only allow a captain to maintain course with ever-changing wind direction and speed but can even maintain course directing into the wind. If a captain just sets sail and allows the winds to do what the winds do, he or she is not sailing, they are coasting and I think a lot of small business owners are coasting and not sailing.

Now, Wait! Before you get mad at me, let me explain this coasting thing. If someone told you that as a business owner you were coasting, you probably would interpret that as you’re not steering your ship at all and at best really going about a lazy way of running your business. That is not what I am saying at all. No matter how hard you work or the intention you put into your business if your view of growth is setting the sails (superior product, superior customer experience) and letting the market (the wind) receive your superior product and superior customer experience and only grow by what happens, not only are you missing out on opportunities, but you are much more vulnerable to market shifts.

In the Doldrums

There will inevitably be times during your adventure as a small business owner where the market forces that once propelled your business are no longer having an effect. In sailing, this is called finding yourself in the doldrums, meaning there is very little wind or not enough to propel the vessel. What the doldrums might look like in business terms would be you’ve been growing along at a nice pace that you feel is sustainable when suddenly your business is slowing although you are still doing the same things that caused growth in the past. What happened? The market is probably changing faster than you are adjusting. Why do successful companies put so much into expanding their products and capabilities? Why do they constantly refine their media strategies? Why is pricing such a key competitive advantage? It’s because market forces are always changing and if you don’t change with them you will eventually find your way into the doldrums. In many cases, the doldrums are caused by new market entrants that are taking market share from you because they are doing the things that you may not be or at least doing them more effectively.

What is the takeaway here?

I have owned several businesses in my working career. I have experienced the excitement of a heavy wind at my back where growth just seems to happen. I have experienced the doldrums where life gets really hard. I have also experienced the death of a business. It leaves scars.

In all my experience, I believe business owners need to understand and appreciate the strategies and initiatives that lead to successful growth because if you don’t, someone will eventually come along and take your market share, sometimes even with an inferior product or service. This is how free markets work. You can adopt a solid organic growth strategy that will help you navigate the changing market forces and protect what you have built.

The question you need to ask yourself is if you are really at the helm driving the ship or are you actually coasting, or rather, letting the wind and the waves take you where they go?

A final thought

I really do understand the impetus of the line of thinking that I just want to produce a superior product or service and make the customer experience the best it can be and things will grow. Sometimes the deeper motivation here is that I don’t want to grow too fast and ruin my business, or I am happy with where things are and I don’t want it to change. It could even be you are scared to grow, which will probably be the subject of another blog post. There is a saying that if you are not growing you are dying. I don’t subscribe to that notion entirely, it’s not quite that black and white. If we said that growth keeps you healthy, then that better aligns with the purpose of solid growth strategies. Slow growth, fast growth, that’s up to you and what you are trying to build and what your market requires.

Regardless of the pace, growth is required for a healthy business and there is a minimum growth rate that allows you to keep pace with market forces. An analogy here would be your retirement investments. In 20 years, the money you have saved today will only have about 60% of its buying power. That’s because of a market force called inflation. How do we mitigate that? Our investments need to grow at least with the pace of inflation so that we don’t see a diminished return or diminished buying power 20 years from now. Growth is required to keep your retirement investments healthy and growth is required to keep your business healthy.