When consultants with McKinsey help clients better understand the underpinnings of growth, they often isolate organic growth from inorganic growth.
McKinsey defines organic growth as “…revenue growth from products and services in existing lines of business. It is distinguished from inorganic growth, which comes from M&A activity.”
McKinsey identifies three dimensions of organic growth: create, perform and invest. I recently asked McKinsey & Company partner Kabir Ahuja how marketing should be addressed to best optimize organic growth opportunities.
Paul Talbot: How does the process of invest, create and perform apply to marketing?
Kabir Ahuja: The best companies manage growth over time with a detailed mechanism to track their efforts at creating above-market growth. They use the full arsenal of marketing’s capabilities to make that happen. They rigorously track marketing performance, and dynamically invest in initiatives that are driving growth – instead of making marginal adjustments to marketing budgets, which often happens.
Every leader should avoid a common trap – just taking last year’s budget and making minor tweaks based on intuition. Leaders develop a deep view into what their customers and potential customers want, and where the growth trends are growing so the business can create new products, services, and business models.
They are investing their channels and capabilities with digital and analytics to become more targeted and operate at much greater speeds.
Talbot: How should an organization’s marketing strategy address organic growth?
Ahuja: Marketing is a key pillar of organic growth. The first thing to do is to identify where the growth is. You can’t win customers if you don’t know where they are.
This can only happen through developing deep customer insight. It’s not just finding your audience but understanding where and how you encounter them – which in most cases is now a question about initial consideration in digital channels.
New tools allow you to better calibrate and target customers. We’ve found, for example, that getting a sense of future-oriented mindshare is useful in plotting an organic growth strategy.
Our Customer Growth Indicator score is an example of a helpful tool here. It’s based on deep analysis that shows future sales are dependent heavily on current share and presence in the consideration set of shoppers.
Good potential in the market and high initial consideration yields a promising CGI score. Today’s data tools can provide insights on tightly-focused segments, which can then drive very targeted action.
Talbot: Where does brand extension fit in, and how should it be addressed?
Ahuja: Any company focused on growth should take stock of its assets, competitors, and opportunities for growth. Often, however, the brand is an underutilized (or at least under-quantified) asset. There is usually an intuitive sense of the value of the brand but not a deep understanding how strong and differentiated it is.
Quantifying the brand – and the value of an extension – helps to plan for investment, develop clear ROI goals, and actively manage the process. The increasing importance of a direct to customer relationship requires an extension of the brand from functional value propositions to brand level promises.
When done well, brand extensions create powerful opportunities to deepen relationships with new and existing customers – for example, when investment banks go into consumer banking, or when automotive manufacturers launch car sharing services.