Understanding organic growth
Organic company growth is internal growth of the firm – gradually building the customer base of the company, and gradually increasing the internal capabilities of the firm to match the sales. Organic growth may include both further development of an existing product area or diversifying into a new area – the key defining characteristic distinction being that it is done internally.
How organic growth compares with other approaches
One alternative to organic growth is to grow the firm through mergers and acquisitions – expanding the company into new areas or acquiring new customers by buying other firms. Another hybrid that straddles organic and inorganic growth is partnering with another firm – utilizing both their and your capabilities to expand.
Compared with inorganic growth, organic growth is more gradual in nature. Rather than being able to quickly move into a new area, or suddenly increase market share through M&A, organic growth is a much slower process. Companies must gradually develop the capabilities to support a new area, or convince customers to make the switch to the customer.
Need for integration
Another key difference between organic and inorganic growth is associated with the challenge (or lack thereof) of integration. The challenge of integrating together two different firms is one of the key issues of a merger or acquisition – one that can take many years to achieve. Growing internally sidesteps this issue – employees can be gradually merged into the culture of the company as they are hired.
Moving into a new technical area
One of the challenges of organic growth is how to build up a capability in an area that you don’t currently have experience in. Without related capabilities that you can build on, it can be difficult to manage building up a new capability. Missteps are common as companies lack the ability to know where to start when attempting to build a brand-new capability.