M&A is central to many companies’ growth strategies. But you can’t grow by acquisition alone. Companies with more organic growth generate higher shareholder returns than those relying on acquisitions alone. But organic growth remains elusive. It’s been easier to go from big to bigger through M&A than new to big through entrepreneurship.
The Mindset Your Company Needs to Grow Organically
M&A is central to many companies’ growth strategies. But you can’t grow by acquisition alone. Companies with more organic growth generate higher shareholder returns than those relying on acquisitions alone. But organic growth remains elusive. That failure is not due to a lack of trying. Companies dedicate vast amounts of time, money, and effort to organic growth. The problem is that many companies have the wrong “operating system” for organic growth. Many are focused on analyzing, planning, and optimizing, when they really need to focus more on experimenting, adapting, and learning. This means finding a problem that is worth solving, that inspires you, and for which you can create an unfair advantage. Once you have found a large total addressable problem, you have to experiment to validate the problem, the solution, and the business model to bring it to market. Finally, maintain a portfolio mindset, knowing that not every investment will generate a positive return. Look to the overall value of the portfolio and make sure that every investment generates learning to improve the return on the larger portfolio.