Organizational Growth Strategies for Breakthrough Innovation

6 years ago, working with a Fortune 200 CPG company, I saw them have an existential crisis around where new growth could come from. Struggling with the limitations of scale, they were wrestling with finding footing in emerging markets as much as protecting ground in developed ones. They were reeling from a few misguided acquisitions. The R&D org had just had its budget slashed because of a couple of noteworthy, and expensive, failures. The question was palpable – if not these channels, where’s the growth to come from? How can we possibly realize our growth goals if we’re hamstrung across the board?

The answer of course was not in identifying some heretofore-unknown growth strategy, rather it lay in being selective about which growth strategy, or strategies, to employ, and to de-risk the processes within those strategies.

Today we see 5 main avenues to growth. This article will help you choose which are right for your organization depending on your goals. I’ll advocate for a risk-optimized approach that’s ideal for achieving breakthrough growth and success in innovation in line with a short list of organizational characteristics.

The 5 Main Avenues of Growth

Companies can grow in a number of ways. The classic macro-distinction says you can grow ‘organically’ (with what you’ve got) or ‘inorganically’ (by plugging in what someone else has). Often, most large organizations do a mixture of things in both camps to realize some modest, single-digit amount of growth. 

For the purposes of this conversation, let’s distinguish between sustaining growth,which might be single-digit year-over-year growth and accretive or protective of the core business, versus breakthrough growth, which is redefining, multiplicative or otherwise separate from the core (for a large enterprise,this often means netting double-digit growth percentages).

When it comes to investing in growth, or innovation, of either type, these are the specific corporate growth strategies that tend to get considered and implemented:

  • Merger/Acquisition – combining forces with other entities to bolster reach, capabilities, or clout; includes acqui-hires too; entails a large equity investment (i.e. all of it)
  • Joint Venture/Strategic Alliance – partnering to bolster reach or capabilities; no equity ownership swaps; long term commitment if JV, fixed term commitment if SA
  • Corporate Venture Capital – external investment, minority equity stake; can be purely a financial play and/or a tech scouting/development effort (I’m fitting accelerators into this camp as they typically involve equity investments)
  • Geographic expansion – same offering (mostly), new place
  • Incubation– in-house development of new offerings for new or current customers 

 So, what’s best or right for your org when it comes to pursuing breakthrough growth? 

Which Strategy is Right for Your Challenge

To take advantage of the portfolio principle, the best answer is a balance of all of the above. The more growth feelers you put out there the better your chances of realizing growth. This is an expensive strategy, though, in terms of both cash and competence, and affordable for only a select few.  

Intel, for example, is one of those select firms. The chipmaker has the cash on hand to make a number of large M&A investments, the investor talent to run the most active corporate venture group on the planet, the regulatory know-how to move into developed and emerging markets, and the culture to incubate new businesses from within. They are strong on all of these because of their market dominance. 

Not everyone has the investment capital and breadth of capabilities, of course. And, you might have noted in the Intel example above, each growth mechanism relies on a distinct underlying capability; being good at one doesn’t make you good at the others.

If you’re choosing, how do you choose such that you give your company the best chances of for big-growth returns? 

The specific strategies you choose should depend upon:

  • Your capabilities
  • Your financial position
  • Your market stance
  • Your goals and timeframe

Then, each strategy also has its own general set of pros and cons to consider:

For those companies contemplating how to grow most impactfully – those looking to leverage existing capabilities, but not averse to adding to them selectively, those looking for returns in the 2-5 year timeframe, those without the cash position or debt tolerance to gobble up whole entities – I think the most resource efficient path to breakthrough growth is internal incubation.

Incubation has several attractive characteristics:

  • It allows for exploring multiple opportunities simultaneously
  • It helps conceal your growth intent from your competitors
  • It enables you to better retain your most innovative and entrepreneurial staff

Candidly, I like this specific organic strategy in concert with an inorganic strategy, Corporate VC preferably. Together, the portfolio of opportunities you can explore is extremely broad, and the relative riskiness is diluted because each of these bets is relatively small and guaranteed to drive learnings back into the business. They also cover distinct time horizons – incubation 2-5 years, venture capital 5-plus.

Overall, this might feel akin to the aggressive (i.e. risky) toggle on your personal investment portfolio, but while you have little control of the markets you can have a lot of control of internal incubation. De-risking the incubation approach is a topic for another post (here’s a framework), but borrowing from entrepreneurship to run a rapid test and learn process is the short answer for how-to. If you pair that with entrepreneurship happening out in the world, you increase your odds of succeeding in spinning something up to the strongest possible place, and you build the strongest high-growth counterpart to your core business.

Happily, I’m seeing a number of major brands now implement these strategies in concert. The number of CVC groups globally has tipped past 300. New corporate incubators and accelerators are springing up daily. And best of all, in many cases they’re working together and learning from each other as they interact with the market – whether live customers or emerging startups. Call it corporate entrepreneurship; it’s a good time to be a big growth company. 

– Clay Maxwell, CEO (@bizinovationist)

We work with companies to strategically determine the best avenue of growth for their business. Learn more here!

Other Posts From Peer Insight

Your Pre-MVP Checklist

Your Pre-MVP Checklist

Do you have clarity on what to build, how to build, and what to test, before spending your first development...

Share This