A deeply ingrained growth mind-set gives these organisations the ultimate edge.
Today, it’s no surprise that corporations’ focus on growth has risen to cult-like popularity.
In one of the most laborious analyses McKinsey has ever conducted, a team spent more than a year studying hundreds of large companies. Researchers mapped out how the companies grew over a decade, comparing portfolio momentum against market-share improvement by analysing market growth within each granular business segment, accounting for M&A along the way.
The team’s most powerful finding? On average, the company that grew about 8.7 percent a year gained 5.4 percent of this from portfolio momentum, about 2.5 percent from M&A and only 0.8 percent from market-share gain.
Only 13 percent of companies averaged more than five percent of annual growth directly from market share gain over a ten year period. Some of the most successful market share gain actions, from new product launches or pricing moves tend to trigger competitors’ reactions that often slow or even reverse these gains.
Based on what 90 percent of companies do to cultivate growth, we strongly emphasize dynamic resource re-allocation as well as M&A to take bigger advantage of portfolio momentum. But we also emphasize that the strongest growth business have generated greater returns to shareholders when their growth was mostly organic as the ultimate objective is value creating growth.
All this is easier said than done! What does it take to grow and successfully add value?
As strategists, we first look for strong competitive advantages, innovative business models and an outward focus on areas such as customer obsession and important external trends. However, executives who have enjoyed strong phases of growth tell us about a zealous growth mind-set that gave them a crucial edge. They refer to a deeply ingrained belief and attitude that was shared across the company, that the business model is well-positioned, and they have the capabilities and resources to deliver above-industry growth.
So, what does it take for organizations to cultivate such a growth mind-set that will authentically permeate throughout the organisation? With this question in mind, we have identified five traits that successful growth companies exhibit.
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Yuval Atsmon is a senior partner in McKinsey’s London office. Norbert Lurz is a Senior Advisor in McKinsey & Company’s Consumer Packaged Goods Practice and a former Senior Executive of Procter & Gamble, Gillette and Reckitt Benckiser.
More: www.mckinsey.com