Organic growth: the new black?

Over the last 18 months, I (along with many other consultants) have worn out several pairs of shoes walking the pavements searching for clients. In 20 years the consulting market hasn’t been worse. And with the majority of companies under severe cost pressure, credit still tight and high and growing unemployment, a fair degree of optimism is required even to describe any recovery during 2009 as ‘tentative’. Even the politicians have finally broken cover and are now talking about a decade of austerity.

So why did the phone to our small consultancy business start ringing again in the summer? And why has it continued to ring with clients wanting to get projects off the ground in late 2009 and early 2010?

At first sight it seemed a curious (if very welcome) turn of events for a consultancy focused on growth and innovation rather then gritty cost reduction or restructuring.

With the hatches well and truly battened down on discretionary cost, isn’t growth and innovation still a bit of a frivolous investment for many companies, and a topic to be shelved until better times?

On deeper reflection, however, it makes sense. Whilst investors have had to be stoical about all the bad news during 2008 and 2009, they reasonably expect an improvement in fortunes in 2010. However, with cost reduction programmes substantially complete, there is limited scope to make further gains that way - and what opportunities remain are hard to ‘mine’. Furthermore, with stressed balance sheets and credit hard to come by, large capital-intensive projects are hard to initiate. Finally, whilst there may be some bargains around, M&A is risky business, and acquiring another stressed business may only serve to exacerbate the problems organisations already face. All in all, quite a lot of growth levers are out of reach for now.

Against this backdrop, organic growth (achievable with intelligent commercial innovation) has risen to the surface. Business leaders are looking for opportunities to take advantage of changing customer needs to gain market share. To improve their marketing and communicate their proposition more clearly and convincingly to target segments. To take advantage of technological and regulatory change to engineer and deliver new products and services. To find, through exploiting their knowledge and imaginations, whole new streams of income and profit – and deliver the growth that their stakeholders demand.

If this all sounds a bit ordinary, and something that businesses do well as ‘business as usual’, think again. Most companies struggle to innovate for a variety of reasons, and most have taken out any spare capacity (and with it thinking time) as a necessary step to cutting cost. As a result, many are turning to a project or programme approach to get things moving again – frequently with an eye to establishing a permanent innovation function when the model and method has been proven.

Interestingly whilst the hard outcomes of projects requiring a level of ingenuity and innovation are hard to predict at the outset, a large number of UK businesses are nevertheless mobilising organic growth programmes of one type or another. Perhaps it’s due to the lack of attractive alternatives, or maybe it’s the need for portfolio balance. However, it undoubtedly helps that the cost of looking for opportunities is relatively low, and there is a good deal of ‘low-hanging fruit’ that will make most programmes cost neutral in calendar year 2010 – which makes it a free bet, in effect.

So maybe we can conclude that organic growth is the ‘new black’ for UK businesses in 2010?.

Rob Anderson is co-founder and managing director of Edengene, a consultancy helping large UK companies to deliver growth through customer-centric innovation.