MULTI-MODAL CORPORATE GROWTH STRATEGIES
To take advantage of these growth opportunities, leaders in diverse companies are investing in home-grown solutions, launching innovation incubators, hiring digital natives to instill innovation in their company cultures and more. Many of the companies and maneuvers we observe are, for the most part, organic and internally focused. Will this be enough?
Historically, established companies have pursued three broad avenues to growing their businesses: Core market penetration to drive share in existing markets, consolidation of peer companies to drive economies of scale and cost, and expansion into adjacent growth opportunities including new offerings or new market segments.
Companies pursuing market penetration make investments in new product or service capabilities or investments in expanding marketing and sales resources to help drive dominance in their core markets. Consolidators utilize M&A to build scale and companies pursuing adjacent opportunities make investments in new products and services or utilize focused M&A to acquire access to customers in new target segments. While this summary portrayal might oversimplify corporate growth strategies it does sum up most of the levers traditional businesses have utilized to grow.
Smart Systems and digital technologies are creating many new external sources of growth opportunities. Ecosystems, corporate ventures, autonomous start-ups, joint ventures with customers and partners as well as minority equity investments and more. External growth maneuvers and inorganic growth mechanisms are multiplying fast and becoming much more dominant than internal organic approaches.
We believe executives need to think more about utilizing multiple parallel growth vehicles and strategies. However, many established companies are conservative and tend to select only one, or possibly two, of the many emerging sources for new growth:
- Internally via spin-off of sound new business ideas that surface in existing core businesses, but where the culture and operating mode in the core do not permit them to survive beyond early R&D and development.
- Internally via incubators, accelerators and other similar innovation development modes.
- Autonomous (standalone] ventures often developed via a corporate venture function or similar for new high potential innovation and business concepts.
- Externally via acquisitions and minority equity investments.
- Externally via joint ventures and other similar vehicles for collaboration with customers or partners.
- Externally through collaborative ecosystems and creative combinations of start-ups and larger organizations