If we could choose our business growth model which route would we go down - to develop organically or by acquisition?

18 December 2019 Posted by: Patrick Woods Posted In: Growth plans, Business development

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Businesses are established in response to a perceived client need. Growth occurs
initially when more clients also identify with this need, or a similar one that can be met
with the same product or capability. Organisations either respond to this rising demand
as it emerges or anticipate it putting resources in place pre-emptively. This all sounds
very organic, suggesting this should be the normal path of the business growth model.

But sometimes an opportunity arises for two or more businesses to come together to
jointly cater for a client need. The simplest example would be where these organisations
are producing the same product or service and their combined resource makes the
business proposition an even better outcome for the client. But the rationale for such a
move could also arise where these businesses create products or services that are
clearly complimentary, and so the client stands to gain from having everything available
in the same place.

But of course, the business model is rarely as fully client focused as this analysis
suggests. There are the objectives of other stakeholders to factor in. Key amongst
these are management, employees and shareholders who will all have views on the
most appropriate future for their organisation. It is of course healthy for an organisation
to incorporate multiple, engaged, stakeholders.

How interesting the assumption that businesses should target growth as a key
performance metric. In the asset management industry this is regularly expressed in
terms of target AUM levels, as if such numbers of themselves carry some particular
significance.

More intriguing still is the often-used justification for growth that cites a requirement for
transformational change” with the clear implication here being that the vision should be
for the business to grow away from the initial customer requirement that gave it life.

Our assessment is that organisations should be clear about their rationale for growth
and that it should always have customers at its heart. Growth implies the addition of new
clients to sit alongside existing ones. Therefore, it is critical for a business to spend time
understanding who the most appropriate new customers might be to blend in with the
culture of its organisation. This will require understanding both the potential nuances of
the new clients being targeted and what your organisation has to offer them.

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