Incentivizing organic growth in business units can be achieved by allowing them to keep a significant portion of cost savings for investments in innovation and top-line growth. Another effective strategy is creating corporate scholarship programs to fund initiatives for organic growth that may not be funded by operating units alone, ensuring that units do not feel penalized for investing in growth. Typecasting business units, such as labeling a unit as 'cash cow,' can hinder organic growth by discouraging them from seeking new customer opportunities and benefits for existing customers. This typecasting places a heavy burden on growth engines to drive overall company growth, leading to overreaching and potential stagnation. An example is Viacom, labeled as the cash cow, while its cable business was the growth engine, resulting in mismanagement and limited growth potential until the businesses were separated, showcasing the detrimental effects of typecasting on business units.
Is your growth strategy working consistently?
Strategy expert Ken Favaro says creating and sustaining growth isn’t rocket science. However, you do have to understand the difference between “organic” growth and “inorganic” alternatives, which come through a merger or acquisition.
Favaro is the chief strategy officer at BERA Brand Management. Formerly he was a senior partner at Booz & Company—now part of PricewaterhouseCoopers (PwC).
In this episode, he argues that it’s important to focus on creating incentives for organic growth within your organization. He also explains why you should avoid typecasting your business units as “cash cows” or “growth engines” if you want them to achieve ongoing growth.
Key episode topics include: strategy, operations and supply chain management, growth strategy.
HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.
· Listen to the original HBR IdeaCast episode: Growth Isn’t Rocket Science (2012)
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