Organic Growth to Executive Training Ground

Author: Sean Carr, Director of Corporate Innovation Programs and Corinne Pierce, Batten Institute, Darden School of Business, University of Virginia

First Published: March 2008

To help managers and academics better understand the drivers of organic growth, the Batten Institute at the Darden Graduate School of Business has undertaken the Leading Organic Growth initiative, a multiphase, in-depth qualitative field study that began over two years ago and continues to expand. Examining the intersection between leadership, entrepreneurship, and strategic thinking, this initiative aims to not only establish new theory as to what drives successful organic growth leadership but also share the practical implications for this new knowledge rapidly with managers at the front lines of companies.

To do so, the Batten Institute team is combining and leveraging insights about the entrepreneurial mindset, thanks to Robert E. Wiltbank, a Batten Fellow and assistant professor of strategic management at Willamette University; about leadership development and psychology with the guidance of Bob Rosen, also a Batten Fellow, and his team from the Healthy Companies International (HCI) leadership consultancy; and about strategic thinking, under the leadership of Jeanne M. Liedtka, executive director of the Batten Institute and faculty member of the Darden School.

Traditionally, such management research is the purview of academics, while corporate growth leaders have their own businesses to focus on running—but this time the Batten researchers are pioneering a more direct and immediate way for executives to reap the benefits of this highly topical growth research.

Research Process Start-To-Date & Methodology

Batten’s Leading Organic Growth research initiative began by soliciting nominations of growth leaders from thousands of Darden alumni and others. Of those, the research team evaluated 225 of the most promising nominees, culling these after careful review to a subset of 54 leaders. By and large, the sample was comprised of operating managers from large, established organizations in the for-profit and not-for-profit sectors. The team then conducted 90-minute, semi-structured interviews with each of the growth leaders, and then coded these against 64 primary factors in four functional areas: leadership, strategy, execution, and organization. They also administered two diagnostics to each subject, assessing leadership qualities with one and entrepreneurial traits with the other. Using this rich set of findings of key characteristics of growth leaders, the Batten researchers will begin to build a model of effective growth leadership.

Leading Organic Growth Executive Ed Course

One important outgrowth of the Batten team’s organic growth research is Darden’s Executive Education course, “Leading Organic Growth: Growing a Business From Within.” Launched in Fall 2006 and led by Jeanne M. Liedtka in conjunction with other leading organic growth faculty at Darden and elsewhere, this course draws from the Batten research findings of leaders in growth environments as to shared characteristics of who they are, what they know, and what they do. Translating this knowledge immediately into action, course participants are given a leadership assessment to see how well they are doing at leading growth in their businesses. They then leave the executive education course with a concrete development plan for leading organic growth in their businesses using growth performance metrics and tools for managing knowledge bases, as well as relationship networks.

Building the High Organic Growth Organization:

In parallel to the Batten Institute’s study of exemplary organic growth leaders, Professor Edward Hess has been exploring growth from the organizational level. Darden’s Leading Organic Growth Executive Ed course can now draw on the growing body of research of Prof. Hess, author of The Road to Organic Growth: How Great Companies Consistently Grow Marketshare From Within, who has devoted several years to pioneering this field of inquiry. By taking the top 800 value-creating public companies through a series of six high organic growth performance tests, Professor Hess and his colleagues developed an Organic Growth Index (OGI). They focused on companies’ growth performance for three five-year intervals: (1996-2001), (1997-2002), and (1998-2003).

Interestingly, less than 4% of the top economic-value added (EVA) creators for the time period 1996-2003 passed the six high organic growth performance tests Hess and his team conducted. In The Road to Organic Growth, Hess describes this initial OGI research and admits his surprise at how small the resulting pool of organic growth winners was. He then explores the question, what enables this small percentage of identified organic growth winners (companies like SYSCO, Outback Steakhouse, Tiffany & Company, and Best Buy) to grow primarily and consistently from within?

Professor Hess’s research debunks many myths about what is necessary to achieve high growth performance and points to six crucial drivers that are all consistently self-reinforced within companies that succeed organically. In The Road to Organic Growth, Professor Hess explains the six keys to achieving organic growth—(1) develop an elevator pitch business model; (2) instill a small-company soul into a big-company body; (3) measure everything—from finances to operations to behaviors; (4) build a people pipeline; (5) lead with humble, passionate, focused operators; (6) be an execution and technology champion.

Not only do these six factors need to be present, they need to be seamlessly woven through the strategy, culture, structure, policies, and operations of the company explains Hess: “Having a growth strategy alone is not enough. All parts have to be aligned and self-reinforcing.” (p. 178). For companies to be organically successful, Hess finds they need to be “execution champions”. In The Road to Organic Growth, Hess goes on to identify a 12-step common progression of organic growth, which most of the identified organic growth winners followed. Clearly it is not easy to put these organic growth factors all consistently into practice over sustained periods of time, but at least now there is a means of identifying what these factors are and how they knit together within certain companies so they can recognized and then more deliberately and widely adopted and practiced by managers at every level of an organization.

At stake in the study of organic growth is understanding the underlying strength and viability of a business. How much more productive and rewarding a thought venture this becomes when business managers and aspiring growth leaders can take the research findings at this new frontier and immediately go and test and teach them in the world of practical affairs where they crucially matter.

To learn more, visit http://www.darden.edu/exed/programs/default.aspx?stage=sem&id=63