Have you noticed all of the discussion around “organic” these days? I always chuckle when I see “organic apples” because I think to myself, of course they’re organic. (Yes, I know they are referring to how they were grown but still you have to laugh at the labeling.) A factory didn’t produce it, a tree did.
Similarly, in the business world, there are different ways to grow a business. You can grow either inorganically or organically. Inorganic growth is through the use of Mergers and Acquisitions (M&As). Organic Growth (OG) is done from the floor up. Both have goods and bads.
M&As are a means to increase capacity, obtain new products, or enter a geographical location – all just by “buying” someone else with the capacity, product, or location. It may take months or years to purchase another entity but once the ink dries, poof – you have instant “apples”.
OG does none of that. It is about investing into current operations with new equipment to expand capacity or increase quality. It is about investing in research and development that creates new products. It is about expansion into locations using the current team (and sometimes really stretching that team). It is about building on customer relations. Your “apple” will grow, just not overnight.
Organic growth ensures you control your culture and allows everyone to understand the direction and pull accordingly. While purchasing others may be considered faster in some circles, it may not always be as sustainable as organic growth. Purchasing growth means combining cultures, realigning visions and dealing with issues that weren’t uncovered before the purchase. It’s a different mindset. Not wrong, just different.
There are times where pursuing a strategy of M&A makes sense and there are times when pursuing OG makes sense. What you have to decide is how soon do you want to harvest your apples?