Almost every day we read about another merger or acquisition. For example, Bunzl, a London-based logistics and distribution company, made 22 acquisitions just last year, and AB InBev is moving closer to joining with SAB Miller. Yet, a recent Gallup organization study caused me to consider the limits of a growth strategy designed by acquisitions versus one based on organic expansion.
Two Gallup research facts caught my attention:
Point 1: The number of companies listed on US stock exchanges has dropped to 3,700 from 7,300 twenty years ago. However, the number of companies on stock exchanges globally has remained relatively stagnant for the past few years at 44,000.
This fact demonstrates that future acquisitions will be more expensive as the supply of acquisition targets shrinks and organic growth is more critical now.
Point 2: Only 29% of B-to-B customers are engaged with their current providers.
This finding indicates that 71% of customers are at risk of switching.
If organic growth is your company’s focus, the question is “what to do?” I have a few suggestions:
- Are you marketing your company’s inherent strengths and capabilities? I can think of several recent clients that assumed customers understood them. However, we discovered that their customers did not fully understand them. Why? Customers are busy, and it is not really the customers’ responsibility to understand them. This is what an effective marketing program should do. Take a closer look at your marketing efforts. Are they educating the customer on why your company is different and provides better value than the competition?
- Innovation matters now. Too many companies that are not devoting the time and resources needed for effective innovation. They are guilty of living off the past. But with new products coming from all over the world, not looking for new and groundbreaking ways to solve customer problems is a prescription for eventual failure. By the way, advancement is not limited to just products; consider innovation that may be valuable whenever you touch a customer.
- Do not forget service. There are compelling reasons to improve service. Perhaps your product line is not quite where it should be from a performance standpoint. Better service can make up for some of that deficiency for a while. Service in and of itself can be an important differentiator. Consider Headsets.com, a company that sells telephone headsets and related items. Their product line is widely available, but they distinguish themselves by having fantastic customer service.
There are many more things to consider to improve your capacity to grow your business organically. While acquisitions have a role to play in company growth, increasingly managers must look inward for expansion opportunities especially when there are so many disengaged customers today.
Hopefully, a substantial portion of your customers are fully engaged. If so, this means there is a happy hunting ground for customers from your competitors.