Last week one of my favorite blogs, The Skeptical Optimist, had a post titled Grow or Die. In it Steve Conover proposes that companies must grow, or else they will perish.
There are only two kinds of problems in business: (1) growth problems; and (2) liquidation problems. Grow or die. Expand or liquidate.
At first I thought I could be comfortable with his assertion as long as "growth" could be defined in multiple ways, including "growth of knowledge" or "growth of capability." However when he clearly defined it as "expand" then I had a problem. In my view there are two positive alternatives to the "grow or die" black-or-white scenario:
- Grow revenue by "growing" pricing. Become so good at the product or service you provide that the value to the customer increases, and the price you can charge goes up.
- Simply be comfortable with a level profit.
Increasing the value to the customer, or reducing the amount of non-value-added from the perspective of the customer, is core to lean. Many lean companies, such as Toyota, balance price, value and volume to help level load production facilities. In other words, Profit = (Price-Cost) x Volume. This is pretty much the polar opposite to tradition American accounting where Cost + Profit = Price. Sound identical? Think about what the arrangement of the formula implies.
The second alternative is rarely used, perhaps unfortunately. In a public company it would be virtually impossible. Private companies have more latitude.
One of the better books I've read over the past year has been Bo Burlingham's Small Giants:
Companies That Choose to Be Great Instead of Big. As Jim Collins, author of Good to Great, says in his forward:
This book should inspire thousands of entrepreneurs to reject a mantra of growth for growth’s sake in favor of a passionate dedication to becoming the absolute best. Bo Burlingham reminds us of a vital truth: big does not equal great, and great does not equal big.
The author profiles a variety of small companies ranging from a two-person dressmaking firm to O.C. Tanner with 1,700 employees and sales over $350 million. The common aspects are that the owners understood their niche, understood they had options besides growth, and decided to focus on becoming the absolute best at what they did. This usually included exceptionally close ties to customers and suppliers, unique forms of corporate governance, giving back to their communities. As Burlingham points out:
The businesses in this book have other, nonfinancial priorities in addition to their financial objectives. Not that they don’t want to earn a good return on their investment, but it’s not their only goal, or even necessarily their paramount goal. They’re also interested in being great at what they do, creating a great place to work, providing great service to customers, having great relationships with their suppliers, making great contributions to the communities they live and work in, and finding great ways to lead their lives. They’ve learned, moreover, that to excel in all those things, they have to keep ownership and control inside the company and, in many cases, place significant limits on how much and how fast they grow.
To learn a bit more about the companies he profiled, his research methods, and conclusions, take a look at one of the excerpts that is publicly available. If you're trying to be great, and not necessarily big, I'd recommend reading this book.