Growth is not just about size, but also about change.
I cannot count the number of times I have been asked, “Why is growing my company so darned hard?” followed by, “My sales are increasing, but so are my expenses, and I do not seem to be getting ahead.” My short answer is that healthy growth requires deciding to and actively implementing necessary growth-focused changes.
Here are four aspects of business that typically limit a middle-market company’s growth: Cognitive overload; Selecting a single growth strategy; Overcome incrementalism and Calibrating the big versus small mindset,
• Cognitive overload. In their book Scaling Up Excellence: Getting to More Without Settling for Less, Robert Sutton and Huggy Rao describe a common and, I believe, universal phenomenon of leaders thinking about too many things, while not focusing on the most important moves to support the business’s growth and health. This is manifested in many ways. The one way I find most common is when leaders of growing organizations, instead of devoting their attention to the key responsibilities they excel at, hold onto responsibilities that they could easily delegate to others with no ill effects. When I hear, “I’m too busy,” it frequently means that the leader is still trying to do things that he/she should have delegated to others.
• Strategy. A founder of a company typically will have already spent much time researching whether there is a market for the product/service, and then establishing a market position. In those efforts, multiple strategic paths might be attempted until settling on the key one that generates success. As a business matures and sales increase, growing a company frequently requires determining a primary operational strategy that has built-in efficiencies and is scalable, at the direct expense of secondary strategies. Getting the company to focus its attention and resources on a primary strategy (its growth engine) requires making a commitment to enable efficient scaling. It also typically requires abandoning an approach that might have been productive early on if it has less potential for success as the company expands.
• Incrementalism. This means that change will be implemented in small steps, but possibly too small to have a meaningful impact. The advantages: It’s typically a more comfortable approach than making large-scale changes (such as dramatically changing processes, systems and talent), and it reduces the risk of a negative decision. The disadvantage: It delays and even prevents a significant change that the company needs to grow. This manifests in many areas of business but is very common regarding acquiring and deploying key staff members and more narrowly defining their roles and responsibilities.
• Perspective/Mindset: thinking that you are smaller or bigger than you really are. Small companies typically operate on a shoestring budget and ad hoc processes and do not invest time in developing efficient processes or systems or in recruiting and organizing talent that will enable growing the company to the next level. They operate this way under the false assumption that there isn’t time. They also may lack confidence in their business model’s ability to scale. In his classic book on growth, No Man’s Land: Where Growing Companies Fail, Doug Tatum articulates the tricky position that business leaders face during growth: that their companies are “too big to be small, but too small to be big.” Tatum means that for some aspects in a growing business, a company might still view itself as an entity that’s struggling to survive – when, in reality, it has surpassed that point of concern. He also writes of companies that believe that they should have the same structure, processes and systems as much larger companies – but that approach, too, would be inappropriate and unjustified. Deciding which aspects of the business to change immediately to enable scaling, and which changes can wait, should be the key drivers of business transformation that enables growth.