True story: there were six of us at lunch together on a beautiful late spring day in 1996. We sat on an outside table in the shade and discussed the next big growth spurt. Would we take this marketing-on-steroids proposal, at a high cost? Would it work? Could we afford not to?
I’m not sure any more which of us said it:
The status quo is great. This company is fun. The team works well together. Do we really have to grow?
I liked the idea, but didn’t fully buy it. My answer:
Yes. We’re a software company. We shrink or grow. There’s no alternative.
We did take the growth pill. Sales doubled in the following three years. Today, 14 years later, I still think that basic idea, growth or die, is true. Technologies change quickly. Trends and fashions change. Operating systems and the tools in software change. You don’t stop moving. Settle in, and you’re in trouble.
But is it that simple? I’m less certain than I used to be. And not just because of this recent piece, but still, I’m fascinated by Karen Klein’s Your Perception of Business Growth Is Wrong a few days ago on the businessweek.com site. She interviews Edward Hess, entrepreneur, author, and academic, who says, point blank:
What most business people think about growth, like “grow or die” or “growth is always good,” is not supported by research.
I do have to say that I am not as influenced by the “supported by research” phrase as I’m supposed to be. I’ve seen a lot of foolish notions supported by research. So I’m not that impressed by the results of a team of interviewers talking to CEOs of 54 companies, with average revenue of $60 million. Companies with revenues of $60 million are enormous to me. They have very little to do with the 95+% of businesses that have no employees, or just a few.
What does impress me, though, are the arguments Hess makes in the Business Week interview:
growth that’s not managed properly can lead to dilution of your customer value proposition and risks to your reputation and brand. I think you should approach growth not as an assumption but as a well-thought-out decision. Understand the difficulty involved and go into it with eyes wide open, knowing that you can stop at any time.
companies don’t necessarily have to grow or die, but they must improve or die, meaning they have to continuously improve their customer value proposition or risk going out of business.
if you take on too much growth, it can overwhelm your processes, people, and controls. What we recommend is managing the pace of growth with something like a gas-pedal approach.
Smaller, privately held companies usually don’t have the financial safety net to withstand quality control issues or negative publicity or a legal downside.
All of these arguments, taken from the interview, make sense to me. So I don’t know. What do you think: grow or die? Grow or shrink? Is it different in software, the web, and other high-tech businesses?