In my inaugural post for the year yesterday I asked if size was important, and today I'm asking another seemingly obvious question - is growth essential?
Many people (especially those in sales, finance or management!) will immediately say "Yes! Of course". This is the reflex-reaction of most of those in most businesses - they exist to be successful, and growth is part of that. But what about wider growth? We all know that most Western markets have minimal, static or even "negative" growth (or shrinkage, in plain English). How is growth even possible in a shrinking market? Many developing markets continue to exhibit excellent growth (such as Russia, growing around 6%), but when you delve a little deeper you find that much of what is driving this is retail and consumer-lead, not industry or the state (as it very much used to be). This is great is you're selling shoes, not so hot if you're making steel.
All this focus on "growth", however, somewhat misses the point. As I asked above, is it even possible to grow in a shrinking market? Well, yes, of course it is, but it is very much dependent on your business and market demographics. A company with a product that saturates Western markets and is experiencing stagnation or shrinkage can do very well in an economy with no significant growth but no prior exposure to that product. So economic growth in this case is not important (or less so) where market penetration is minimal. The reverse is also true - a growth market which is saturated can mean a static or negative growth market for your product.
So this is all about business intelligence, understanding your markets well and responding to them appropriately. Even so, it might be very hard to achieve growth where financial pressures on your business and customers make selling in a crowded marketplace a bitter duel. Even so, the oft-reported mantra of growth without fail is, to me, rather odd. Sometimes it's better for a business to consolidate it's position and fortify itself rather than try to grow recklessly.
Think of playing that classic board-game Risk. You had to grow to get more armies to grow more, but a sure way of losing was to stretch yourself too far so that your enemies could drive great channels through your territories. Businesses generally need to grow, but they need to do it in a controlled fashion, or something gives - quality, support, delivery - something - and that impacts your brand, competitiveness etc. In extreme cases it can destroy your business. You have to grow and consolidate, and measure your performance against your competitors. Your absolute growth figure is often less important than your growth versus your competitors - that's a real test of how successful you are across the market, not a number plucked out of the air by a manager or board (and incrediably, these numbers can be just that!).
-0.1% growth when your competitors are doing -10% won't feel good, but you're pulling ahead of those around you. The best strategy might be to trim some excess costs and continue until the time is right to push forward again. After all, unless your marketplace is shrinking for everyone (which is another issue!), then the demand is still there, and you'll be in best position to capitalise on it whilst your competitors are still reeling from deep cuts and structural changes.
So is growth essential? Well, for most businesses the answer will be yes, but it's how that growth is measured and against what figures these are derived from that are really important, and it has to be keyed into a wider understanding of your competitors and the marketplace. Sometimers holding the fort for a while and letting others expend their strength is the best short-term tactic for longer term success.
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