PETER MEYER

What you want is sustainable, sane growth. To get it, you need to invest your limited resources wisely in what matters most.

With all the uncertainties of markets and business, can you still have sustainable, rapid growth? Yes, but there are fallacies to avoid and common denominators to emulate. Some companies, such as General Electric and Cisco, are adept at sustaining growth over time. Many more are like shooting stars, with rapid ascents and even more rapid descents. My intent is to give you an overview of what works, and does not work, for sustainable warp-speed growth.

Four Fallacies of Growth

Growth is like a holy grail—everyone says that they want it, but growth does not solve all problems. Common fallacies about growth include:

1.You can grow out of operational problems. Unlike product costs, operational problems only get worse as volume increases. Poor yields in today's production will decay even further as you add more people and products. If your information services infrastructure is barely adequate today, it will fail as volumes increase. If closing the books on time now is hard, it will get harder when you grow. You cannot grow your way out of these problems. If you are growing rapidly, you need to correct these problems early. You do not want to be like the toy company that had to close its warehouse in the Christmas season because the volume was greater than the computerized inventory system could handle.

2. Growth equals profitability. If growth equaled profitability, the fastest-growing company in the Fortune 1000 would be Lyondell Chemical, not GE. To grow you will make tradeoffs that may reduce your profits to get revenue. Worse, if your growth comes from acquiring new customers, those new customers may cost you more than ones you already have.

3. Profitability improves when every customer is yours. Getting added customers usually costs you more than getting original customers. They did not buy from you earlier for a reason. Overcoming that reason is expensive. There is no correlation between being the market share leader and the leader in profitability. Few market leaders are also profitability leaders. Steelcase leads the market in office furniture, but HON leads in profit. WalMart may have dominant share, but Family Dollar and Dollar General are more profitable. Market leaders have to stretch to get extra customers, and those customers cost more to get and keep.

4. If you grow, the customers will benefit. Growth itself is never a benefit to the customer. Every second of time that you invest in your own growth is time that your business could have invested in customers. Such a diversion can disrupt service. Smart customers know it and will want to know what you are doing to minimize that disruption.

Growth can be great, but only if you tailor your strategies around the reason for growth, not just the growth itself. Once you decide that you want to grow rapidly, look at what other executives have done to make this work.

Sustainable Growth

I see two common denominators of sustainable warp-speed growth:

1. Invest your resources wisely. Your business will always have constraints on growth. Resources define these, and the most critical resources are time, people, and money. You need enough of each to get growth to happen, and your business never has enough. When you treat all three as investments, you start the process of growing sanely. Which matters most in growth? You can always get more money, but time and people are harder to acquire. In companies that sustain warp-speed growth, executive teams value how they invest their time and the time of their top people. They act as though there can never be enough time, especially in tough markets. How well you make investments will determine how sane and sustainable your growth is. Each decision you make as you grow is a commitment to invest time, people, or money. These are the currencies of your opportunity.

2. Play with puzzles. Identifying the resources of time, people, and money is only part of it. Making decisions on how to use resources on goals is the next part. Remember: there is more to it than just your own decisions. To have sane and sustainable growth, you want your people (employees, contractors, partners, and vendors) to make decisions for you. You can't make them all, and somehow you have to ensure that they are making good decisions.

Business decisions are a bit like a Jigsaw Puzzle. Most “puzzlers” do two things: They show the picture on the boxtop to their help, and they let the help choose how they will assemble the pieces. Executives at companies that sustain rapid growth find ways to express the boxtop clearly and make sure people use it as a decision criteria. Wise executives grow a business by investing their time in what they tell their people is important, and in absolutely nothing else. They use the boxtop image to keep extraneous pieces out of their days, and ask their teams to do the same.

The current economy is tough, but no worse than when many of today's top-growth companies excelled. Your organization can also excel and grow if you invest your resources wisely. EE

Peter Meyer is a principal of The Meyer Group in Scotts Valley, CA. His most recent book is Warp-Speed Growth (AMACOM). Peter writes about and advises rapid growth companies. E-mail: Peter@MeyerGrp.com.

Excellence in Action: Recognize the fallacies first, and then devise your plan for achieving sane, sustainable growth.