Award-winning review journalist and author, Micheal Blanding, has demystified the theories surrounding company growth. Writing this week, he posits that growth is not merely about growing revenue or quickly expanding market share, but more about changes that take place internally within an organisation.
His analyses outlay the importance of putting emphasis on long term growth for businesses. Therefore he reveals the dynamics that could help business executives make important decisions for the long term sustenance of any enterprise.
He cites the example of Digital Equipment Corp., a US computer giant, which seemed to be growing in the 90s until it suddenly packed up, as a pointer to the danger of placing emphasis on revenue via market expansion without requisite focus on building an adaptable internal machinery (processes, people and products inclusive) that is able to withstand sudden changes in the external environment.
Blanding’s growth analyses stem from Gary Pisano’s, a Harvard Professor’s, work. Pisano has taken out time to examine different academic literature and histories of firms before co-authoring a paper that provides cogent understanding of what true company growth means. The paper titled ‘Long-Term Firm Growth: An Empirical Analysis of US Manufacturers 1959-2015’, deploys a systemic approach to tackling the subject.
Gary Pisano and his co-authors define growth “as a process by which organisations pursue market opportunities and the acquisition and accumulation of the resources required to exploit those opportunities”.
They point out a critical approach that differentiates mere pursuit of growth from the pursuit of sustainable growth. They explain, “growth involves changes to the internal ‘machinery’ of the firm itself”.
Precisely, the foregoing suggests persistent company growth may not necessarily mean sustainable or fast growth. If internal growth does not match changes in the business operating environment a business may fall off the cliff or hit a wall.
In a world where technological disruption, climate change and inter-trade relations are quickly changing business realities, and adjusting age-long dynamics, staying the same way without making key internal changes may prove costly to any enterprise.