Organizations need to grow. Without growth, they will either become dwarfs, or they will be swallowed up, or they will become weak and unprofitable.
This, at least, is the conventional wisdom and, for much of the part, this does hold true.
The questions that are often not asked, are:
- Why do you need to grow?
- Where do you need to grow?
- How do you need to grow? How do you prepare for growth?
The first question may seem surprising, and may even seem to be somewhat ridiculous. Grow, or die is the oft quoted mantra in most business circles. However, the reason for growth is a strategic imperative, and the rationale for growth needs to be clearly stated. Without this, growth plans that ensue tend to be somewhat chaotic and unstructured.
Do you need to grow just for the sake of increasing your turnover? While this may seem to be somewhat obvious when it comes to organic growth initiatives, it is not so obvious when it comes to inorganic growth initiatives. In such cases, acquiring, or partnering with another company simply for the sake of increasing your turnover does not always result in a very productive growth initiative. What do you bring to the table? What does your partner bring to the table? Why are you entering the partnership? Do you have the complementarity to make this successful? These are questions that often should be asked, but not always answered.
Similarly, when a company branches off into a new market, the question that is often not asked is – why is this market attractive and, do you have the strengths to be able to succeed in this market.
Undeniably, a larger size brings about greater efficiencies in manufacturing, negotiation etc, it also brings about other issues like organizational complexity; issues with organization structure, changes in culture etc.
Now, if indeed a company wishes to retain its entrepreneurial culture, it may opt to stay small and lean. The rationale for growth is one that needs to be well thought through.
When we were preparing our growth strategy in China, we were clear that, in our case we needed to grow, so that we could become more competitive in the market, attract better talent and improve our profitability overall. We were cognizant of the possible changes in our organization culture. What we did, was to prepare for this, by doing a survey on what people thought of our culture. Based on the feedback, we drew up concrete action plans to try and keep the organization culture as open as possible, while preparing for the growth that we wanted.
In the first few years of my stay in China, growth was not the imperative. Going after growth would have brought about organizational collapse. We were simply not geared for it.
The imperative in those early years was organization and process building. This was critical for us. During this time, we grew at less than the market growth rate. Under ordinary circumstances, this may have seemed suicidal, however, in the medium-term strategy that we had planned, this period of almost zero growth was essential for the subsequent growth that the organization experienced.
The question that is essential is – why do you want to grow? An organization generally outlives the lives of most CEOs, and so it is essential to minimize the impact that corporate ego plays in asking the fundamental question – why do you want to grow?