In Business Growth is not always Good Growth!

Advice for business owners and leaders by Richard Gourlay

In Business Growth is not always Good Growth!

Business Growth is not always Good Growth, it can be Bad!

For every business owner growth is the ultimate measure of success, except it isn’t! Not all growth is good growth, and bad growth can have significant negative consequences. 

Growth is seen as THE measure of success in business. Leaders are measured by what they deliver in results, and growth is the simplest measurement to communicate. Headline results of increased turnover are always eye-catching news but may not be good growth.  Turnover, for turnovers sake, is often the most dangerous result a leader can deliver.  Growth sounds like a good result but not all growth is good. 

When growth at any cost becomes the sole focus, then leaders open the pandora’s box for the wrong types of growth.  Growth for growth’s sake is a high-risk business move. It sounds great as a headline but often masks what is really going on. The short-term benefits of rapid growth often come with long term consequences for any business. This is the difference between good growth and bad growth, which need to be clearly understood by owners and directors.

So, what is Bad Growth?

Bad growth is unsustainable. It’s a short-term grab that looks good but does significant long-term damage.  Bad growth comes in many shapes such as:-

1. In grabbing market share: buying a low value contract to win a new customer, which reduces margin sets a trend to lower margins.
2. In opening the wrong type of customer: which pulls the business to somewhere outside its marketplace, stretching the brand into different unprofitable places.
3. Over rapid growth by buying market share: with a low-cost entry offer or product which stretches the company’s resources, from financial causing unnecessary debt, to brand stretch damaging brand value to customer and channel trust breakdown.

The outcome of bad growth is that it stretches and pulls the company in wrong direction. Pulling a company in a wrong direction, is short-term thinking. If it is recoverable will take time, money are human resources to correct short-term bad growth. But here’s the other key problem that bad growth creates. If we incentives and measure only the growth, then we reward the people who created that bad growth. By giving them rewards and incentives to do more of the same, feeding the bad behaviour.  That creates an empowerment and acceleration off driving growth at any cost and at all costs.    

Growth at any Cost

That growth at any, and all cost, becomes a mantra which often overriders all other business and brand metrics. The first casualty is margins which become eroded, followed by key areas such as investment in new innovative product is sacrificed for cash cows. That in turn leads to brand position erosion as the brand moves from where it was. Which is where its existing valuable customers want it to be. To a new market position, which results in its former customers moving away to new brands. 

Causes and Solutions of Bad Growth

Bad growth is an outcome of poor leadership decision making. When directors, press the green button to go for growth at any cost they are the fundamental root cause of bad growth. Instead they should be developing a clear strategic plan for the business. Identifying a company’s its true value and long-term aspiration must to be laid out by its leadership team.  

Clear guidelines of what the business and brand stand for is a must be defined. and protected Growth has impacts and good assessment of the full impact should always be made. If a business outgrows a market growth rate, then how is that being achieved, and what is the long-term impact on the company must be fully understood.  

Bad growth is often cheap and easy, but destructive and expensive in the long-term. The classic phrase ‘there is no such thing as a free lunch’ should always be at the forefront of leaders minds. Bad growth takes the company in the wrong direction, moving it away from its market position, and most importantly away its existing loyal and valued customers.

Bad Growth Business Impact

As well as driving the company into wrong markets or short-term grab growth, bad growth often also has severe and significant internal impacts. Firstly, on the company’s values and its people motivators. Bad growth does not feel right to employees, demotivating good people and putting strains and stresses on systems and people as they are pulled in the wrong direction. 

Often bad growth creates internal conflict as people and systems are set up for good growth in product development, operating systems and customer focused activities. Challenging these, or short circuiting them to override them for bad growth goals creates tension and disappointment, demoting and demotivating even the most loyal employees.

Growth is a complicated goal and rarely one where there is easy low hanging fruit. It’s not just about increasing sales or market size; it’s about building a resilient, sustainable, and innovative enterprise. 

So What is Good Growth?

In business good growth is inextricably linked to a sustainable expansion strategy. It must be beneficial to all stakeholders within the business and to its external stakeholders especially its customers and channel partners. This holistic approach that considers the long-term impacts on the company, its employees, and customers. Good growth is led by a clear long-term strategy planning. It creates a steady increase in turnover and profit reflected in market impact of new product and brand position retention and enhancement.

Defining Good Growth

We can all see good growth after it has happened. We see more of the right type of customer for the business. They are spending more and are happy to buy more and more frequently. Happy customers come back and want more of both the same but also products and services which they want to a company to supply. 

Good growth is where: –

1. Alignment is strong between all stakeholders: with shared values and brand perceptions work hand in hand in growth planning and delivery.
2. Good growth is sustainable: it is both manageable and self-sufficient in generating products and services which sustain the growth of the business.
3. Ultimately it creates long-term profitability: throughout the business, not short-term growth but long-term profits, such as shareholder value.      

The signature of good growth are therefore sustainability, profitability, and alignment with the company’s core values and mission. Good growth reflects the inter-relationship of all these three factors. It’s a type of growth that supports and is supported by the company’s overall strategic plan.

Benefits of Good Growth

Good growth benefits the whole business. Not only does it support long-term sustainability It supports brand reputation, builds and develops customer loyalty, and motivates employees. Good growth is enhancing the businesses whole value as it fits within the brand values and adds to the whole of the business offering. Each off these three elements protects the business from bad growth drivers and practices.  

Strategic Thinking

All decision making starts with leaders focusing on long-term strategic positioning, which comes from a clear vision and strategy.  Good growth requires good leadership decision making skills, focused on looking at the whole picture and incentivising and motivating people on long-term strategic thinking. Typically, this is thinking out the business over timescales such as 3 to 5 years, depending upon market rate changes. 

This contrast with short-term grab thinking, which is often led by short-term grab bad growth habits of one year or less with motivators that reward or override big picture thinking.  

Leaders who foster good growth are adaptable and responsive to market changes. Good growth leaders are open to innovation and learning. In bad growth situations, leadership are often rigid, do not listen to feedback from customers and employees that could prevent negative outcomes. The outcome is more important than how they got there.

Conclusion

Good growth balances opportunities with threats to the business. It focuses on the three key elements of alignment, sustainability and profitability. A good growth culture ensures it is aligned with all stakeholder and company needs. It is sustainable so it can be replicated without damage to the brand, its customers and its future and finally it makes money for the business and enhances shareholder value.  

Don’t be led by people who over promise to grow your business, especially if they come from outside your sector or culture. If they don’t understand the sector and your market, they don’t understand good growth. 

Richard Gourlay, experienced management consultant, leadership development and strategic advisor, director and NED to high growth companies. Author of book:- Strategy: The Leader’s Role by Richard Gourlay builds the skills which makes leaders successful in their business. #cowden #mentor, #mentoringleaders, #leadershipskills, #NED, #Director.