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Paradox of Growth

Recently, I've been burning through the HBR Ideacast. It's a podcast. As an MBA and constant learner, it's one of my favorite. If you have time and are curious about why so many companies experience stellar growth and then stall this episode of the HBR Ideacast is for you.

If you don't have time to listen to the 18:05 podcast here's the notes I took...

All businesses and most people want to experience growth. We want to grow our knowledge and our finances. However, growth creates complexity. Growth creates internal complexity. Growth creates external complexity. The ideas that fuel growth generate complexity, and lots of it. Paradoxically, the accumulation of complexity is the silent killer of growth.

Organizations that have experienced growth often have the passing luxury of building complex decision processes. Organizational layers of management start to distort information so much that senior leaders in the company no longer know what's actually going on. Growth organizations often get more matrix. A matrix organization often allows accountability to hide and without accountability quality and efficiency suffer.

With the above pre-text, Chris Zook dives dip into the paradox of growth in his book, The Founder's Mentality. How can we cut down on complexity that is actually hurting our ability to grow?

  1. Create a very clear and insurgent mission that inspires and attracts talent to stay on-board and focused on objectives. An example of this approach might be Netflix's decision to elevate the team focused on their small streaming business while their DVD business was still dominating and driving revenue.
  2. Focus on the customer experience. Think about the CBS show Undercover Boss. In every episode, the senior leader quickly identifies opportunities to improve the customer experience by spending time in the operation.
  3. Foster an owner's mindset. Even if you have a matrix organization, someone needs to be accountable and everyone should be responsible. I see this most at Starbucks, where employees seem empowered to quickly resolve issues.

As I was listening to this HBR podcast, the topic reminded me how some founders choose not to take on much debt. When Apple began to stabilize after Steve Jobs returned to the company, he refused to take on debt. He simply didn't need any debt as the company had strong cash flows. Today Apple's cash flows are still great, but they also carry roughly $75 billion in long-term debt. Why? My guess is that it was a relatively easy way to grow by adding just a bit of finance complexity.


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