On growth
Okay, this might sound stupid but I’m going to go ahead and throw it out there anyway because it involves a subject that I find endlessly perplexing: why is it that corporate entities, whether they’re publicly or privately owned, are always so hell-bent on growing? I suppose what rekindled this mild fascination was the release of Nick Denton’s “unique” memo earlier today where he outlined what he thinks the various Gawker Media properties need to do in order to grow in 2010.
The memo reminded me of a thought I’ve had for a while, which is this: once you’ve achieved a certain level of success, what’s wrong with simply being content with where you are?
By shunning the urge to grow, you can focus your resources/energy toward maintaining what made you popular in the first place with your core customers/audience, rather than channeling those resources/energy into tinkering with the formula that made you successful in the first place just so you can bring in new customers/audience members?
A company I’ve been fascinated with for the longest time, Starbucks, is a perfect example of the potential pratfalls inherent in the relentless pursuit of growth. Once upon a time, and it’s almost too long ago to recall now, Starbucks was a spunky little upstart chain that achieved great success selling a product that most people made at home, coffee. They became popular by simply providing a really good product that was sold by friendly, knowledgeable employees. I used to love Starbucks, as did millions of others. But that all changed rather rapidly.
Fueled by a seemingly insatiable desire to conquer the world, i.e. to grow, Starbucks CEO Howard Shultz started popping up everywhere touting all of the things Starbucks planned to do “to better serve our customers,” which just about any idiot knew was a thinly veiled euphemism for “what we need to do in order to grow.” So Starbucks started opening more stores, both domestically and abroad, at an astounding rate. They also started offering all sorts of crap food. This led to a bit of a problem…in order to staff all of the new stores, Starbucks had to lower their hiring standards a bit and then had to train these new, less-educated and less-motivated employees rapidly. Additionally, the food they were serving would often take time to prepare, which led to longer lines in the stores, not to mention that serving food took the focus off of the product that made them successful in the first place…COFFEE! So then what you wound up having were less than stellar employees serving a less than stellar product to increasingly pissed off customers, all in the name of, you guessed it, GROWTH!
Eventually, many of the core Starbucks customers, people like myself who would make multiple trips to their stores each day, abandoned them, and the company went into the shitter financially. To his credit, Howard Shultz recognized the company’s mistakes and took steps toward righting the ship by closing stores and eliminating some of the food items, but it may have been too late. Personally, I think I’ve had one Starbucks coffee in the past month, a far cry from the days when I was purchasing 2 or 3 per day, and frankly, I doubt that I’ll ever give Starbucks another chance. They just left me with too bad of a taste in my mouth, no pun intended.
I suppose it’s the natural order of things for human beings to aspire to grow, both personally and professionally, but just once, I’d love to hear of a company founder or CEO who has the balls to just put the damn thing in cruise control once they’ve passed their competitors with nothing but open highway on the horizon instead of continuing to push the pedal to the proverbial metal.
“You know what…I’ve got (insert number here) people per day consuming my product. I’ve got a nice house. A nice car. I take great vacations. I’ve got all I’ve ever wanted and more. So I plan on just doing everything I can to maintain doing exactly what we’ve been doing to make us so successful. By trying to attract new customers, we may alienate the customers we worked so hard for so long to build loyalty with.”
That’d be kind of refreshing, wouldn’t it?
What is it that they say about not trying to fix something that isn’t broke? Perhaps I’m naive, but I’m sure they do say that for a reason.
10 comments:
This is *only* because a company's stock price( = wealth for shareholders) is highly dependent on it's growth - so blame the analysts on wall street, not the CEO - analysts will scream bloody murder if a company ever stated they wanted to stop growing, and since a CEO's job is to create profitability and wealth for its owners (shareholders), they *have* to grow.
I had a history teacher who once said that the fall of every empire could be directly tied to over expansion.
Like in biology, I've always thought that there is probably a natural carrying capacity for companies (and maybe countries/empires). Going over may have disastrous effects.
http://en.wikipedia.org/wiki/Carrying_capacity
COMMIE BASTARD! That's not the American way.
@twoeightnine...I know, right! I'm such a flaming pinko!
I think you have to look at it in the context of modern America. People move on because we love new things. If you don't expand and continue to offer something different, won't people eventually move on to the next thing?
With the internet, I don't think, other than espn, there are any websites I read now on a regular basis that I did 5 or even 2 years ago.
Why does Apple keep updating and adding things to the iPod like video cameras? Because if they don't someone else will and people will buy that instead.
It's weird--it seems to happen in every area of life. Countries want to expand their empire. Companies want to expand. We want bigger houses, more money, more toys. Bloggers want to gain more followers. I think maybe it makes us feel like we have some sort of quantifiable measure of success. Like, I have this many followers to my blog, so I am a good blogger but not as good as so-and-so who has more followers. Starbucks could think, "We have this many stores/stock prices this high," so we're doing well. Really, blogging, business, and conquering the world are much more complex than that, but it seems like a good, easy measure of success, however deceptive.
If you could hook me up with a house...i'd be much appreciated...fact.!
like the first commenter, i blame wall street--not only for the convenience, but because anything less than 15% growth per annum speaks failure to them, and in turn, corporate america. and as corp america owns our government, the government feels honor-bound to save wall street in any way possible, because they've drunk the kool-aid of "grow or die". mr. denton is only following those sheep, bizarre new metrics (and gambling bonuses!) notwithstanding.
starbucks is a great example. they could have grown easily without fucking with the formula. americans were increasingly caught up in better/faster, and their zeal for more caffeine went hand-in-hand with that in the 90s. but no--they had to get greedy with mediocre food, music sales, and outrageous retail expansion. they simply weren't content with growing the thing they did best within new channels of people--instead, they wanted to simply sell more things to the punters already lined up. that's pretty lazy thinking. even the catholic church has this figured out--same product, new suckers.
there is no shame in simply staying in the black and enjoying a steady living, but as we know living here, that takes higher earnings year-on just to survive. when i lived in paris, there was a small epicerie at the foot of the building where i lived. it was small, but offered both convenience and all the food staples. as a native moroccan, the owner, mohammed, would profit by being open when the other businesses were closed (sunday afternoons and wednesday mornings). he would extend you credit if you were short, and you could count on a warm welcome. mohammed would take august off, and would often re-open in september with a fresh coat of paint on the walls or some other small improvement. one september, he re-opened with a re-ordered shop, new lighting, new shelving, and a new awning. i asked him if he was looking to grow the business, to profit more. he said, "no, i simply want to keep this going for my sons. if i expanded i would have to work much harder than i do, and i work enough. i want to send my kids to school and take time off--nothing more. my customers still come, every day, and that's enough. i'm content." i'm forever in search of something that could be that steady/satisfying, but really--is that possible here?
Why growth? Because if i bought SBUX at $20 a share one year I damn well better be able to sell if for $24 a share 2 years later. That's the short version. If I knew SBUX was not going to grow (to $24), I'd sell it - and it would go down. I would put my $20 somewhere else and SBUX would get sold by everyone until the stock was $1. And then they would go out of business.
The long version is that there is more of everything growing organically all the time - the return on investment is necessitated by more people being born, wanting to eat (more), needing jobs (that pay more), needing to retire (in Florida) and just, for the hell of it, wanting more.
nice post. thanks.
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