Reigniting Growth

Most successful new companies eventually face a predictable crisis that the authors call "stall-out"--a sudden large drop in revenue and profit growth or a collapse of once high shareholder returns to well below the cost of capital. Stall-out occurs when the growth engine that powered companies to success stops working. This rarely happens because the business model has suddenly become obsolete--a common misconception. Rather, research by Zook and Allen shows that the business has almost always become too complex, most often owing to bureaucracy that slows the company's metabolism, or internal dysfunction that distorts information and hampers managers' ability to make rapid decisions and take swift action on them. But stall-out can be overcome. The authors find that most companies that achieve sustainable growth share attitudes and behaviors: (1) They view themselves as business insurgents, fighting in behalf of underserved customers; (2) They have an obsession with the front line, where the business meets the customer; and (3) They foster a mindset that includes a deep sense of responsibility for how resources are used and for long-term results. Those qualities can help any company restart its growth engine by removing gunk and complexity that have built up over the years, inhibiting the clean execution of strategy.

• Entrepreneurial management
• Turnarounds
• Organizational change
• Systems theory
• Problem solving
• Growth strategy