Growth is the lifeblood of most businesses, but the organizational and marketplace dynamics of the drive for growth are complex. Growth, for one thing, comes in many forms. In the business press, you’ll read about healthy growth, unhealthy growth, organic growth, growth through consolidation, as well as slow growth, no growth and decline.
Obviously, growth informs every facet of strategy in that growth is most often THE business goal. Organizational views on growth, furthermore, inform the constitution of the business, from its culture to its legal form. Great strategy and great products can drive growth. On the other hand, defects in the business, its leadership, as well as economic and market conditions, can hamper growth, even when the strategy and products are sound.
I am just beginning to wrap my head around the complex issue of growth, but one thing I have learned in my consulting experience is that companies rarely grow any bigger than the vision of their leadership. Furthermore, there are often obvious constraints on growth, either of an internal or external nature. At the risk of oversimplifying, I’ll say that isolating and addressing the constraints that face your business can help achieve growth.
Here are some of the common constraints on business growth; I will explore more of these in future posts.
The 10 Growth Constraints
The Market Constraint — While it’s a tried and true principle of business to focus on a target market, both the size of that market and the degree to which a company’s success depends on that one market can be constraints to growth. Niche markets allow us to secure customers and revenue, but are limited by definition.
The Capital Constraint — The inability to effectively generate or utilize capital will constrain the growth of any business. Inadequate access to capital will limit an organization’s ability to develop existing business and pursue new business opportunities.
The Strategy Constraint — Depending on the business and market, the strategy a business employs (or the failure to employ a strategy) can limit a business’ potential for growth. Often, selecting an inappropriate strategy or poorly executing a good strategy can hamper a business.
The Industry Constraint — Excessive attachment to one industry and the biases of that industry can constrain growth. Many new businesses find that closely aligning to an industry group can provide early growth, but that growth hits its limits rapidly. If a business then defines itself too narrowly along industry lines, it may adopt the reactionary tendencies of an industry construct and run the risk of missing opportunities and failing to innovate.
The Competitive Constraint — Excessive competition for a market, or the existence of more powerful competitors, can hamper business growth. A soft drink maker, for instance, can create a popular product and enjoy initial business growth, but the growth of such a company will eventually be constrained by the existence of more powerful competitors.
The Organizational Constraint — A company is a collective of people and processes, assets and attitudes. An organization that is poorly designed or lacks the talent, processes or culture to innovate will eventually be hampered in its ability to grow.
The Leadership Constraint — Any business or SBU can only grow as large as the mind and/or vision of the man or woman in charge. It can certainly be smaller, depending on the business’ maturity, market conditions, capital, etc. But it will never be bigger than the mind and/or vision of the leader.
The Followership Constraint — Many businesses grow in the shadow of an industry leader and generally innovate in the safe shelter of another company’s innovation. Me-too products and look-a-like services, delivered to the marketplace well behind the cutting edge, can generate revenue, and may secure satisfactory returns for the stakeholders, but followership generally constrains the company’s potential for growth.
The Success Constraint — Sometimes, success can be our worst enemy by creating biases that impede innovation or that prevent us from responding to changes in the marketplace. This constraint is common in entrepreneur-led and early-cycle businesses, but it has also affected members of the Fortune 500.
The Complacency Constraint — General satisfaction with the status quo in the industry, marketplace and the activities of the business will constrain growth. Complacent businesses may not believe that they are complacent; they may in fact seek growth. But they are satisfied to do the activities they have always done, and they expect growth to come primarily from selling more of the same products to more of the same customers.
