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What The V Curve Reveal About Stalled Growth In Businesses
Growth stall research conducted by Matthew S. Olson, Derek van Bever, and Seth Verry over 500 companies and two decade worth of data has revealed important patterns in growth and stall of firms.
In this article, I will highlight 4 such factors that I have incorporated into a model called V curve of growth stall.
FIRSTLY, WHAT IS UNEXPECTED IS SUDDEN BUT NOT UNEXPECTED
“How did you go bankrupt? "Two ways. Gradually, then suddenly.” - Ernest Hemmingway
These lines from Ernest Hemingway’s novel The Sun Also Rises, reveal a lot about the human experience when it comes to success and failure. There’s pain and shock when the world collapses beneath our feet. Then we realise that this outcome was quite predictable.
Once we analyze what led us to this point, we can usually see where we went wrong. The conflicting intentions, the minor procrastinations, the blind spots we overlooked … Like the customer complaints, salespeople requests, and breakdown of our strategy, it does not matter if your business was growing every year and everything was fine yesterday. What matters is, how well it is doing today.
SECONDLY, MAJOR REASONS FOR DOWNFALL ARE WITHIN MANAGEMENT’S CONTROL
Success breeds its own destruction, and some of it is because of how the strategy is formulated, and some of it is explained through the hubris of success that results in blind spots on part of the management.
Strategic captivity results from the choices about the strategy that the management makes. Often the trap happens when the companies are growing and serving a few big customers. This creates opportunity costs tradeoff and a situation of a dilemma for organizations, where on one end they can not give up on growth and on the other hand they keep increasing their risk exposure.
BLINDSPOTS: The second is a blind spot that emerges due to success. And they result in ignoring changes in the external environment on the self-confirming biases that everything is fine since we are growing. The irony is that just before the decline the companies tend to grow the most, this is also confirmed by the research that Mathew, Derek, and Seth conducted.
MISJUDGEMENT: While on one end
THIRDLY, THE FALL IS OFTEN ON THE BACKS OF INFLECTION POINTS
Companies, where growth is stalled, have often missed an important strategic point where something major has happened in the technology, customer, regulations, or economic conditions. It is usually because companies are often cornered by the above reasons. But missing an inflection point changes the whole equation of price-value. The changed assumptions result in a strategic breakdown.
FOURTHLY, THE EXTERNAL CHANGES MULTIPLE STACKS OF SLIPPING VARIABLES
The turnaround in growth-stalled companies is very hard to implement since the external environment changes result in changes in many variables including:
The stacking of multiple of these variables changes the price-value dynamics in the new environment. And this position serious readjustment in the strategy, often resulting in transformation programs to overhaul the decline.
It is possible to protect your organization from getting on the V curve, and it is best described in Jeff Bezos's quote to his shareholders:
“Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight”.
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