What Got You Here Won't Get You There
Everyone knows the law of large numbers: the bigger you grow, the harder it is to grow fast. But mathematics isn't the only cloud threatening a successful company's parade. "The growth that landed you on the Inc. 5000 carries with it the seeds of problems you didn't have when you were smaller," Inc.'s editor in chief, Eric Schurenberg, warned the audience at the annual Inc. 5000 conference.
What got you here won't get you there. So what will get you there?
A panel of three experts offered disparate perspectives. The more you do something the better you get at it, pointed out Gary Kunkle, economist in residence for The Build Network and research fellow at the Institute for Exceptional Growth Companies. Consequently, "the number of times that you grow tends to increase the probability that you are going to survive in the future," said Kunkle. Not only do CEOs who grow repeatedly exercise those muscles, but so do their employees. Returning to the theme later, Kunkle urged CEOs to do everything possible to retain their key people. "These are the folks that lead the teams that are at the forefront of learning the lessons of how to grow," he said.
But while frequent is good, fast--specifically, very fast--can be disastrous. "At the extremes of percentage growth, the odds are that the company is going to run into trouble," said Kunkle. So what is the ideal growth rate? There's no one right answer, of course. But Kunkle and his colleagues surveyed 100 middle-market companies that have grown five out of the past five years, and "they told us, on average, that they grow about 33 percent," said Kunkle. "That's still a very fast pace but also one that can be sustained long term."
Ted Zoller, a senior fellow at the Ewing Marion Kauffman Foundation and director of the Center for Entrepreneurial Studies as the University of North Carolina, Chapel Hill, laid out a multipronged approach. Zoller advised CEOs to train their attention on "targeted growth" by exploiting channel development, targeted financing, diversified platforms, global markets, and possibly M&A.
Three kinds of people help companies achieve the next level, said Zoller. Rainmakers deliver sales. Marketmakers identify and open markets. Perhaps most important are the dealmakers. Dealmakers represent "the very top echelon of people who will unlock the future of your business," said Zoller. They "broker information resources, shape networks...and bring other people that bring power to your story." Dealmakers account for 2.7 percent of business players, according to Zoller's research. "Most of you already know them," he said.
Maya Townsend, founder of Partnering Resources and co-editor of Handbook for Strategic HR, identified business ecosystems as critical to sustained growth. She defined ecosystems as dynamic structures of interconnected organizations that depend on each other for mutual survival. "The question for you is in what kind of ecosystem does your company operate," said Townsend. Is it one "where there are threats from your channel partners and you may find yourself blindsided by someone you thought was on your side?"
Other ecosystems, like the one surrounding Android, are "benign and welcoming," said Townsend. The worst ecosystems are brutal, dominated by bad players who don't care who they take down with them. The ecosystem created by Enron is one dramatic example.
Regardless of the nature of their ecosystems, companies must consider how to get others to "build, add, enhance, and engage with our products," said Townsend. They must also nurture communities that care deeply about their products. Finally, they must ponder how to make better products, a challenge Townsend views through the prism of "the next possible convergence of disciplines, fields and ideas that will totally upend our industry." She advised CEOs to lift their eyes out of their own businesses and scan the future, as it breaks, over the horizon.
LEIGH BUCHANAN is an editor at large for Inc. magazine.
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