The majority of advice for success in business is still centred around concepts such as “get big or get out” and “you need to grow to survive”. This is the appropriate advice if you are in an industry which is highly competitive. If you don’t have something unique to sell then growth through low cost, geographic coverage or control of distribution channels will be necessary to provide competitive advantage. It is also the strategy of most public companies trying to satisfy their insatiable shareholders.
But opening more stores or developing more products will not necessarily bring more profit. Most industry sectors have their ‘Goldilocks’ spot. Not too big, not too small. This is a mix of customer base, their willingness and ability to pay versus innovation and the ability to service at an agreed price. That is demand and supply keep each other in check through price and availability. So if the pie is only so large then having more of the pie is a viable strategy. In staple areas such as food, clothing, resources, transportation etc. this is still a dominant strategy.
There are other ways to compete however. What if your primary strategic direction is to compete on superior customer focus so as to improve the yield from your existing customers rather than spending money to attract more customers? Then growth is of limited value to your organisation.
In a new book, “Small Giants - Companies that Choose to be Great instead of Big”, author Bo Burlingham has studied fourteen successful companies, all of which at some stage in their history chose to neither get big nor get out but to stay and remain profitable. These companies include some well known US firms such as Anchor Brewing in San Francisco and Rhythm and Hues Studio who won an Oscar for their digital animation work on George Miller’s film, Babe.
These companies made a conscious decision not to grow for various reasons but in particular they all have redefined their concept of success to emphasise such things as quality of life, control, profitability and in several cases to try and retain their ‘mojo’, or that intangible that makes their company different and successful while making it an enjoyable place to work.
Ultimately it came down to passion versus growth for many. I have particularly enjoyed this book since at Redbean we love working with people who are passionate about their organisation, large or small, and are prepared to measure success in other than purely fiscal terms. These are what we call ‘Smart’ businesses.
The book is published by Portfolio (Penguin, New York) and I recommend it to anyone seeking informative yet inspiring stories on how to build a successful organisation.
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