Growth. Do you always need it?

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“OUT OF CLUTTER, FIND SIMPLICITY. FROM DISCORD… FIND HARMONY. IN THE MIDDLE OF DIFFICULTY… LIES OPPORTUNITY.”

– ALBERT EINSTEIN.

GROWTH ≠ PROGRESS

There seems to be a recurring theme in today’s world that suggests that “Growth Solves All Problems”:

• Many start-ups sacrifice certain elements like profitability, product quality, and culture for further growth in revenue or market share. E.g. Uber, WeWork, Casper, etc. The “move fast and break things” culture coined by Mark Zuckerberg is shortsighted and is a recipe for disaster.
• Related to this is the “blitzscaling” philosophy of prioritising speed over efficiency. Who does this benefit?… Customers? No… Employees? No… Investors? Yes… Companies like SoftBank Group, Venture Capital funds and Private Equity investors will swoop in and fund a business with more capital than asked for, to give their favoured company more cash than their competitors–seen as a competitive advantage–so they can expand internationally (everywhere), cut prices and undercut the competition. Thus creating monopolistic winner-take-all markets.
• The US recently joined countries like Greece, Portugal and Japan (amongst others) where the ratio of the gross national debt to GDP exceeds 100%. Now at 108%, and up from 63% in 2006 (pre-financial crisis), the US has nearly doubled its national debt (relatively speaking) in 13 years to trigger economic growth, which is still sluggish at 2.3%.

• Corporate leaders, most likely because their compensation ties to revenue in some way, will focus on the metric that “can’t be gamed” (Eric Schmidt).
• The self-help/happiness/I-can-fix-you bubble where dozens of “Gurus” have emerged offering advice on solving your problems even though they’ve experienced no hardships of their own. In case you hadn’t realised yet, you need help. You need personal growth. To get it: Buy my e-book, “like” my photo on Instagram and “subscribe” to my podcast. For those seeking enlightenment: Attend my seminar for the “affordable” price of $999.99.

Don’t worry, this is not a doomsday piece. Nor is it a critique on the strategies seen above. I’ll save that for another day. Instead, I will suggest some alternative focal points, which inadvertently lead to business or personal growth.

TO EFFICIENCY AND BEYOND

Image by WikimediaImages from Pixabay

bottleneck

noun

1. the neck or mouth of a bottle.
2. a narrow section of road or a junction that impedes traffic flow.
3. a device shaped like the neck of a bottle that is worn on a guitarist’s finger and used to produce sliding effects on the strings.

Thank you, Oxford English Dictionary… Maybe, I’ll try door number four.

In project management and operational theory, a bottleneck is one process in a chain of processes, such that its limited capacity reduces the capacity of the whole chain. In other words, work arrives at a given point more quickly than that particular point can handle it.

Depending on the type of business, the result of stalled capacity can lead to overload of processes in production, supply overstock, pressure from customers and low employee morale.

The problem with having growth as the imperative is that both the number of bottlenecks and their frequency of occurrence increases. This is not only a feature of business. In our personal lives, we call this stress. If you are attempting to do too much at the same time, growth does not and will not solve all. My solution–solve for efficiency first–then grow organically through scalable processes.

There are four common types of bottlenecks that we can solve for regarding performance improvement:

ACCUMULATION

If a production line has a long queue, you are likely to see a bottleneck. Sometimes it is easy to identify where the bottleneck is occurring, but there are other times when it is far more complicated to determine what is going on and find a remedy. For the individual, consider which parts of your day are reliant on others and figure out which are independent. Is there a particular function taking more time than it should?

THROUGHPUT

Throughput is the amount of product (or service) produced (given) over a specified time period. You need to consider the links in your chain of processes, and tweak those that will reduce overall throughput time.

FULL CAPACITY

If all your machines are producing at their very top level for a given time period, you may have a bottleneck. The link in the chain at full capacity will affect all processes following it. The only effective way to deal with this type of bottleneck is to find a machine (or process) with increased capacity.

WAIT TIMES

Wait times are almost self-explanatory. If there is a hold-up, you may need to review the machine or person who is the step just prior to the one with the wait time to determine what needs to be done. Do you need a better machine or software? Do you need an extra employee to handle the work-load?

So, how do you solve such issues? The best-practice for improving a process flow that I’ve come across is the Theory of Constraints, by business leader Dr. Eliyahu M. Goldratt. Here, he outlines the five steps to increase overall system throughput by improving each constraint:

1. Identify the process constraints
2. Decide how best to exploit the process constraints
3. Subordinate everything else to the above decisions
4. Evaluate the process constraint
5. Remove the constraint and re-evaluate the process

Goldratt’s theory works well in production systems. But is it possible to take this theory a step further?

Conceptually, it is about the elimination (of bottlenecks) that hamper process flow. However, business is not just a process flow based upon production. It is a collection of processes that commingle together. If we can identify and rectify non-production bottlenecks, we have a better chance of gaining corporate efficiency and therefore competitive advantages, without forcing growth.

PULLING DIAGNOSTIC LEVERS

Image by Ivan Bertolazzi from Pexels

The following ideas are not exhaustive but given as an illustration on where we can apply this theory to either our businesses or personal lives to improve efficiency and reduce stress. I like to think of them as Diagnostic Levers we can pull. Ask yourself the following questions:

ELIMINATING EXPENSE

What are the largest expense categories in your industry which, if reduced or eliminated in your company, would allow you to gain a competitive advantage? Tesla Inc., for example doesn’t spend on marketing whilst their competitors spend on average 10% of revenues. In doing so, the company can allocate resources to what matters most to customers, quality and price.

REMAKING THE CUSTOMER BUYING OR USER EXPERIENCE

What elements in the typical buying or usage experience in your industry impede demand, which, if drastically reduced, changed or eliminated in your company, would allow you to get a competitive advantage? Take Amazon.com, is the epitome of the three-click-rule. As a customer of the “Everything Store”, you can buy over 3 billion products over 11 marketplaces worldwide, all within 3 clicks and often delivered on the same day! This is a customer journey like no other.

OVERCOMING THE CUSTOMERS’ PSYCHOLOGICAL BARRIERS

What emotional or psychological barriers in the minds of your industry’s main customers impede demand, which, if drastically reduced or eliminated in your company, would allow you to garner a competitive advantage? Often, the switching costs of customers are high. Your product or service may be cheaper/faster/better but consider how you can build trust quickly and break the psychological barriers of potential customers.

WINNING HEARTS AND MINDS

What disenchanted or not very engaged group of people in your industry or its value chain, which, if your company won their hearts and minds, would allow you to get competitive advantage? Sometimes, often focused on the minutiae of your operations, we forget about the suppliers and other stakeholders. Can you build a product or service that aligns interests, winning the hearts and minds of all stakeholders involved. Consider the Business Roundtable, where last year 181 CEOs pledged to run their organisations for the benefit of all their stakeholders–customers, employees, suppliers, communities and shareholders.

ELIMINATING NEGATIVE EXTERNALITIES

What negative externalities does your industry generate, which, if drastically reduced or eliminated in your company, would allow to get a competitive advantage? If your business is in an industry that historically is not socially responsible, environmentally friendly, or sustainable, perhaps you can set yourself apart from the herd by being so.

Coming full circle, to trigger organic growth, our systems and processes need to be robust and sustainable. It is illogical and proven to be fatal to think “Growth cures all”. If we consider the various elements of what makes up a business, it seems prudent to act upon the levers that gain us a competitive advantage, through elimination rather than addition.

“An expert is not someone who gives you the answer, it is someone who asks you the right question.” — Dr. Eliyahu M. Goldratt

Often, you need not ask an expert; You need to ask yourself the right questions.

Originally published at https://exileofthemainstream.com on February 2, 2020.

Hi, I’m Adam (Exile of the Mainstream). I’ve worked in venture capital management consulting and financial markets for 10+ years— name a topic and I’ve not only read it, but I’ve likely lived it. Follow me on Twitter and Instagram.

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