The Dark Side of Growth

If you want to grow a business quickly, the first step is to destroy it.

When Howard Schultz bought Starbucks, it was a small, local coffee chain in Seattle that didn’t even have Espresso drinks.

As soon he bought it, Schultz proceeded to destroy the business. On a trip to Milan, Italy he noticed coffee bars on practically every corner. In Italy, coffee bars were not like other drink shops, they were meeting places that were an important element of Italian culture.

Schultz introduced espresso drinks to Starbucks and tried to create an environment that would make each Starbucks a meeting place in its community, not just a place to pick up a cup of coffee.

While the success that followed is well known, it came at a cost. Schultz alienated or drove out most of the original Starbucks patrons. The type of person who likes a small, local coffee shop serving drip coffee is not the type of person who goes to Starbucks today.

What Schultz and Starbucks story shows is a general business principle I’ve seen play out in many different businesses: You can usually double your customer base by just doing more of whatever you’re doing, but you can’t grow it by ten times.

If you got to 10 clients by sending emails to your friends or approaching strangers in coffee shops, you can probably get to 20 clients by doing more of the same.

However, this strategy almost certainly ends. Whatever operational systems you have in place for those 10 clients also won’t scale to 100.

You will have to re-engineer it from the ground up. You may, like Schultz, have to change the business model.

As a general rule, if you want to grow your business by 10 times, you need real innovation.

The first step in innovation is destruction.

Not just part of it, either — you have to break the entire thing and rebuild it.

Military strategist John Boyd called this phenomenon snowmobiling.

Imagine a motorboat, tank, and bicycle.

If you break them down into the constituent parts, you have:

  1. a motorboat with a hull, outboard motor, and a skier being towed behind it;
  2. a tank with treads, a gun, and armor; and
  3. a bicycle with wheels, handlebars, and gears.

You can break each of them into parts and rebuild them into many different incoherent wholes, but a coherent and useful whole would be a snowmobile — treads from the tank, an outboard motor and skis from the boat, and handlebars from the bike.

To grow your business by 10x, you need to snowmobile it: re-arrange the constituent parts of the business in order to serve a new purpose and allow for the next level of growth.

This notion of destruction is important because it shows that innovation is part destruction and part reconstruction.

When we talk about innovation, we tend to talk about it warm, fuzzy and generative terms: invention, creation, building.

In truth, innovation is as much about destruction as it is creation, as much about demolition as building.

The rebuilding must be purposeful, using the same parts to make something better than the original that was destroyed.

A snowmobile provides you with a new instrument to use in a new way, different from a tank, boat or bicycle.

Often times when a business is unable to grow, the reason is not because the CEO or management are afraid to “think outside the box” or “try new things”; it’s because they’re afraid to destroy their existing business.

The reason innovation rarely happens within large companies is for precisely this reason. A truly innovative plan would be kicked off with a presentation that started: “So, first we destroy our existing business model which you’ve built your career on and which provides your livelihood.”

Unsurprisingly, this is where the innovation tends to stop. One notable exception was Intel in the 1980s.

Intel developed the first-ever low-cost memory chip in the 1970s and for the decade that followed Intel dominated the memory business. However, by 1985, Japanese firms started making memory chips cheaper and better than any American company could, Intel included.

Under the leadership of Andy Grove, Intel decided that the only way to survive was to rapidly grow their microprocessor business. If they tried to grow it slowly, they knew the memory business would drag them down.

Under the new plan, Intel used their assets from the memory business to successfully expanded their microprocessor business and came to dominate the microprocessor market. Andy Grove was named Time magazine’s Man of the Year in 1997 for the turn around.

However, the first step in transition was that Grove laid off more than 7,000 employees, nearly a third of the entire company.

This is just as true in small businesses and startups. When I talk with founders and business owners that are frustrated by a lack of growth, the problem is rarely that they aren’t working hard enough or that they aren’t intelligent enough. The most common reason I see for a business being unable to grow is courage.

It’s not easy to destroy something that’s working to try something that might not work.

If you want to grow though, destruction is the first step.

Acknowledgements: Jason Cohen

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Originally published at Taylor Pearson.


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