7%-38%-55% Communications MythBy Robert P.
Top 10 Big Mistakes Of Big BusinessBy Francis T.
Climate Change Is Real! Act Now!By Kathrin G.
Improving The Quality Of Decision MakingBy Niladri R.
Knowledge Management And CreativityBy David G.
Top 10 Big Mistakes Of Big BusinessBy Francis T.
Best Practice Benchmarking - The Path To ExcellenceBy Robert C C.
What Is A Healthy Company?By Raymond H.
Challenges And Opportunities In The New EconomyBy Alkistis A.
Managing Bad Debt - Importance Of Good Collection SkillsBy GERARD A.
Growth And Size
"Size is no guarantee of future success."
What is strategically important is strength not size. Speed is more important than physical mass and flexibility is more important than volume. The strategy must focus on becoming better. Everything else results in incorrect and bad management. What constitutes correct and good management?
Size should never be a strategic aim in itself. A company does not have to be big, but it has to be strong.
After "Profit" the second most common term used in management is "Growth". This is a dangerous concept if you don't differentiate between right and wrong growth and between healthy and unhealthy growth.
There's no getting away from the fact that most corporate strategies followed during the Nineties boom were fundamentally wrong. Many of the early empires were destined to fail. The bold strategies presented by consultants and managers led to disastrous consequences: retreat on all fronts, downsizing, redundancies, falsifying balance sheets, fraud and excessive personal gain at the expense of companies and shareholders, and in many cases the threat of insolvency and bankruptcy.
Even though the debacle is there for everyone to see, many managers still haven't changed the way they think, including those who as the successors to those who previously failed are confronted every day with the enormous fall-out from those earlier mistakes. They continue to work according to the same wrong criteria. If you ask them what the most important strategic aims are, their automatic response is: profit and growth.
Even though growth is undoubtedly an important corporate factor it is wrong and dangerous to make it a strategic requirement. It inevitably leads a company down the path of failure. Growth should not be the input for strategy but the output. It should not be set as an initial requirement but should be the result of thinking through the business and its internal laws in a fundamental way. Unless this is firmly anchored in the minds of the senior managers and supervisory organs, the company will only see temporary improvements and will make the same mistakes over and over again.
The advanced school of strategic planning only becomes clear with the distinction between unhealthy and healthy growth. If a twelve-year old child grows a couple of centimetres every year he is healthy; if the same happens with a fifteen-year old child, he is unhealthy.
There is no conceivable model in which the size of a company is strategically important. Anyone who bases strategy on size is under an optical illusion and in figurative terms is unable to tell the difference between muscle and fat. People are misled by the fact that the correct strategies almost always lead to growth and lastly size, whereas the reverse is not true. The size of a company can also be the result of pursuing the wrong strategies.
Size is measured according to sales and - rarely today - according to the number of employees. Sales can be increased relatively quickly and easily - as has been shown in the recent past - if you allow it to happen in the wrong way: by simple geographical expansion, expanding the product range, through wrong acquisitions and mergers. The results are, without exception, increasing complexity and loss of earnings power. The absolute figures increase and because these are visible, they are taken as proof of success. On the other hand, the underlying relationships get worse, but because these are invisible or are concealed, they are not taken into account.
There are only two criteria for distinguishing between healthy and unhealthy growth. The first factor is the market position: size and growth are only healthy if they result from an improvement in the market position. On the other hand, size and growth do not in themselves lead to a strengthening of the market position.
The second, much more important indicator is productivity. Only the best companies have a well-developed strategy for this. Productivity continues to be neglected, wrongly defined and wrongly measured. Defined as Total Factor Productivity, it is the only reliable indicator for assessing growth.
Only if overall productivity increases in line with sales growth, is it healthy growth, which, in medical terms, leads to muscular power and strength. If the overall productivity of a growing company stagnates, however, then it is well on the way to obesity. It is possible to live with that to a certain extent but if the overall productivity falls as the company continues to grow then the company has cancer. Tumours grow faster than everything else - until the patient dies. It is possible to reverse this growth in some cases, but only if it is caught at a very early stage.
What's your opinion?
54 more Articles by Albert
31 min. There appears to be plenty of room for much greater effort and involvement by companies and organizations around the world. Here a few thoughts and pointers.
POP6 min. Two of today's buzzwords are Team and Teamwork. Those with a particular desire to conform to the spirit of the age portray them as the polar opposite of ...
20 min. What is success, what is failure, and how can you improve your odds for success?
6 min. Valuable insights on using your speaker to maximise the success of your event
4 min. US Recruiting, Retaining & Developing Talent Statistics & Best Practises
17 min. An organization is much more likely to improve its current performance and underlying health by using a combination of complementary practices rather than ...
8 min. Foresee the future, that's what your customers expect, that's what you need to deliver.
4 min. Few companies have the skills to effectively manage procurement across all spending categories. Smart enterprises should examine their procure-ment strategies ...
POP11 min. Somewhere in Corporate America, a human resources manager is tweaking her company's employee-incentive program. Maybe she's dumping last year's customized ...
13 min. The days, weeks, or months between taking the job and assuming power are precious. Put them to good use.
9 min. The success of strategic investments depends largely on the subsequent moves of competitors. Uncertainty about competitive conduct can lead executives ...
13 min. Employees' personal connections can be as valuable as their individual knowledge base. Social network analysis, or SNA, helps maximize a company's collective smarts.
6 min. Plenty are the professionals who are on the "front lines" of the industry, knowledgeable of the countless changes, and who are willing and able to speak ...
16 min. For GCC states, liberalizing the labor market and developing the local workforce are the keys to moving beyond a reliance on foreign workers.
15 min. The CEO helps a transformation succeed by communicating its significance, modeling the desired changes, building a strong top team, and getting personally involved.
6 min. Trying to perfect a flawless presentation can result in disaster...
28 min. Surprisingly, many organizations lack a proper succession plan. One reason is that they do not have an effective succession planning process. This author ...
9 min. The global talent war has seen organisational leaders scratching their heads to understand how they can attract and retain the very best talent that is ...
15 min. Further reform will be essential if one of the world?s fastest-growing regions is to seize a broader role in the global economy
4 min. The proliferation of brands and channels is forcing companies to restructure their marketing efforts significantly.
13 min. Of all the findings on business strategy yielded by the study of the businesses in the PIMS? database, the following is one of the most controversial: ...
8 min. Companies based in the GCC states are using their petrodollars to expand into global markets. But in the long run, these companies will have to develop distinctive capabilities and skills.
6 min. Once companies reach a certain size, setting realistic performance aspirations gets a bit trickier.
15 min. Operational risks are costly, but they can be conquered when high-ranking executives join the battle.
12 min. Companies that rely on IT governance systems alone will come up short.
8 min. Organic search engine optimization has some distinct advantages over pay-per-click advertising. However, there are undoubtedly certain situations and scenarios ...
9 min. Complexity has been one of the most frequently used words for some years now. People talk about complex systems, complex interrelationships, complex problems ...
15 min. Five easy-to-use tools help negotiators in complex deals arrive at a negotiating position that is not only acceptable to them but also palatable to other ...
3 min. The aim of this guide is to prepare you for discussions with a bureau, and to get you thinking about all the factors that affect your Facilitator choice.
11 min. Lean Thinking is a highly evolved method of managing an organization to improve the productivity, efficiency and quality of its products or services. The ...
11 min. Reasons Why You Should Speak at and Attend Professional Seminars
3 min. Over the last two years of working with hundreds of clients from all walks of life, I have noticed trends of what my clients want and need. This top ten ...
POP10 min. To get beyond survival and to grow both profits and margins, the successful companies of the future will be forced to become true customer experts.
POP19 min. The art of leading deep corporate change can be learned. The trick is to help each member of the company discover a new reality...
12 min. Value created by knowledge is often not captured. Five accounts of knowledge strategies.
11 min. Growth is necessary, but size is no guarantee of a successful future! Nevertheless, growth is needed. Without growth there is no life. In a certain sense, ...
POP4 min. Recently, I came across a code of ethics for hackers (yes, it really does exist) that I'd like to share with you, because I think it really hits home with ...
13 min. Everything that we do for our clients is based on the idea that improved communications will improve an organisation's performance and contribute to the ...
8 min. Gen X-ers want far more collaboration with companies - both as customers and as employees. CIOs are uniquely positioned to help their enterprises meet ...
7 min. Sometimes we can all use a friendly reminder to keep us from backsliding into old ways of thinking about selling that lead us down the wrong path with potential clients.
16 min. Services are more difficult to measure and monitor than manufacturing processes are but executives can rein in variance and boost productivity - if they implement rigorous metrics.
7 min. In 15 seconds, a visitor to your site determines whether or not they are interested in your product or service. Web usability experts can provide all sorts ...
15 min. By building social issues into strategy, big companies can recast the debate about their role in society.
17 min. Over the next two decades, the country's middle class will grow from about 5 percent of the population to more than 40 percent and create the world's fifth-largest consumer market.
POP18 min. Looking for inspired leadership, passionate employees, unsurpassed productivity, and grateful customers? Forget the dispirited corridors of corporate ...
21 min. Are you on board with enterprise risk management? You had better be. It's the future of how businesses will be run.
14 min. Newspapers have tried a host of measures to halt the long-term decline in their readership, but they haven't stopped consumers from turning to TV and the ...
17 min. How leading-edge companies are streamlining applications development.
13 min. Talent can be bought, but the best companies develop their own.
4 min. How do you know if the speaker fits? How do you avoid embarrassing mismatches?
5 min. Improving the customer-centricity of your organization isn't just good business, it's also good marketing.
5 min. Should work be fun? Must it be fun? Today, the answer to these questions is mostly yes. What else should it be? Yet however plausible this answer might ...