Rethinking "Growth"
Beyond 'more': why bigger isn't always better
Ten years ago, while researching the business models of emerging fashion brands, I had a realization that many of us have come to (or are coming to, or will come to): the idea of exponential, endless growth is wack!
At the time—around 2014—there were all sorts of emerging designers and companies creating businesses and product lines. What struck me was the sheer variety and diversity in the goals of these companies. Of my research participants, only a few aimed to build large global brands. Most of the designers simply wanted a relatively small, independent, financially sustainable company—one that supported its founders and employees.
But during this period (the beginning of the DTC boom and its investment bubble), many companies that experienced any amount of success were encouraged to grow. This meant increasing expectations to do more, make more, and sell more, which required bigger infrastructure and larger investment.
Even in my modest pool of 20 participants, I was struck by the realization that this is impossible. If every one of these companies were to grow according to these expectations of ‘success,’ the market would be flooded with products. And the companies likely wouldn’t be able to achieve the sales — and revenue and cashflow — needed to sustain their infrastructure (teams, offices, capabilities, etc.). In such a system, there would be constant churn—and with that churn, winners and losers.
"One day you're in, and the next you're out," as Heidi Klum famously said.
Maybe it's my elder millennial, everyone-gets-to-participate sensibility, or my perspective that creative industries (i.e., fashion) fundamentally don't work as zero-sum games like we often think of in ‘free market’ economics, but the idea of winner-takes-all is at odds with the diversity, innovation, creativity, and culture development we crave from businesses (as is evident in the cultural and creative industries).
Around seven interviews into my research, I realized that growth at all costs—and for its own purpose—doesn’t actually work. It increasingly feels like a house of cards (welcome to late-stage capitalism).
And so, I began to pull at a little thread of curiosity to uncover what this actually means for the development of businesses. What were the goals of my research participants? How did that influence their approach to growth? What did that mean for how they positioned their companies and developed their operations?
Upon reflection, continual study, and constant reconsideration, I've come to identify four types of growth that companies can pursue emergent from four observations.
Four Observations That Inform Growth Objectives
Part of this realization comes from ongoing study across various resources, including sustainability and economics research (see the rise of regenerative economics and the degrowth movement), but also from generally observing market cycles and the COVID pandemic.
This combination of resources allowed me to explore the issue of growth from various intersections, including the impact of personal decisions (i.e., why people make certain choices for themselves and their companies), micro-economic considerations (i.e., how businesses develop strategy), and macro-economic systems (i.e., how economic policies impact behavior and decision-making). This led me to some interesting observations:
In the historical "market-based" view of economics, a company's purpose is to achieve a "competitive advantage" to "maximize returns" (i.e., revenue). However, people who form companies do so for many reasons. Achieving a “competitive advantage" never emerged as a motivating factor in my research. In fact, this was a key finding: most people are not motivated by competition; the purpose for developing new businesses is far more nuanced than simply ‘beating the competition.’
Various market environments mean we can't always maximize revenues. For example, if you’re facing a down market (aka a recession or, as with COVID, an economic shutdown), you likely have little control over your ability to “maximize returns.”
Not every company needs to grow. (If you’re already delivering a good, profitable return, isn’t that enough?)
Exponential, endless growth is extractive. (This is why we’re using the resources of 1.7 Earths).
Four Types of Growth Objectives
Given these considerations, here are four types of growth objectives I’ve identified for companies:
Revenue growth. This is the traditional form of growth we often think about. In my research, "revenue growth" emerged as something pursued through two strategies: (1) organic growth and (2) artificial growth (via investment). At a minimum, companies need to achieve (organic) revenue growth to the point of profitability (selling more than they’re spending). Beyond that, the goal is to generate enough to invest in innovation and deliver a return to owners and shareholders. However, my research participants’ varied goals and resources suggest that there are many perspectives on growth, which brings us to the next three objectives.
Operational efficiency. This is growth in process, meaning the company operates more efficiently by reducing expenses or increasing output without increasing input. This can be achieved through professionalizing processes or investing in technology that streamlines production. While this might positively impact revenue growth, it could also just save time or make production more enjoyable—both positive outcomes that don’t necessarily have to lead to increased production.
Creative growth. I think of this as pursuing novelty or exploring new creative avenues for the company. Examples include launching new products or go-to-market (GTM) strategies. The goal here is to explore new areas for innovation or new markets, but it can also mean evolving or exploring new expressions of (creative) work. Again, creative growth could lead to revenue growth, but that doesn’t have to be the goal.
Leadership growth. I love this concept because it places people at the center of business development (after all, people build businesses). Leadership growth is about investing in the personal and professional development of a company's people. Increased leadership skills could improve operational efficiency or create new opportunities. Importantly, leadership growth deserves special mention because it speaks to developing a company as a living system. It’s about elevating the people within the organization so they can live their best lives, and it measures how the company’s activities contribute to the wellness and wellbeing of its people and community. Strong leadership growth means employees, customers, and other stakeholders are better off because of their experience with the company.
Bonus: Exploring Your Growth as an Individual
I love looking at these concepts from various lenses. As an individual, you can track your growth in these same four categories:
Revenue growth: Are you generating more income or reducing expenses? Are you saving for the future?
Operational efficiency: Are you becoming more efficient in your work? Can you implement processes that make your daily tasks easier?
Creative growth: Are you learning? Are you incorporating play, exploration, and creative challenges into your work?
Leadership growth: How are your activities contributing to leading your best life? Are you investing in your professional development and own wellbeing?
These diverse concepts of growth are emerging in our zeitgeist as worthy business pursuits (e.g., B-corps) that better reflect the complexity of our environment, taking into account a more diverse spectrum of motivations, resources, capabilities, and potential outcomes (see Doughnut Economics for more on how overly simplistic models that exclude ‘externalities’ are too limiting). In short, understanding why “maximizing revenue returns” is not always attainable or desirable helps us design business strategies more aligned with meaningful outcomes.
Indeed, when I speak with founders, entrepreneurs, executives, and other leaders, I often explore their personal motivations for the strategies they want to pursue. This ensures we’re aligning resources and capabilities to achieve meaningful outcomes. This alignment enables us to prioritize and develop the right processes for teams and strategy implementation to achieve growth—in all its forms.
Questions for Consideration:
What are your personal motivations in your work practice?
How are you measuring the four concepts of growth?
Are there particular concepts of growth you need to prioritize in the short term?
How are you working to maximize returns across the four concepts of growth in the long term?
When we think of growth, we often first think of MORE. But growth can also mean new avenues of discovery and an evolution of understanding. There is a natural compounding of knowledge and experience that can be tied even more so to wellbeing than our previously overly simplified concept of business growth as more-for-the-sake-of-more. Because of all of this, it’s time to rethink our concept of growth in business.
Onward.