Stall Points: Most Companies Stop Growing — Yours Doesn’t Have To
By Matthew S. Olson and Derek Van Bever
Yale University Press, 2008, 256 pages
Nothing in nature grows to the sky, and in the corporate world, growth can stall for a multitude of reasons, many of which are under the control of the corporation’s management. At least that’s the diagnosis of Matthew S. Olson and Derek Van Bever, executive director and chief research officer, respectively, of the Corporate Executive Board, a worldwide network of executives from large organizations in the public and private sectors. In Stall Points: Most Companies Stop Growing — Yours Doesn’t Have To, they identify 42 root causes of stalled growth in large corporations. The authors estimate that only 13 percent (by frequency of occurrence) of these causes are outside the control of the corporate executives and that a whopping 70 percent fall under the rubric of “strategy.” The balance (17 percent) of root causes can be attributed to “organizational factors,” which are also seen as controllable by managers.
Within the “strategic” category of root causes, Premium Position Captivity is the most prevalent (responsible for 23 percent of stalled growth at companies), and it is a situation that will be familiar to readers of Clayton Christensen’s work on disruptive innovation. Seeking higher margins and less price sensitivity, firms migrate up-market with their product offerings, trying to offer unique functionality. Here they become vulnerable to attacks by low-cost disruptors offering less functionality but rock-bottom prices. Next in these strategic categories is Innovation Management Breakdown (13 percent), Premature Core Abandonment (10 percent), Failed Acquisition (7 percent), and so on, to make seven strategic categories in all. The authors then break down most of these into subclasses.
Of course, the concept of a root cause analysis, as practiced by the quality movement, is not meaningful in an aggregate sample of 50 firms, and the so-called root causes are really categories of causes that demand further examination. The authors recognize this and provide several practice briefs for articulating and testing assumptions as well as a “red flag” self-test for management that may give warnings of an impending stall. All these make eminent sense, and the analytical framework seems sound. But one has to wonder how it is that nearly 90 percent of Fortune 100 companies experience a stall (as the authors’ analysis shows) if the vast majority of the causes are under management control. Charges of widespread complacency and incompetence, often made by people other than these authors, are not credible. It seems more likely that if a true root cause analysis were done, business unit by business unit, the causes would prove to be far more complex and intractable than suggested by the analysis in this book.
Whether or not you see organizational decline as inevitable depends very much on where you stand. Management academics who take a long, detached view can argue persuasively that nature does not rely on large trees to reinvent themselves but destroys them and recycles their components. Saplings are nourished so that the forest is renewed. Those closer to the action and with shorter time frames cannot afford the luxury of this view. A.G. Lafley, CEO of Procter & Gamble, reportedly tells his staff that he does not believe in the existence of the product life cycle. P&G’s leaders have to revitalize their product offerings every day, never considering the probability of their demise. Thus they have extended the lives of their products in ways that have astonished outsiders. The Swiffer, which revolutionized the humble task of mopping, is just one example. This book’s message is a timely reminder to all managers of this potential for renewal.