Natural law dictates that if you’re not growing, you’re dying. From trees that continue to grow until the law of physics limits their height, to the great white shark that must keep swimming to stay alive, in our natural world stagnation signals death.
The same is thought to be true of our economic world. The U.S. social security system is based on the premise of continuous growth, not only because this is the only economic model we currently have, but also due to the logistics of the workforce. If workers who are aging out of the workforce must be supported by the economy, then the economy must keep growing in order to support them.
Financial analysts have long-held this belief in regards to business metrics as well—a company must continue to grow or risk going out of business.
Some companies have experimented with a different model. Entrepreneurial ice cream maker Ben & Jerry’s attempted to create a small, static state company that embedded its social mission into its legal structure, and yet in the end, still wound up selling to corporate giant Unilever.
Does this all lead us to believe that growth is the only end game for business metrics?
Or is there another end goal that can drive industry forward?
A different way of thinking
The first misconception in the common “if you’re not growing, you’re dying” idiom when applied to business has to do with our definition of growth. While a company certainly must continue to grow and evolve in order to remain competitive, if this growth is only recognized in the form of financial growth, a company could be setting itself up to fail.
Growth is the framework that should drive all aspects of a company—not just profitability but also goals, teams, initiatives, and operations. Companies that invest in the development of their team in order to attract the best talent will see their return in increased profitability because a company’s overall growth is a byproduct of their team’s growth.
Another danger of using growth as a company’s only end game can be found in a company’s willingness to take risks. Many companies will avoid taking an immediate loss even if that risk could lead to a big gain down the road. When in business we have a laser-focus on financial growth, we can end up being blind to opportunities that could benefit our company in a bigger-picture sense.
Innovation as a Substitute for Growth
An alternative to financial growth as the end all of business metrics is innovation.
It’s an unfortunate fact in our economy that many investors favor companies that skimp on R&D. As a result of this trend, public companies tend to hoard capital and are more interested in their balance sheets than pursuing innovation.
However, there is a significant correlation between companies that invest in innovation and their profit growth. From Apple and Google to Intel and 3M, the best-performing companies in our market today encourage innovation by investing in research and even allowing their employees to spend 10 to 20 percent of their time on ideas unrelated to their daily workloads.
Beyond the positive growth benefits that can be seen from using innovation as a dual end goal for business metrics, at the end of the day it’s innovation that will drive our economy forward. Business leaders who focus only on staying in the black and growing profitability will fail when their companies cannot compete in a changing market, while the business visionaries and innovators of our world will continue to shape the future of our economy.