The growth paradox

Here, Dr David Cliff, managing director of Gedanken, analyses the growth paradox that small businesses face.

We know that the old maxim within companies of “grow or die” is becoming a bit careworn these days. These primitive assumptions work on the basis that if one did not achieve market dominance, one’s competitors would ultimately overtake your organisation, colonising a sufficient market share to send your company spiralling into decline.

To a certain extent, this is true. Multinationals have created monopolistic positions and of the competition that does exist on the high street and elsewhere, it is dominated typically by a “big few” who are well able to buy out smaller competitors and nullify any organisational threat.

The problem with this is it ultimately reduces consumer choice and creates systems so large, they become inflexible, process-based operations with high-performance demands that can often stress and demotivate workforces. All too often you hear people whose work used to be a passion degenerating into a more transactional relationship, wherein it is “just a job”.

Many companies I see that wish to peg their growth at a certain level still have this underlying anxiety. The truth is, it is possible for smaller entities to exist alongside the competition. It depends a lot on the nature of the operation. If your goods and services rapidly date and you are required to spend huge amounts on research and development, that can be a real disadvantage to a smaller entity. Equally the individualism, talent, and vision of the smaller entity can far outpace even the largest research and development operation in a multinational, and produce innovation that would offer the potential for what might be termed “breakthrough” initiatives. There is no absolute rule though.

We have to get back to organisations that can actually peg their size. There is a huge range of moral, ethical and social reasons that underpin this. The smaller entity can respond to the needs of local communities both as a provider of goods and services and as an employer. Such approaches can reinvigorate rural communities and those away from capital centres. They can foster ownership and identity. A sense of community and belonging is good not only for the local economy, but also the mental health of the local workforce. Initiative and diversity can flourish and customers can receive more of an individualised, fulfilling consumer journey.

There are ecological reasons behind this as well. Yes, scale may produce ecology, but it also produces huge waste. Local production units, for example, do have increased fixed costs in certain aspects of the operation but save enormously on logistics. Equally, the ongoing growth model seen by so many companies is not ecologically sound long-term. Populations cannot continue to expand infinitely. Profits in commercial growth levels will have event horizons, not yet reached but foreseeable at some future point where we have to make decisions about economic models that work for the planet with far more vigour than most companies currently do. With multinational companies brought down so easily by a single cyber-attack, we are safer when our systems are more diverse, as less unified technology is more difficult to hack.

The paradox of growth versus stable markets that are sustainable long-term is one we cannot dodge for much longer. Although a company may desire growth above all in an attempt to dominate the market, as its size increases it could lose the elements that made it successful when small. All the charm and creativity required as a plucky challenger could be lost in favour of a dependency on expensive and increasingly ‘essential systems. The qualities that make small businesses special might be the very thing that helps them survive long term.

Dr David Cliff is managing director of Gedanken

Further reading on growth

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