An oak tree doesn’t promise how tall it’s going to be when it’s a seed. It doesn’t predict the number of branches it will have or how many leaves it will lose in autumn. It doesn’t promise the squirrels any certain quantity of acorns. It just grows. And while early on, the growth is very visible, no one expects a tree to keep growing until it’s as tall as a mountain. At some point a tree’s growth becomes invisible and simply regenerative. Then the growth stops.
As with all cycles, we’re coming around to a new period – one more affected each day by inflation, war, and possibly recession.
For at least as long as I’ve been working professionally, big growth companies (like tech giants) have enjoyed cheap debt and consumers whose idea of scarcity is waiting the full two years to buy the next iPhone.
The companies that middled (or worse) during this time are likely to be toast in the next year or 2. Their funds will dry up quickly and investors will turn their sights to something less shiny, more predictable, and ultimately familiar.
Companies that grew quickly will try to get that magic back because big growth is all they know. But if they’re not in a commodities business that can make a cheap offering to cost-conscious consumers, or find ways to normalize their operations, or choose projects to ignore while they focus on shoring up fundamentals, they will continue to have to make sacrifices to protect their margins and please their shareholders.
We can learn from the big growth folks who used to do pretty much anything that even looked like growth – hiring for hiring’s sake or spinning up new projects, spending money because money was cheap and seemingly endless.
Yes, there is still capital, and investors will need to deploy that capital, but they may be more hesitant. They’ll be looking more closely at the relationships and business models to vet opportunities with a new, more pragmatic lens.
This is good news if you’re pragmatic and thorough, if you’re thoughtful and patient; now is your time to shine. But don’t expect big growth. Those rules have changed.
Start small. Deliver exceptional products and services. Get a couple of people so excited about your work that they ask you solve more of their problems. Then figure out how to streamline those operations. Yes, seek growth, but not by ‘big growth’s’ rules.
This still works, it’s only in the necessity of big growth that big spending is required. Big growth incentivizes managers to ‘grow’ – not to build great businesses.
If you work very hard, and if you’re lucky, you may hit a regenerative phase. Just don’t start promising the squirrels how many acorns you’re going to produce.
What's your take...?