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3 Limiting Factors to business Growth
Remember the petri-dish experience in biology? The one where you’re encouraged to introduce the nastiest bacteria you can find and then watch it grow? Next biology class, nada. The following biology class, a speck; and then, one day, you take a look and half the dish is covered in mould. It’s looking furry and you think “this is it, I’ll have a furry little monster by next week”. If you remember, however, the following class, the dish is fully covered and by the following week, it’s practically all gone. The learning? A limiting factor that, if not nurtured, will limit growth and result in decline. The rise and fall of the bacteria’s life cycle is called the S-curve. Adjusting the limiting factor moves it to a new s-curve. Doing nothing results in decline, and eventual death.
I love using this model with clients. Often, they’ve never heard of it applied in a business setting and, if they did the experiment in biology, the learning is well forgotten. The most obvious limiting factor in business is the market – it has become saturated. However, most businesses never get to that point because, in reality, they have internal limiting factors that prevent them from ever growing so big. Here are 3 limiting factors that I’ve observed, while working with clients:
Organisation Design
Very few organisations are intentionally designed from the beginning, they tend to evolve and grow over time. At some point, they solidify and the collective assumption that “this is how our organisation is” takes hold. For a while, that’s good. At some point, stability becomes important for a business, to maximise opportunities and consolidate business, as they rapidly move up the s-curve. However, at some point, the business outgrows it’s organisation design. It may need to increase collaboration, or become more responsive to the market. However, the invisible bonds of the organisation design doesn’t permit such needs. Unless changed, the Organisation Design becomes a limiting factor to further growth.
Innovation
Start-ups are very exciting. The energy, the entrepreneurial go-getting spirit, is very exciting. As we move up the S-curve, the constant weaving, ducking and diving is eventually replaced with increased stability and consistency. Typically, senior managers from more established companies in the industry are brought in, to help the company grow up. There are many very valid reasons to do this but it also comes with risks. One clear risk is the potential loss of innovation. Managers who have developed their careers in well-established organisations tend to not need to worry too much about Innovation and being innovative. After all, don’t we have a department that takes care of that?
As the market matures and new innovations start coming into the market place, such companies often find themselves being limited by their lack of innovation.
Leadership
In working with clients, I regularly come across managers in positions of leadership. What do I mean by that? They see themselves as managers, there to manage the status quo but not to lead. By definition, leadership is about change; management is about the status quo. If the world wasn’t changing, there would be no need for leaders. Given the pace of change that is being imposed on businesses in all sectors, very quickly, this becomes a limiting factor to growth.
If leadership was an individual limiting factor, it’s impact might not be so great. After all, it’s possible to limit the impact of a leader low on innovation. Leadership has a multiplying effect within a business. Leadership dictates the culture and behaviour patterns that can seriously detract from business growth. A limiting factor of leadership can arrest all growth and seriously imperil the company’s future. If you don’t think it’s possible, think of Kodak and it’s demise. Not only had they identified the change and designed the future technology (digital cameras), but they had the time (10 years) to pivot to a new s-curve; but leadership could not overcome the vested interests inertia.
Summary
What does all this mean for your business? These are 3 key high-level limiting factors that provide a starting point to analyse specific limiting factors in your business. Determining what is really happening with a specific company takes reflection, analysis, assessment and action. In one organisation, it might be a specific leader is a limiting factor; in another, a lack of clarity or poor collaboration on a particular process might be a limiting factor. Take the time to identify your business’s top 1-2 limiting factors and determine how you’re going to kick-start the liming factor to a new s-curve.
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