what constrains your growth?

What is Constraining Your Growth?

What does it take to grow from mid-size company to large? From bit player to serious contender? From commuter plane to jet plane? From a 50 crore company to a 500 crore company? What are really the constraints to growth?

The Usual Excuses Won’t Do!
We can’t blame the government any more, not in these days of liberalization – no government stopped Tata from buying Corus, and becoming a global player. No government even stopped Kingfisher from buying into Air Deccan and becoming one of the 3 largest airlines in India.

Can it be the market, then? Even less credible. Unless your company has 50% market share, you can’t claim market size is a constraint. If you are a 50 crore company, it is unlikely that your market is only 100 crore, unless you are in agarbattis or fireworks or some such very specialized industry.

Finding the Constraint
Finding the constraint should be the first task of any CEO who wants to grow beyond the 100 crore barrier. Once you have found the constraint, it miraculously becomes a lever – you can move the earth!

Were should one look for constraints? Ideally, one should look inside one’s own organization, and even inside one’s own mind A few illustrations, from my experience with Indian companies over the past few year:

Constraint type 1: Obsession with short-term goals

If you are in the software services industry, everyone around you is growing at 40% a year. That convinces you, as CEO, that you need to grow at 10% a quarter, or 3% a month. The math may be right (actually it isn’t quite right, as my sharp-eyed readers will no doubt observe!) but what happens once you follow it? Come April, if all your management attention is focused on growing 3% over March what will you naturally focus on? Actually, there is only one sure-fire way – to place some bodies. There is no other business action that can actually deliver any incremental revenue within the same month. Anything else will take months – whether it is projects, or products, or solutions – there is no realistic way to accelerate a product sale by several months, for instance, just as there is no realistic way to accelerate delivery of a baby in less than 9 months. Some things take time, and that is all there is to it

So, once our CEO is intent on selling bodies, imagine what will happen to his sales force. They will be forced to turn away from relationship-building, from trying to figure out their customers’ real needs, anything that can lead to significant long run growth. Net result – total paralysis and atrophy of the sales engine, and of the delivery engine for projects, solutions, products. Result: tension, struggle. Month after month. In extreme cases, as we saw with Computer Associates under a previous CEO, it can even lead to ‘creative accounting’. Certainly not to long term growth. Who is the culprit in this case?

Constraint Type 2: Inertia in the management team

If a certain set of senior managers have become comfortable running a 50 crore company, at least some of them may not be too excited about becoming 10 times bigger. They realize, only too well, that things will not remain the same – their safe feudal territories, their respect in the organization, all may change if the company is much bigger. Even if they are not insecure, they may fall prey to ‘group think’ or ‘the prisoner’s dilemma’..” if I change as an individual, and nobody else does, what good will it do? And I know the rest of these chaps, they will never change.”. Net result: stagnation even in the face of very real growth opportunities

Constraint Type 3: Weak front engine pulling a long train

Companies that have grown rapidly from nothing to 50 crore, are often scarred by the growing pains they went through, the struggles to set up a factory, to build up the delivery team, to ensure quality. All their management attention has been devoted to the ‘back end’, to the neglect of the customer-facing front end. The CEO usually is the front-end, but around this time, he finds himself running out of hours in the day and getting increasingly consumed by issues in the delivery or manufacturing side.
The bottleneck therefore becomes the sales engine, but it takes time to realize this, especially as delivery and manufacturing problems rage unabated and it is hard to look beyond them.

Constraint Type 4: Bandwidth of the Top Management (read CEO)

If the CEO has to make every decision himself, compose every mail to customers himself, decide on every new hire himself.. at this point in the company’s life, he simply runs out of hours in the day. The CEO’s bandwidth becomes the constraint.
Bandwidth can mean time, but it can also be simply the scope of the CEO’s vision. Coupled with constraint 2 above, it can really chain the company down.

What is the lesson in all this? We have not even mentioned any number of very real constraints here – supply chain, lack of good people, lack of funds. Whatever it is, the first task of a CEO in this stage of the company’s growth journey should be to step back and figure out, dispassionately, what the constraint is. Once you know what it is, the rest is easy. The jet plane can now take off!