Popular business theories often rely on the notion that success is binary: that you either defeat other businesses or you are defeated. This idea enables sports coaches to consult with Fortune 500 companies, but does it really cover all the bases?
“Do or die” has an elemental, romantic appeal to corporate CEOs, most of whom are highly competitive and love a good battle. And it’s true that the marketplace can be ruthless. But that’s not all there is, and out-and-out market victory certainly isn’t the only source of profitability. Let’s look at some of the popular shibboleths and see if we can improve on them:
- Grow or Die: This idea comes mainly from the 1973 book Grow or Die by George Land. The author described how all living systems, including businesses, go through growth spurts when they discover and exploit new resources, then stall out when those resources run dry, at which point new approaches to resource discovery and management must be developed. It helped publicize the S-curve, which shows how growth starts slow, speeds up, then slows down again. These concepts have proven popular and useful to business strategists. But still we’re left with that catchy binary book title, which seems to imply that all companies, and life forms in general, must constantly enlarge or they will be destroyed. By that reckoning, the oldest and most successful creatures would be the size of Massachusetts, generating their own Zip Codes and a sizeable gravitational field.
- Better: Adapt or Fade. The point is profits, not constant growth. It’s not how big you are but how much you return to your stakeholders. To that end, especially in today’s innovative marketplace, the adaptive and creative firms will do best. That S-curve will show the growth of your margin, not merely your bulk.
- Go Big or Go Home: This is a metaphor from sports, where outcomes are always binary (except in hockey). But it’s not a solid match for what companies face in the marketplace. Competition is only one aspect of commerce, and second- and third-place firms often earn more profit than the leader. But “Go big” appeals to men, who are fueled by testosterone and thrive on competition. For many leaders, the only thing that matters is total victory, as if they were in a war where the loser submits to unconditional surrender. Markets don’t usually work that way.
- Better: Own Your Niche. Find the spot in the market where your company has a natural monopoly because of its uniquely useful products. The focus is on serving the clients and making a profit, instead of trying for some arbitrary notion of “victory”. (But you can still feel dominant in your particular corner of the market, if you need that buzz.)
- Take or Give: Givers, says Adam Grant in his book Give and Take, prefer to give more than they get, and their team thrives. Takers, on the other hand, believe it’s a dog-eat-dog world, and they must grab as much as they can and give as little as possible, which disrupts group efforts. Clearly, you want a Giver on your team. But Grant’s thesis suggests a binary takeaway, namely, that the energy of your labor is exactly counterbalanced by the energy stored in the money you make. This is a zero-sum game, and it represents an attitude that goes all the way back to 17th-century Mercantilists, who believed that trade only worked if they “got more than they gave”, as if cash and product were worth exactly the same to both sides of an exchange that was more competition than cooperation. It’s also an attitude popular among fiscal liberals, who tend to think the rich got that way by cheating. In fact, Grant suggests that the only real flaw in a Giver is the tendency to give too much, as if he or she should pull back, now and then, and be a Taker — at least, long enough to pay for some nifty stuff. It makes the Giver look like the Nicest Loser.
- Better: Create Value (rather than hijack it). Grant’s main point is that we work best when we’re not constantly calculating what we’re getting from our labors. If, instead, we focus on producing for the team, our pay will tend to reward us naturally over time. This seems a wise and fruitful attitude. And Grant — a Wharton Business School professor — no doubt understands exchange theory quite well. He’ll likely agree that when you make value generation your goal, you’ll do much better in the long run than when you act like a leech.
- Dominate the Market: If you control the market, you ought to be able to dictate price and guarantee huge profits. Or so they say. The binary implication is that you own your market or it owns you. In fact, giant companies with overwhelming market share often get trapped paying for their enormous infrastructure by cranking out low-margin items. Meanwhile, small competitors can adapt and innovate quickly, so their goods and services are more likely to be uniquely valuable and command higher margins.
- Better: KIP (Keep It Profitable). Yes, a huge corporation with a low margin may take more total profit than a small company with a big margin. And, yes, a big margin on big revenue is better than a big margin on small revenue. But as a general matter, it’s more important to be profitable than large. Size, as scientists would say, is an “emergent property” of success. But it’s not required.
In short: stay adaptive, develop your own niche, focus your team on creating value, and point your firm toward profit rather than size, and you’ll sidestep most of the grinding headaches that come from trying to steamroll your competitors in a “do or die” fight to the finish.
Let someone else take home the laurels, and you bring home the bacon.