Business Insights

Business Insights

What Are The Limits Of Organisational Survival?

Much has been written about “growth” in the business world and you don’t have to turn very far to find a growth coach or a growth accelerator.  Indeed there are specific funding routes aimed primarily at organisational growth.  Now I’m all for growth, but intuitively we can’t all grow indefinitely.  In an organisational context growth tends to be defined by numbers – increased revenue, more people, larger GVA and so forth.  But why not measure growth by increased knowledge or capability, growth in terms of learning and understanding?

It was Donella Meadows et al who first discussed the concepts economic and population growth in writing the seminal book “The Limits to Growth”, which modelled the consequences of the interactions between the Earth's systems and those of mankind.  It articulated for the first time the dynamic nature of our dependency on physical resources and on ecological systems. It illustrated the processes of ‘overshoot and collapse’ that can occur when these limits are approached and suggested that, without a shift in direction, adverse consequences would become obvious “within the next century”. 

It was (and has been) heavily criticised, but now after more than forty years, it looks to have withstood the test of time and, indeed, looks to have become increasingly more relevant.  The recent all-party parliamentary report suggests that there is worrying evidence that we are still following the “standard run” of the original study – which leads to an eventual collapse of production and living standards.

One of the most important lessons from the study is that early responses are absolutely vital as limits are approached.  The same is true in an organisational setting, if you’ve already hit the road block then it’s more difficult to turnaround and find a new route.  For some businesses it can be too late and survival becomes increasingly difficult – ask the likes of Kodak, Olivetti, Commodore, Blockbuster et al.  There are plenty of examples of business that didn’t survive.  Faced with these challenges, there is clearly a need to create space for outward and longer term thinking and change, thus developing positive narratives for organisational development and progress – if not growth!

The successful businesses are those that find their limits and problems before the competition do, so having a useful tool or process to aid that progression would no doubt be useful for organisations right?  So why is it that many do not use them?

In my opinion the enemy is the short termism that many of our organisations unintentionally distil into their DNA.  The unintended consequences of having an excessive and unhealthy focus on short-term results, at the expense of long-term interests, could well be the problem here.

How many of us know an organisation that has a “2020 vision”? Plenty I bet!   More seem to have one than not these days.   Now how many of those organisations built that 2020 vision on the back of bad financials? or poor sales? or a negative market cap?  The most prevalent accounting-driven metric is the earnings per share (EPS). Research has shown that managers are making real decisions - such as decreasing spending on R & D, maintenance and recruitment - in order to hit quarterly EPS targets.  Unbelievable but true………………….. and very, very destructive.

When times are hard what is the first budget to get cut?  R & D is usually the first, and what is R & D?  It is the long-term future cash flows.  If organisations are really serious, when times are hard they should invest even more into R & D, not less!

I think that most long-term organisational visioning plans are built out of a limiting necessity rather than out of a real desire to build something for the long-term.

So what are the limits to organisational survival?  Well we can learn a lot from the concepts of a Learning Organisation, but the businesses that survive and thrive tend to be those that understand that you must work on the business, not in the business and have the right balance between the strategic intent and the here-and-now demand!

Now I know, from experience, that getting the right balance is not easy.  I would estimate that more than two-thirds of the businesses I work with have an unhealthy balance between the two.  How many of you work in organisations where the sales and marketing function is under one person or one department?  Many of you I would guess!

But the two are inherently contrasting.  Sales is the here-and-now, the cash flow.  Sales people are (rightly) concerned with closing the next sales, gaining the next new customer.  The time horizon of sales is weeks and months.

Whereas marketing is about the strategic intent of understanding the market dynamics, forecasting demand in future years, anticipating changes in technology and competition and being ahead of the curve.  The time horizon of marketing is years and decades.

Asking one person or one department to be both is like asking Usain Bolt to run the Olympic marathon.  He could probably get round but is unlikely to enjoy the experience (most sprinters don’t like to run more than 400m) and his performance will be …….limited to say the least!

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