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  • March 2008
  • Article
  • Harvard Business Review

When Growth Stalls

By: Matthew S. Olson, Derek C. M. van Bever and Seth Verry
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Abstract

This article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading. An abrupt and lasting drop in revenue growth is a crisis that can strike even the most exemplary organization. The authors' comprehensive analysis of growth in Fortune 100-size companies over the past half century revealed, in fact, that 87% of them had stalled out at least once. The record shows that if management cannot turn a company around within a few years, the odds are that it will never again see healthy top-line growth. Fortunately, the authors (of the Corporate Executive Board) have uncovered and categorized the most common causes of growth stalls. The majority of these standstills are preventable because, according to the authors, they arise from management choices about strategy or organizational design; external factors (e.g., regulatory actions) account for only 13%. Four categories predominate: Premium-position captivity. When a firm's world-class offering has won the most demanding customers in the market, it often fails to respond effectively to new, low-cost competitive challenges or shifts in customer valuation of product features. Innovation management breakdown. Because most large corporations generate sequential product innovations, any systemic inefficiency or dysfunction in the innovation chain can cause extremely serious problems that last for years. Premature core abandonment. Managers may conclude too quickly that a core market is saturated. Or they may incorrectly interpret operational impediments in the core business as evidence that it's time to move into new competitive terrain. Talent bench shortfall. Insufficient capabilities will stop growth dead in its tracks. They also identified a common culprit in detailed case studies of 50 stalled companies--failure to adapt company strategy to changes in the external environment. Two tools can help managers avoid growth stalls: a self-test to diagnose impending stalls and a choice of practices to explicitly identify strategic assumptions and test them for ongoing relevance.

Keywords

Growth Strategy; Revenues; Crisis Management; Revenue; Growth and Development Strategy

Citation

Olson, Matthew S., Derek C. M. van Bever, and Seth Verry. "When Growth Stalls." Harvard Business Review 86, no. 3 (March 2008): 50–61.
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About The Author

Derek C. M. van Bever

General Management
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More from the Authors
  • Managing Religion in the Workplace: Abercrombie & Fitch and The United States Postal Service By: Derek C. M. van Bever, Nien-he Hsieh and Matthew Souba
  • Richard G. Phillips: Spiritual Grounding in Times of Crisis By: Derek C. M. van Bever and Nien-he Hsieh
  • Martin Luther King, Jr.: A Young Minister Confronts the Challenges of Montgomery (B) By: Nien-hê Hsieh and Derek C. M. van Bever
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