Falling For The “Grow More! Grow Faster!” Dare Can Wreck A Company

Ever since the “grow or die” mantra began to get traction back in the 1980s, companies of all types and sizes have eagerly taken it up as their battle cry. “Growth is good so more growth is better,” goes the theme. Conversely, companies that show the faintest signs that their rate of growth might have slowed are slammed in the business press and their reputation for being a good investment tarnished.

Even established companies like Apple that have revolutionized the way we run our daily lives haven’t escaped the bad rap. Look at this scary headline: Apple not the great growth stock it used to be.

And Shake Shack recently took a stock price hit because of concerns about “same-store growth,” despite better-than-predicted earnings!

One company that grew itself into near-oblivion is WeWork. This recent article has lots of detail about the activities of the founders as they struggled to raise money in the run-up to the scheduled time for the public offering. But less is said about the source of their problems, trying to integrate a portfolio of wildly diverse businesses:

• CASE, a real estate and construction technology company, was WeWork’s first acquisition in 2015.
• In October 2017, the company acquired Flatiron School, a coding school offering classes online and at a location in Manhattan.
• During the $32 million series B of a women’s only co-working space, The Wing, WeWork contributed a portion of the money raised.
• WeWork acquired Meetup in November 2017, and Conductor in March 2018.
• In April 2018 WeWork merged its China operations with local competitor Naked Hub.
• In August and September 2018, WeWork acquired Designation, a for-profit design school, and Teem, an office management software company.
• In May 2018, WeWork acquired MissionU, college alternative. MissionU was wound-down shortly afterwards and students were not charged tuition. MissionU’s CEO went on to become COO of WeWork’s WeGrow, a private school for children aged 3 through grade 4.
• In April 2019, WeWork acquired Managed by Q, a platform office tenants can use to hire service providers (e.g. cleaning crews, receptionists, IT support staff, etc.).
• In August 2019, WeWork purchased Spacious, a company that leases unused space from restaurants during daytime hours and then rents this space to mobile workers.
• Rise (previously known as WeWork Wellness) is a luxury gym concept, currently only available at WeWork’s Manhattan location.
• WeWork launched a separate but related “co-living” venture called WeLive in 2016. WeLive applies the same basic principle as WeWork to housing, offering rental apartments that are grouped together with shared spaces and services, such as cleaning, cooking, and laundry, as well as group activities and events.

And all in the name of growth! Seriously, how couId any company possibly expect to manage all this? Is it any wonder investors lost confidence in the ability of management to forge all this into an effective organization that could be counted on to make money?

It turns out that commentators have been sounding the alarm about the dangers of too much growth for years. Published in 2012, Grow to Greatness: Smart Growth for Entrepreneurial Businesses by Edward D. Hess is not at all an argument for more growth. Rather, it’s a cautionary tale about the wide and deep implications of too much growth and provides some excellent strategies to manage that risk. It’s well worth reading — and re-reading in this era of the unchallenged wisdom of “growth is good.”

Next time you hear someone pushing, urging, daring you to grow more and faster, especially when it’s likely to make you stretch beyond your ability to serve the customers to whom you are already committed and in the businesses where you’re already active — take a breather and think twice.