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Management article
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Reference no. SMR4523
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2004
Length: 6 pages

Abstract

Popular wisdom holds that blue-chip companies can somehow grow continuously. According to the authors, however, the struggle of corporate icons like Kodak, Digital and Xerox demonstrate that natural limitations, managerial complexity, a lack of stakeholder harmony and antitrust concerns make continuous growth increasingly difficult. Rather than seeking growth at any cost, they suggest that companies seek alternative ways of moving beyond natural growth limits. The authors draw on a host of examples - from Microsoft, JP Morgan, IBM and others - suggesting that companies finding themselves confronting this scenario can either break up their company, create new corporate forms or make a graceful growth-to-value transition. In evaluating their options, say the authors, the corporate executives must consider their company''s position in its life cycle - growth, stall or post-stall. Stalls can be anticipated by assessing the natural limits of the company''s dominant growth strategy and its pattern of financial performance. Executives must also realistically assess their company''s capacity for both innovation and new-business creation in order to decide whether their capital and talent would be better spent on core business development than on the reckless pursuit of high growth. Choosing alternate options is not easy, suggest the authors, given the pervasive culture of continuous growth. The first step toward making constructive decisions for a company''s future, however, is to acknowledge that unbounded growth may indeed be a myth.

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Abstract

Popular wisdom holds that blue-chip companies can somehow grow continuously. According to the authors, however, the struggle of corporate icons like Kodak, Digital and Xerox demonstrate that natural limitations, managerial complexity, a lack of stakeholder harmony and antitrust concerns make continuous growth increasingly difficult. Rather than seeking growth at any cost, they suggest that companies seek alternative ways of moving beyond natural growth limits. The authors draw on a host of examples - from Microsoft, JP Morgan, IBM and others - suggesting that companies finding themselves confronting this scenario can either break up their company, create new corporate forms or make a graceful growth-to-value transition. In evaluating their options, say the authors, the corporate executives must consider their company''s position in its life cycle - growth, stall or post-stall. Stalls can be anticipated by assessing the natural limits of the company''s dominant growth strategy and its pattern of financial performance. Executives must also realistically assess their company''s capacity for both innovation and new-business creation in order to decide whether their capital and talent would be better spent on core business development than on the reckless pursuit of high growth. Choosing alternate options is not easy, suggest the authors, given the pervasive culture of continuous growth. The first step toward making constructive decisions for a company''s future, however, is to acknowledge that unbounded growth may indeed be a myth.

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