>Netflix, Blockbuster, Motorola and Nokia all pursued growth strategies, yet the latter three (at least) ultimately failed to maintain their lead in consumer facing markets. So how does that explain the need for perpetual growth?
You're laying out a cause & effect I didn't claim. I'm not saying "pursue growth guarantees success" -- which is unrealistic. A variation of your scenario is like asking, "Most novelists pursued growth of their audience but most failed so how do those failures explain why novelists want to grow their audiences?"
The # of failures is a different subject from the _motivation_ for growth.
My reply to gp was to dissect the flawed premise that profits are predictable and stable. It's that flawed assumption that makes it seem like growth is unnecessary.
In other words, even if you want to deliberately create a new company with a "no growth" policy, the outside world has its own freewill and doesn't have to cooperate with your goal. New competitors or changing consumer preferences can sabotage your "no growth" idea and erase the steady-state profits.
> A variation of your scenario is like asking, "Most novelists pursued growth of their audience but most failed so how do those failures explain why novelists want to grow their audiences?"
Not at all. You said,
> Why can't Blockbluster Video stop worrying about growth and just pay dividends from profits? Because an upstart like Netflix competed away Blockbuster's rental profits
And I simply don’t see the connection.
Blockbuster could have done any number of things to prevent their demise but pursuing a growth strategy in the face of an obvious threat to their business was not one of them. And their size - perhaps achieved from a growth strategy - did not protect them. It’s possible that their size, and the blandness that was necessary to get there - actually made them more vulnerable. (We used to call it “Lacklustre Video”)
The same for Nokia and Motorola. It’s a strategy of crap products built en masse to drive growth into every segment which makes a company vulnerable.
So I think novelists make for a poor analogy. And I think there are plenty of companies that pursue a sustainable profit strategy rather than a growth strategy.
It’s just that you don’t hear about them because they aren’t screaming for your business.
>Blockbuster [...] their size - perhaps achieved from a growth strategy - did not protect them. It’s possible that their size, and the blandness that was necessary to get there - actually made them more vulnerable.
Again, you misunderstand my point and asserting claims I didn't make. To restate:
- growth by itself does not guarantee protection from competitors.
- a large company that became large from growth does not prevent them from stumbling over their own bureaucracy and losing to more smaller more nimble competitors who haven't grown into giants yet
Yes, it's obvious pursuing growth doesn't guarantee success. Blockbuster did try growing their streaming business to compete with Netflix but still failed. Lots of stories like that.
>pursue a sustainable profit strategy rather than a growth strategy.
The issue is that you're inserting the adjective "sustainable" as a presupposed condition which conveniently proves its own point. Thus in your mind, if it's "sustainable profits", it makes pursuing growth unnecessary. You've made the same exact assumption as the gp I replied to when he stated, "If a company is sustainably making a profit ..."
- your mental model: sustainable profits are the premise; therefore there is no connection to growth strategy
- others mental model: sustained profits are NOT assumed; therefore there is a strong connection to pursing growth opportunities
In the mind of many businesspeople, profits are not assumed to be sustainable. That's the key point. (E.g. Andy Grove's famous "only the paranoid survive"). Yes, you may have booked some profits for this quarter and try to make conservative assumptions for the next few but you don't know what competitors (many unknown to you) will do. Profits can suddenly flip from seemingly sustainable to unsustainable. What seemed like a "defensible moat" in Warren Buffet's can change and new competitors can just bypass the castle.
>And I think there are plenty of companies that pursue a sustainable profit strategy rather than a growth strategy.
Flip that around: A company can pursue growth strategy as one way to pursue sustainable profit strategy. Finding adjacent/complementary products. Finding adjacent markets.
The "sustainable profit" can be the outcome of pursuing growth. Growth is one strategy to offset the shrinking of sales from previous products and/or loss of customers. Or put another way, "pursuing sustainable profits" is partially achieved by pursuing growth because the components of last quarter's profit number is declining. Netflix started the streaming business in 2007 and grew it before profits declined from the DVD-by-mail business. Streaming revenue didn't surpass DVD revenue until 2016. If Netflix didn't grow the new product (streaming) and let it cannibalize its older product (DVD), other competitors would do it anyway. Growth is adaptation to a changing world.
If one is running a local Italian restaurant or a custom woodworking shop making custom furniture, competition isn't as cutthroat so finding ways to grow is less of a concern.
However, if one is starting a software SASS company with an initial successful product, the idea of growth will be on the radar because the premise of "sustainable profits" in the software business can't be assumed. That's because the SASS company can't control others such as Microsoft or AWS or some other unknown competitor offering a similar service for less (or even bundled for free). Jeff Bezos threatened other businesses with "your (profit) margin is my opportunity".
You're laying out a cause & effect I didn't claim. I'm not saying "pursue growth guarantees success" -- which is unrealistic. A variation of your scenario is like asking, "Most novelists pursued growth of their audience but most failed so how do those failures explain why novelists want to grow their audiences?"
The # of failures is a different subject from the _motivation_ for growth.
My reply to gp was to dissect the flawed premise that profits are predictable and stable. It's that flawed assumption that makes it seem like growth is unnecessary.
In other words, even if you want to deliberately create a new company with a "no growth" policy, the outside world has its own freewill and doesn't have to cooperate with your goal. New competitors or changing consumer preferences can sabotage your "no growth" idea and erase the steady-state profits.