An Object in Motion
Part two of the three part series highlighting how Newton’s three Laws of Motion apply to business focuses on the first law: every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.
Most businesses have one primary goal: growth—to grow in size, revenue and profit. Growth in one area frequently hinders growth in others, so leadership teams must constantly make decisions and adjustments to find optimal balance. This is how to achieve desired, long-term outcomes. When revenue grows, that often requires a larger headcount. Hiring more people can impact profit, which presents other barriers to growth, like having less money for acquisitions and investment. Making profit the top priority can also stall growth. Failing to release funds to stay competitive through product development or compensating top talent could mean high (expensive) turnover that can impact your customer relationships and, in turn, negatively impact revenue and profit.
While it would be great if all companies were always in a perfectly balanced growth state, the reality is that most businesses cycle in and out of three stages of growth: up, down and flat. When a healthy business is controlling its own destiny, all three of these stages can serve a useful purpose in a long-term growth strategy.
At their infancy, all successful businesses must start an upward climb from ground zero. At the crossroads of Luck and Opportunity, some companies are faced with very steep, very long slopes that require years of hard work. Other companies hit the right market at the right time and explode onto the scene with massive growth very quickly. As Newton theorized, if everything continued on its exact course with no barriers, a business would continue to grow at exactly the same pace, but that can never happen. All businesses will at some point reach a point when their ability to grow is inhibited by internal and/or external factors (market saturation, competition, employee retention, manufacturing capacity, availability of raw materials, changes in consumer behavior, etc.). Some businesses will even elect to slow growth to allow the company to rightsize in order to ensure excellence in product delivery. When a business grows too quickly, many challenges arise that must be addressed to ensure consistency and quality. Adding staff will help manage workload, but new people take time to train and make mistakes. Adding operational capabilities requires both financial and human resources that typically take months or even years to scale up. With all this to consider, the “up” growth chart for many successful companies looks less like a straight line from the bottom left to the top right, and more like the side of a mountain, with an up/flat/up/flat pattern that shows smart, managed growth.
Let’s face it; down sounds bad, and it usually is. Usually. But down can sometimes serve as a helpful wake-up call to remind a company not to rest on its laurels. Perhaps if they’ve become too complacent, “down” can be a call-to-action to invest, innovate and be aggressive. Down can also be an eye-opener to realize that your business is becoming less relevant, so either evolve or dissolve. Many companies and brands were flirting with the road to extinction before they reinvented themselves (think Apple and Olay, for starters), so “down” was a catalyst to market dominance. “Down” is also a powerful teacher. It’s through our failures that we often learn our greatest lessons. Read the autobiographies of great business leaders like Steve Jobs or Jack Welch and you’ll find their roads were paved with plenty of failures. Don’t fear “down.” Sometimes staring it straight in the face and coming out alive is one of the most satisfying feelings you can have professionally. “Down” brings with it Uncertainty, and its cousin Anxiety, but business is cyclical, like the stock market. If you sold your shares every time the market went down, you’d never get ahead. You have to maintain your position in order to reach long-term goals. Likewise, during a down period, allowing yourself to take a deep breath, work harder and wait it out for a month, a year, or even a decade could expose you to tremendous learning and a great feeling of accomplishment.
Flat is a funny thing. For some businesses, like many private companies, small businesses and “lifestyle” companies, where an entrepreneur makes a nice living but isn’t interested in taking things to the next level, flat is great! It’s predictable, less stressful and more manageable. For most public, private equity or venture backed companies, where fast growth is demanded, flat can be tough. Flat could mean that the business has peaked for good. The leadership team needs to decide if they’re prepared for settling into the status quo, whether it’s time to sell or time to innovate. Flat could be a temporary status, as perhaps the company has divested a business or closed operations in an area of decline in order to focus on growth areas. Over the last seven years, since the 2008 market crash, for many businesses, “flat is the new up.” Spending in many areas has shrunk or shifted, so replacing lost business from a declining area with new business from a growth area to remain flat is a huge accomplishment that could allow a company to shift back to a growth trend again.
Because business is both art and science, with a lot of hard work and a little bit of luck to keep it interesting, the truth is that Newton’s “uniform motion” doesn’t apply here. Things can go on in one continuous motion for only so long. Something will inevitably disrupt the momentum to either accelerate the speed or press the brakes. Looking at your company through this lens will help you anticipate the guaranteed shifts and changes and appreciate the experiences you will gain by riding out the peaks, valleys and plateaus inherit in today’s ever-changing business landscape.