How growth in your business can make you worse off

Growth is a good thing—until it is not. In this video, I discuss why growth for the sake of growth may be a bad idea for your company—and what you can focus on instead.

What is good—and what is wrong—about growth?

One of the more common growth strategies include product lines extension and business diversification. The idea is simple—offer something else or something more to your existing consumer base to increase your revenue. Many global brands and companies have used these strategies to their advantage. The idea is simple: offer something else or something more to your existing customer base to increase your revenue.

A product line extension entails using a popular and established brand name for a new item in the same product category. A successful example of this strategy is Diet Coke, which is a product line extension of Coke.

Diversification, on the other hand, entails entering into additional markets or using a different pricing strategy. Amazon, for example of successfully diversified its offerings when it launched Amazon Prime, Kindle and Alexa. Amazon Prime offered a premium delivery service for a fee, while Kindle and Alexa are two products that extended Amazon’s offerings.

Diet Coke, Amazon Prime, Kindle and Alexa all strong arguments for the viability of these growth strategies. Done well, product line extensions and diversification can lead to growth.

However, these strategies aren’t fool-proof—and they can especially lead to a financial disaster if a company uses it merely to grow without concern for how this affects the company’s overall operations or how its customers will respond to these strategies.

One example of a failed product line extension is the New Coke. The New Coke was meant to compete head to head with Pepsi. To do so, the New Coke was formulated to taste exactly like Pepsi. This left Coke fans confused—and Pepsi fans remained loyal to their brand. The product was pulled out of the market after suffering severe losses.

The Amazon Fire Phone is considered as one of—if not THE most expensive mistakes Amazon has ever made—in fact, it made US$170 million in losses. While the idea of the world’s largest online retailer launching a phone made sense in its early stages, it quickly became apparent that the phone did not meet the needs of its users, despite its many features.

If I don’t focus on growth, what should I do instead?

New Coke and Fire Phone are perfect examples to the phrase—just because you can do it doesn’t mean you should. Having a goal to grow is not necessarily bad—but growing for the sake of growth can hurt more than benefit you and your business. And many times, focusing on something else—something more important—may be what you need in your business.

What can you focus on instead?

  • Focus on what you do.

I can appreciate why one would want to diversify—don’t we always say that we should not put all of our eggs in one basket? That said, we also need to choose which baskets we put our eggs into.

Before we diversify, for example, we need to ask ourselves several questions. Do we have the expertise to diversify and offer a different product or service? Does it make financial sense to offer this different product or service? Do we have the equipment and infrastructure to support this?? Do we have the labour resources? Do we understand enough about the new market we will be entering to know what market wants?

If you find yourself responding with a “No” to any of these questions, perhaps it’s a reminder that we do not always need to diversify right now. Maybe what we need to do is to focus on what we do well—and find ways to improve on that.

  • Focus on what works.

You do not need to reinvent the wheel—especially if the current solutions or offerings work well. The New Coke was meant—in the company’s terms—to reinvigorate the market by offering a new formula. Unfortunately, Coke’s fans did not like this new formula—and openly protested that there was never a need to reformulate to begin with.

When we implement something new, are we offering a better product? Are we introducing a simpler solution? Or are we messing up with a formula or product that already works? Are we trying to reinvent something that doesn’t need reinvention? Are we changing things merely to introduce something new?

  • Focus on your customers.

What Amazon and Coke teaches us is that the best strategies and the best products are the ones that keep the customers happy. Diet Coke works because it provided an alternative for Coke fans who wanted or needed to cut back on sugar. Amazon Prime, Kindle and Alexa provided Amazon customers convenience—a better way to enjoy the products they bought from Amazon.

The New Coke and Amazon Fire also remind us that new features and supposedly improved formulas don’t always lead to products that existing customers will love.

The line that separates Diet Coke, Amazon Prime, Kindle and Alexa from New Coke and Amazon Fire can perhaps be defined by this question: who was the product designed for?

Are you offering a new product and service with customers in mind? Are you diversifying to offer better solutions or to make things more convenient for your customers?

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.



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