Steve McKee, a columnist for BusinessWeek.com and president and co-founder of McKee Wallwork Cleveland Advertising, is knowledgeable about growth stalls. His knowledge comes from real-life experience—he lived through one. Due to interest from other executives, McKee wrote a book When Growth Stalls: How It Happens
, Why You’re Stuck & What to Do About It
. In an interview, he discussed what he had learned.
As McKee explained, the company for which he worked had been a very fast startup. In its first year, it made the Inc. 500 list of the fastest growing private companies in America. Subsequently, the company drifted with no rational explanation. “Today we look at the economy and where it’s at, and we can blame corporate problems on it. At that time,” he said, “we couldn’t.”
So the company undertook a marketing research study to find the answers to the problem and, as he told us, “the results were really revealing. The study showed, first, that the company wasn’t alone—about one in five companies named in the Inc. list had stalled thereafter. This helped to take some of the psychological burden of stalled growth off the company’s leadership. Second, the study showed there were external dynamics that hindered growth—problems like those we’re experiencing now—but, more important, there were issues inside and they truly counted.”
McKee added, “As our mother always said, it’s what’s inside that counts.”
According to McKee, “Companies change inside or manifestations of things that were there but dormant arise when growth stalls, and that’s what tends to keep companies down.”
The external factors—“market tectonics,” McKee called them—are the economy, changing industry dynamics, like a new technology or product introduction, and competition. “Every organization faces all three during the course of its lifetime,” said McKee. “Some cope with them better than others, and the reason is their internal health, which is dependent on four internal factors: lack of consensus within the management team, a loss of focus in the marketplace, loss of nerve, and marketing inconsistency. Together, they create a vicious cycle that can really keep companies down.”
As McKee explained, all are important but lack of consensus may be the most critical. ‘If the Armed services and all the members thereof don’t have consensus about a mission—what they’re trying to accomplish and when—you’re going to have carnage on the battlefield. The same thing is true in business. You need to have consensus about the situation you’re facing, what you’re trying to accomplish, what the company is about, and how the company is going to get there. When growth stalls, disagreements that probably were there all along begin to rise to the surface and emotions start to fray because everyone is worried about the company.”
Signs of lack of consensus are subtle—a rolling of the eyes or an avoidance of a meeting, or refusal to lend a hand with a project. But until the problem is addressed, a company can’t get on with things.
What about the other three factors identified by McKee?
As he observed, lack of nerve is especially prevalent due to what is happening with the economy today. “Companies try to reign in spending but they go too far, even cutting marketing or R&D, or innovation. Such actions may not feel harmful at the time, but it does hurt down the road.” Besides hamstringing the organization, such actions may reinforce the consensus problem. McKee said, “As the economy starts to rebound, many companies are going to assume that their fortunes will rise. But because of these internal dynamics, they may continue in their stall, unaware of what really hit them.”
Lack of focus, said McKee, is a double-edged sword. “Sometimes companies stall because they lost their focus in good times. They think that they’re so successful in one industry that they can extend their brand to other industries. Then, when hit with a market tectonic,” he explained, “the house of cards collapses.” Thereafter, the company’s managers start chasing customers or chasing revenue that in good times they wouldn’t be after, thereby diluting the focus of the organization to the point where its edges become dull and people can’t really tell what it’s about.”
McKee explained how lack of consensus, nerve, and focus can all happen at one time and thereby cause marketing inconsistencies.
What should executives do about these internal problems? According to McKee, companies have to recognize their existence, which takes a certain amount of emotional intelligence. “To begin with,” he said, “organizations have to address the consensus issue. Until management has reached consensus about what to do, there is no use in trying to solve the other internal problems.” The external problems can be quickly diagnosed but the strategic response to these is where the disagreements arise. “If you can form a consensus about what the company is really facing and what its short-term objectives are, the company has the foundation on which it can begin growing again.
This isn’t as simple as it sounds. McKee’s firm consults on the question, and he’s found that lack of consensus can cause a company to drift for some time because nobody puts a label on it. In a down economy, executives and managers bring financial worries with them into a management meeting. A strategic recommendation that the group might accept in a time of growth might overtly or passive aggressively be vetoed in tough times.” Identification of the four internal factors is like a splash of cold water in the face.