The greatest barriers to growth are internal. What can executives do about it?
Just one in nine companies achieve sustained, profitable growth over 10 years. And 85% of executives blame that shortfall on internal factors. This is the growth paradox: Growth creates complexity, and complexity is the silent killer of growth.
Most companies that achieve sustainable growth without falling victim to the growth paradox share a common set of motivating attitudes and behaviors that can usually be traced back to a bold, ambitious founder.
Companies that grow profitably to scale often consider themselves insurgents, waging war on their industry on behalf of underserved customers. They possess a clear sense of mission. They foster in their employees deep feelings of personal responsibility for the company. They abhor complexity and bureaucracy. They are obsessed with the details of the business and celebrate the frontline employees who deal directly with customers.
Together, these three traits—an insurgent mission, an owner mindset and obsession with the front line—constitute a frame of mind that is one of the most undervalued secrets of business success. We call it the Founder’s Mentality.
Research by Bain & Company finds a consistently strong relationship between the traits of the Founder’s Mentality in companies of all kinds—not just start-ups—and their ability to sustain performance in the marketplace, in the stock market, and against their peers. It is a key source of competitive advantage for younger companies going up against larger, better-endowed incumbents. For mature companies that have retained—or regained—their Founder’s Mentality, it is a key to ensuring sustained, profitable growth in a fast-changing world.
As companies grow, they encounter a number of predictable forces and crises that burden them with complexity and erode their Founder’s Mentality.
As companies grow, they usually follow a default path, moving from insurgency to incumbency. At first, this is a dream come true. They become the leaders of their industry and the benefits of their newfound size allow them to reap a disproportionate share of its rewards.
But this success comes at a cost: the gradual, imperceptible loss of Founder’s Mentality. Complexity grows. Their metabolism slows. They become vulnerable to forces—which we call the winds—that cause their growth to stall.
The Westward Winds
As insurgent companies gain scale and scope, they encounter a number of forces that threaten to drive them off course and away from their Founder’s Mentality. We call these forces the westward winds. They include:
The Southward Winds
Large multinationals also struggle against forces that threaten to turn the power of incumbency into the pain of bureaucracy. We refer to these forces as the southward winds. They include:
Companies that have made it successfully through their start-up and early-growth phases face three predictable crises of growth: overload, stall-out and free fall.
Overload refers to the internal dysfunction and loss of momentum that management teams of insurgent companies experience as they try to rapidly scale their businesses. As companies scale, their leaders tend to undermanage or take the Founder’s Mentality for granted, which can result in those companies losing what made them great in the first place. Overload afflicts growing companies that have failed to internally prepare for the strains of size and complexity.
Stall-out refers to the sudden slowdown that many successful companies suffer as their rapid growth gives rise to layers of organizational complexity and a dilution of the clear mission that once gave the company its focus and energy. Stall-out is a disorienting time for a company: The accelerator pedal of growth no longer responds as it used to, and faster, younger competitors are starting to gain ground. Most companies that stall out never fully recover.
Free fall is the most existentially threatening crisis. A company in free fall has completely stopped growing in its core market. Its business model, the original reason for its success, no longer seems viable. Time feels scarce for a company in free fall. The management team often feels it has lost control. It can’t identify the root causes of the crisis, and it doesn’t know what levers to pull to escape it.
The Journey North
Growing companies do not have to trade away their insurgency for a doomed stint in incumbency. If they know the predictable dangers they face and how to avoid them, growing companies can resist the winds that blow them off course and become scale insurgents. This is the Journey North, a multiyear commitment to defining the insurgent mission succinctly, translating it into strategy and using that strategy as a blueprint for growth and professionalization.
Path to Renewal
Incumbents eventually sink under the weight of their own complexity—pulled down until they become struggling bureaucracies that have lost their Founder’s Mentality, and with it, the net benefits of scale and scope. Incumbents and struggling bureaucracies combat these forces by reviving and regaining their Founder’s Mentality. This can put them on the path to what we call scale insurgency, a state in which companies have grown to scale and achieved a position of leadership while maintaining the many beneﬁts of aspiring insurgents.
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Incumbents and struggling bureaucracies can maintain or recreate the benefits of scale by reinvigorating their Founder’s Mentality with six building blocks.
Each building block corresponds to an element of the Founder's Mentality. If a company has lost its owner mindset, executives can create a company of insurgents and simplify their business continously and relentlessly to fuel growth. If a company needs to rediscover the insurgency, it can focus on capability spikes and build its Engine 2. If its greatest issue is frontline obsession, a company can refocus on franchise players and build learning systems to connect with customers.
We call the building blocks the “what” of the Founder's Mentality. We call micro-battles the “how.”