Stall-out is common in large companies. Once a company stalls out, it is difficult to restart the engine of growth. Chris Zook, coauthor of The Founder's Mentality: How to Overcome the Predictable Crises of Growth and partner in the Global Strategy practice, discusses three ways companies can successfully reverse stall-out.
Read the transcript below.
CHRIS ZOOK: One of the greatest challenges leaders can face is being part of a large company with a clear growth engine and the perception that it is starting to slow down. Stall-out is actually not rare, it's common, in large companies. Over the last 15 years we found two-thirds of companies either stalled out, were acquired by others or went bankrupt. And of those that stalled out, only about one in seven actually was ever able to renew their momentum. Once you stall out, it's extremely difficult to restart the engine. A lot of bad dynamics occur. Younger people don't see as much opportunity and they begin to leave. Power begins to move into the corporate center from the front line, who becomes demoralized. Bureaucracies begin to husband and hold on to resources rather than liberate them to invest in new sources of growth.
But we asked the question of that 15% of businesses that clearly were showing the signs of stall-out or had stalled out and renewed themselves successfully, what did they do? What we found is that [in] nine out of 10 cases, they did not jump to a completely new lily pad—a new hot market—discovering the cold truth of hot markets that they really didn't know. Reversing stall-out in a major company is one of the hardest acts in business. It's why only one in seven companies that encounters stall-out ultimately regain their momentum. But for those that do, it involves, always, three things: massive complexity reduction, a rebuilding of new capability to refresh the business model and rebuilding the internal energy around one of the three elements of the Founder's Mentality®.
Fast-growing companies can become global leaders without losing the values that helped them succeed. Bain’s research explores how large incumbents can also reignite their growth by recapturing their Founder’s Mentality®.