Idea in Brief
The Problem
Growing companies often face the predictable crisis of stall-out—a sudden large drop in revenue and profit growth. The culprits are usually complexity and bureaucracy.
The Solution
Leaders need to rediscover the “founder’s mentality”—attitudes and behaviors that are strongly associated with founding management teams and can revitalize the business.
The Principles
Stalling companies should drastically reduce complexity and excess cost, refresh the mission, and configure the organization to focus obsessively on the business’s front line. Finally, they should instill an owner’s mindset that eschews bureaucracy and celebrates speed and accountability.
Most successful companies eventually face a predictable crisis that we call stall-out—a sudden large drop in revenue and profit growth or a collapse of once high shareholder returns to well below the cost of capital. Stall-out occurs when the growth engine that powered a company to success stops working. This rarely happens because the business model has suddenly become obsolete—a common misconception. Rather, our research shows that the business has almost always become too complex, most often owing to bureaucracy that slows the company’s metabolism, or internal dysfunction that distorts information and hampers managers’ ability to make rapid decisions and take swift action on them. When we talk to executives about the symptoms of stall-out, their words vary, but the reasons remain the same. We’ve lost touch with customers. We’re drowning in process and PowerPoint. We have no shortage of opportunities, but somehow we can no longer act decisively. What was once such a high-energy ride now feels like trying to pilot a plane with no thrust and unresponsive controls.