This article was originally published on LinkedIn on December 26, 2018 and has been reproduced with permission.
During my experience in small to mid-size businesses, I always had this attitude that unexpected opportunities must be welcomed, and accordingly, business services should be expanded to take advantage of those circumstances. It was a few months ago that I read an article published by HBR (Harvard Business Review) on How Winning Organizations Last 100 Years. This study was about why some organizations celebrate their 100th birthday and look like they will be here forever while the average lifespan of a company has fallen by 80% in the last 80 years. Having read that article, I realized the centennial companies aim to get better, not bigger.
Seven months ago, when I joined my current employer to work as an assistant director, I was told there would be opportunities to increase our revenue streams by adding new services that we already have access to their associated markets. As always, I welcomed this idea and started to bend our strategies towards entering those new markets. Everything seemed to be fine until I read that article on HBR and started to doubt my hunger for business expansion. So, I went over the historical database that I have created earlier to analyze our revenues, expenses, and efficiencies. Surprisingly, I noticed emphasizing on those new ones had affected our core services more than I was expecting. Knowing it takes time and resources to establish yourself in a new market, the economic productivity of those new ones was still far from our expectations.
Besides that, I was working toward getting bigger (apparently juicier) contracts for the company, so the company would be forced to acquire more equipment and resources and get bigger. Likewise, I started to question this approach as well. As the smaller a project is, the higher the markup will be; I noticed the aggregated profit of a bunch of small projects could easily beat that of a big project with a higher revenue. And that markup difference blew my mind. Although bigger projects sound fancy, economically, they might not be the best choice.
After all, I realized that in small to mid-size businesses, instead of going for lateral growth and looking for bigger deals to push the company forward, the focus should be given to perfecting the core services and increasing the number of small-sized projects. In other words, a company should not be urged toward an upper league unless it is big enough that it must happen.
Saying that, I still believe there is an underlying tendency in business leaders to expand their products or services instead of focusing to make the existing ones better. Perhaps one of the psychological roots of such perception might be how video games, for instance, that all of us used to play defined progress and success for us. We were encouraged to finish a level quickly and go to the next one. Or perhaps, the hunger for bigger bits is due to the sense of achieving the ultimate prize by defeating the last giants. I am not sure what else could cause this mindset, and I would really appreciate it if you shared your thoughts on this.
Now that I am highly convinced businesses should get better instead of getting bigger, I am putting this new approach into practice to see how it goes and I will try to share my experience with you.
And if you are interested in reading the full HBR article, click here.
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