BUSINESS AREA

Your Perception of Business Growth Is Wrong

Don’t assume that bigger is always better, says B-school professor Edward D. Hess. Steady improvement is much more crucial than expansion

By Karen E. Klein

Much of the perceived wisdom about business growth is mythology, says Edward D. Hess, professor of business administration and Batten-Executive-In-Residence at the University of Virginia’s Darden Graduate School of Business. The former executive has spent years studying the concept of business growth and written myriad articles and books on the topic, including Smart Growth: Building an Enduring Business by Managing the Risks of Growth (Columbia Business School Publishing, 2010). He spoke about his latest research with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

Karen E. Klein: What interests you about business growth?

Edward D. Hess: What most business people think about growth, like “grow or die” or “growth is always good,” is not supported by research. Most business executives accept without question that bigger is always better and that they should have growth that is continuous and linear. But that’s just flat wrong. The data show that consistent, above-average growth is the exception, not the rule.

How did you do the research for your new book on growth in private companies?

In 2008, as part of the Darden Private Company research project, we identified 54 high-growth private companies in 23 states. Their CEOs agreed to participate in surveys, interviews, and case studies. They included product and service businesses that had been in business 9.6 years, on average, and at the time had average revenue of $60 million.

One result of that research is the warning that growth can destroy a business. How did you determine that? Full Story »

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