Article Review of When Growth Stalls
Review of: Olson, Matthew S., Van Bever, Derek ,Verry, Seth. 2008. When Growth Stalls. Harvard Business Review, 51-62.
The article raises the issue of revenue growth stalls that affect even the most successful companies. The article focuses on four major causes of the crisis. The first cause is the premium-position captivity that is”the inability of a firm to respond effectively to new, low-cost competitive challenge or to a significant shift in customer valuation of product features” (p.54). The second reason is the innovation management breakdown that is”some chronic problem in managing the internal business process for updating existing product and services and creating new one” (p.56). Third reason is the premature core abandonment that means “the failure to fully exploit growth opportunities in the existing core business” and “acquisitions of growth initiatives in areas relatively distant from existing customers, products, and channels”(p.56). Finally, the fourth cause is the talent bench shortfall that is “a lack of leaders and staff with the skills and capabilities required for strategy execution” (p.58). Authors emphasize that these causes are mainly within management control since they result from “a choice about strategy or organizational design” (p.54).
They point out that awareness and understanding of these causes assist companies in avoiding the growth stalls. In addition, the article demonstrates few practices that some companies use to predict and prevent the problem.
The article provides examples of companies that have faced the crisis. For instance, the premium position captivity reason was among the main factors causing Levi Strauss to lose its share of market. The company failed to note changes in customer preferences and demand. As a result, companies responsive to a new customer demand successfully entered the market and gained ground. Next, 3M fell into the innovation management breakdown trap when they decided to decrease R&D expenditures below their conventional average and shifted the R&D activities to the company’s divisions. Accordingly, “major new-product development activity was replaced by incremental product line extensions” (p.56) that resulted in a major revenue stall. The premature core abandonment cause is illustrated with the Kmart example. While the company was investing in a range of unrelated businesses searching for growth, Wal-Mart developed effective distribution and inventory systems. Kmart’s...