Be Paranoid About Healthy Growth

0
30

John Chambers, CEO of Cisco Systems says that he possesses a “healthy paranoia”. He
Is paranoid that Cisco may grow too far from its customers, partners and employees.
Andy Grove of Intel first wrote about paranoia in the book, “Only the paranoid will
Survive. “Company should not just be paranoid about survival, it should also be paranoid
About healthy growth.

John Chambers grew Cisco from 1995 to become a super growth engine, which fueled
The burgeoning demand for computer networking. Its sales revenues grow from $ 2.2
Billion in 1995 to $ 18.9 billion in 2000. The profits grew from $ 0.84 billion in 1998 to
$ 4.3 billion in 2000. Without Cisco routers, there would be no World Wide Web. By
Year 2000, over 75 percent of all Internet traffic tracked over Cisco products and the
Future appeared bright and expected to grow from 275 million to 1 billion by 2005.

However late in 2000, the US economy went sour and by early 2001, the high-growth
Cisco System was in trouble. It was forced to write off billions of stocks and laid off
7,900 employees. The stock fell and Cisco Systems fell from its pedigree of growth.
Chambers was always mindful that Cisco’s bubble might burst, although it was taken by
Surprise too by the sudden turn in Cisco’s fortunes. Faster than most other CEOs under
Similar circumstances, Chambers restructured Cisco by putting stress on profit and cash
Flow performance. He put emphasis on focus, execution, productivity and taking only
Calculated risks. The company did remarkably show signs of improvements.

Another example is Donald Trump’s corporate empire. He was acquiring and growing
Very quickly from real estate, hotel, casino and airlines. When the real estate market
Crashed in New Year in the late 1980s, Trump was almost bankrupt. Like the proverbial
Phoenix, he emerged from the ashes and became a comeback kid in the 1990s. Both John
Chambers and Donald Trump had taught a bitter lesson that a company must emphasise
On getting healthy first before growth and expansion.

The 1980s and 1990s were decades of growth by merger and acquisition. However, the
Successes had been far and few. Also, companies that went through growth by merger
And acquisition were highly geared and paid dearly for their overburdened debt situation.
As a result many are still digesting their acquisition or invented from further
Acquisitions. In the 2000s, growth will be more organic rather than through pure
Acquisitions. Companies will plan more for real growth through internal development
And expansion. Branson has risen to this challenge by building his businesses through
Organic growth rather than acquisition. Growing and starting new companies enables him
To stretch his people and he invites providing opportunity for his employees. At the risk
Of overplaying his image, this strategy fits his concept of the organizational family, one
That grows by progeny rather than adoption.

One also bought to be paranoid if the company is not growing. The market, the staff, the
Creditors and the shareholders demand growth. The bank interests, inflation, wage
Increase, returns on investments are all expected to grow and therefore the company must
Also grow correspondingly. Chances are that if you are not growing, your competitors are
Growing at your expense. Companies need to have sustainable growth, otherwise they
Are dying. Similarly, a person who totally retires is heading for the grave and need to
Grow mentally in order not to become senile.

Even in so-called mature and competitive industries, companies are growing. For
Instance, Dell Computers is still growing despite the very tough and mature personal
Computer market. Many old companies such as Coke, Proctor and Gamble and Gillette
Are still growing in the markets with hundreds of similar brands. Growth is always
Possible no matter what the age is. Thomas Alva Edison deemed mentally slow by his
Teachers patented a total of 1,033ventions! His work spanned a lifetime and grew with
Age, with the first patent issued at age twenty-one, his last at age eighty-one. For both
Corporate and individual, the lesson is never to stop growing.

However, top line growth per se is useless, as evidenced in the demise of many dot.com
Companies in the world and construction companies in Singapore. If the growth is not
Accommodated by attention to costs, productivity and efficient use of resources then the
Growth is not sustainable and can spell more troubles.

However, companies need to have a healthy and balanced view of growth. If growth is
Done artificially to please the stock market and shareholders, then it can not sustain. This
Happens to companies that go on an acquisition binge and they get indigestion. Therefore,
One should target for healthy growth, which is based on a solid foundation

Source by Mike Teng