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Stall Points: Most Companies Stop Growing--Yours Doesn't Have To
Very few large companies manage to avoid stalls in revenue growth. These stalls are not attributable to the natural business cycle. Rather, careful analysis reveals that the vast majority of such stalls are the direct result of strategic choices made by corporate leaders. In short, stoppages in growth are almost always avoidable. This extensively researched book analyzes the growth experiences of more than six hundred Fortune 100 companies over the past fifty years to identify why growth stalls and to discover how to rectify a stall in progress or, even better, avoid one.
Board members and executives in companies of all sizes will find this book a practical and essential resource. Matthew S. Olson and Derek van Bever investigate the incidence and consequences of growth stalls in major corporations, then probe the root causes. Examining hundreds of stall points, the authors conclude that the greatest threat to a company’s growth is posed by obsolete strategic assumptions that undermine market position, and by breakdowns in innovation and talent management. The study includes a selection of practices for articulating and monitoring strategic assumptions and concludes with a self-test built around fifty “Red Flag” warning signs of an impending growth stall.
Top Four Reasons a Firm May Stall:
• Premium position captivity
• Innovation management breakdown
• Premature core abandonment
• Talent shortfall
Board members and executives in companies of all sizes will find this book a practical and essential resource. Matthew S. Olson and Derek van Bever investigate the incidence and consequences of growth stalls in major corporations, then probe the root causes. Examining hundreds of stall points, the authors conclude that the greatest threat to a company’s growth is posed by obsolete strategic assumptions that undermine market position, and by breakdowns in innovation and talent management. The study includes a selection of practices for articulating and monitoring strategic assumptions and concludes with a self-test built around fifty “Red Flag” warning signs of an impending growth stall.
Top Four Reasons a Firm May Stall:
• Premium position captivity
• Innovation management breakdown
• Premature core abandonment
• Talent shortfall
- GenresBusiness
256 pages, Hardcover
First published April 28, 2008
2 people are currently reading
211 people want to read
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Displaying 1 - 7 of 7 reviews
August 3, 2023
Overall a good theory. Read like a research paper so I lost interest.
June 24, 2013
Sooner or later all good things come to an end. Winners stumble, the mighty are fallen. People are at the top of their game for only so long. Companies that are the biggest, bestest, fastest growing one year are in the toilet the next.
Literature is filled with stories that teach this lesson. Shakespearean tragedies like Lear and Macbeth detail the challenges faced by those in positions of power.
In contrast, the message of the motivational speakers and books in the modern business world teach how to win, win, win. It's all upside, baby. They ignore, or minimize, the downside.
So it is refreshing to read Stall Points: Most Companies Stop Growing-Yours Doesn't Have To by Matthew Olsen and Derek van Bever. This book examines the fundamental reasons why revenue growth often stalls in successful companies. They identify four main reasons:
1. "Premium position captivity" - when a market leader fails to respond to a low-cost competitor.
2. "Innovation Management Breakdown" - where new product development fails to deliver an ROI.
3. "Premature core abandonment" - where growth opportunities in the core franchise are not exploited or new competitive challenges are ignored.
4. "Talent bench shortfall" - where a company withers due to a lack of leaders and staff able to execute strategy.
It's interesting to review the history Silicon Valley companies and spot candidates for each of these mistakes. I would suggest that, in turn, we can see Sun Microsystems's failure to anticipate the effect of Linux (#1); Xerox PARC's famous inability to capitalize on everything from the mouse to the GUI (#2); MicroPro's failure to hold on to the WordStar franchise in the 1980's (#3); HP's decision to go outside the company for the last two CEO's (#4). In the latter case it can be argued that the stall resulting from the actions of the first candidate has been amply rectified by the actions of the second. The company Board learned from their mistakes.
(Full disclosure: I have not worked for Xerox PARC; at the others I had a ringside seat.)
What's fascinating to consider are some of Olsen & van Bever's prescriptions to avoid these all-to-common errors. These include:
* Being willing to review "belief's that are so obvious and accepted that it is no longer politic to debate them." Something most business cultures are loath to do.
* Writing a "pre-mortem analysis" - a newspaper account five years in the future describing why the company succeeded, and another account detailing why it failed. Not a prescribed activity by the power-of-positive-thinking brigade.
* Setting up a high-level "Shadow Cabinet" to discuss alternatives to current strategy and look for red flag indicators.
These are challenging ideas. One wonders if the mainstream American attitude of winning at all costs can stomach the process. In many organizations it's considered career suicide to point out when the Emperor has no clothes. Think the DoD and Department of State. Likewise, East Coast financial institutions at the core of the current credit market melt-down seemed to lack anyone with this ability. They don't hand out no stinkin' bonus packages down on Wall Street for pointing out how things could go pear shaped. But at least they have the option to short the future and make a dime in the process.
Fortunately, it's more in the nature of Silicon Valley to encourage and reward disruptive innovation. Out here, companies don't stall as much as crash and burn. Out of the ashes, new ones are built. In the current wave of consolidations around the high-tech landscape there's plenty of people making a good living catching the guys who are in stall mode and revving up the engines. In doing this, they often implement many of the solutions Olsen and van Bever proscribe: reviewing core assumptions; testing alternatives; scenario planning; zero-sum budgeting.
Driven by the relentless pace of technological change, business models learn from failure and reinvent. This is the competitive advantage of Silicon Valley.
Literature is filled with stories that teach this lesson. Shakespearean tragedies like Lear and Macbeth detail the challenges faced by those in positions of power.
In contrast, the message of the motivational speakers and books in the modern business world teach how to win, win, win. It's all upside, baby. They ignore, or minimize, the downside.
So it is refreshing to read Stall Points: Most Companies Stop Growing-Yours Doesn't Have To by Matthew Olsen and Derek van Bever. This book examines the fundamental reasons why revenue growth often stalls in successful companies. They identify four main reasons:
1. "Premium position captivity" - when a market leader fails to respond to a low-cost competitor.
2. "Innovation Management Breakdown" - where new product development fails to deliver an ROI.
3. "Premature core abandonment" - where growth opportunities in the core franchise are not exploited or new competitive challenges are ignored.
4. "Talent bench shortfall" - where a company withers due to a lack of leaders and staff able to execute strategy.
It's interesting to review the history Silicon Valley companies and spot candidates for each of these mistakes. I would suggest that, in turn, we can see Sun Microsystems's failure to anticipate the effect of Linux (#1); Xerox PARC's famous inability to capitalize on everything from the mouse to the GUI (#2); MicroPro's failure to hold on to the WordStar franchise in the 1980's (#3); HP's decision to go outside the company for the last two CEO's (#4). In the latter case it can be argued that the stall resulting from the actions of the first candidate has been amply rectified by the actions of the second. The company Board learned from their mistakes.
(Full disclosure: I have not worked for Xerox PARC; at the others I had a ringside seat.)
What's fascinating to consider are some of Olsen & van Bever's prescriptions to avoid these all-to-common errors. These include:
* Being willing to review "belief's that are so obvious and accepted that it is no longer politic to debate them." Something most business cultures are loath to do.
* Writing a "pre-mortem analysis" - a newspaper account five years in the future describing why the company succeeded, and another account detailing why it failed. Not a prescribed activity by the power-of-positive-thinking brigade.
* Setting up a high-level "Shadow Cabinet" to discuss alternatives to current strategy and look for red flag indicators.
These are challenging ideas. One wonders if the mainstream American attitude of winning at all costs can stomach the process. In many organizations it's considered career suicide to point out when the Emperor has no clothes. Think the DoD and Department of State. Likewise, East Coast financial institutions at the core of the current credit market melt-down seemed to lack anyone with this ability. They don't hand out no stinkin' bonus packages down on Wall Street for pointing out how things could go pear shaped. But at least they have the option to short the future and make a dime in the process.
Fortunately, it's more in the nature of Silicon Valley to encourage and reward disruptive innovation. Out here, companies don't stall as much as crash and burn. Out of the ashes, new ones are built. In the current wave of consolidations around the high-tech landscape there's plenty of people making a good living catching the guys who are in stall mode and revving up the engines. In doing this, they often implement many of the solutions Olsen and van Bever proscribe: reviewing core assumptions; testing alternatives; scenario planning; zero-sum budgeting.
Driven by the relentless pace of technological change, business models learn from failure and reinvent. This is the competitive advantage of Silicon Valley.
July 25, 2008
Stall Points: Most Companies Stop Growing--Yours Doesn't Have To
Matthew S. Olson and Derek van Bever
Yale University Press
In this brilliant volume, Olson and van Bever assert that "the assumptions a management team holds most dearly - has known so long or so well that they are no longer debated - pose the greatest danger to growth. In other words, it is not what you know that isn't so that will stop your growth run - more likely, it's what you know that's no longer so." The material in Part I (The Growth Experience of Large Firms) is based on "a comprehensive quantitative analysis of more than five hundred companies that have numbered among the Fortune 100 across the pasty fifty years. As for Part II (The Root Causes of Growth Stalls) they complement the quantitative analysis with "detailed case analysis of a subset of the Fortune 100 to determine why growth stalls occur." Then in Part III (Avoiding or Recovering from Growth Stalls), Olson and van Bever examine the controllability of stall points previously discussed that leads them to the implications of what they learned for executives: "you must continually articulate and stress-test the assumptions underlying your strategy because it is the assumptions that you believe most deeply or that you held true for the longest time that are likely to provide your undoing. You may think you are currently doing this, but the odds are that you are not, and it is an oversight that you suffer at your peril." Olson and van Bever note that it is common for an organization to stall, but very difficult to see a stall coming, and even more difficult to recover from one; also, that strategic myopia can occur at the highest executive levels even in organizations that are annually ranked among the most valuable, most highly admired, most profitable, etc. For example, 3M, American Express, Apple Computer, IBM, Rubbermaid, and Xerox. Of course, the degree of severity of consequences from a stall period varies from one organization to the next, as does the length of that period.
Many of those who are thinking about reading this book may well ask, "All well and good, indeed very interesting, but how specifically can this book help me and my own organization to avoid or recover from a stall period?" Hence the importance of the last of five appendices that provides a diagnostic test for senior managers to complete. Each respondent is asked to rate each of 50 "red flag warnings of an impending doom" in terms of having No Concern, Moderate Concern, or Substantial Concern about it. In my opinion, this diagnostic test (all by itself) is worth far more than the cost of the book. Olson and van Bever also offer five foundational recommendations (in the final chapter) for executive teams that find themselves struggling to recover top-line momentum, and briefly explain the importance of each. I appreciate the fact that after briefly identifying or suggesting a "what" (e.g. a challenge, question, problem, peril, or opportunity), Olson and van Bever devote the bulk of their attention to explaining the "how." For example,
How to recognize the limits of prudent growth
How to recognize a stall point
How to calculate the costs of a stall period
Why companies stall and how to avoid or recover from one
How to take into full account various strategic factors (e.g. "premium position captivity")
How to take into account various organization design factors (e.g. talent bench shortfall)
I also commend them on the provision of five appendices in which they identify the companies in their sample, explain their methodology, list case study companies for stall factor taxonomy (in business markets ranging from Asset-Intensive to Tech-Intensive), provide stall factor definitions, and then conclude with the aforementioned diagnostic test in Appendix 5.
Matthew S. Olson and Derek van Bever
Yale University Press
In this brilliant volume, Olson and van Bever assert that "the assumptions a management team holds most dearly - has known so long or so well that they are no longer debated - pose the greatest danger to growth. In other words, it is not what you know that isn't so that will stop your growth run - more likely, it's what you know that's no longer so." The material in Part I (The Growth Experience of Large Firms) is based on "a comprehensive quantitative analysis of more than five hundred companies that have numbered among the Fortune 100 across the pasty fifty years. As for Part II (The Root Causes of Growth Stalls) they complement the quantitative analysis with "detailed case analysis of a subset of the Fortune 100 to determine why growth stalls occur." Then in Part III (Avoiding or Recovering from Growth Stalls), Olson and van Bever examine the controllability of stall points previously discussed that leads them to the implications of what they learned for executives: "you must continually articulate and stress-test the assumptions underlying your strategy because it is the assumptions that you believe most deeply or that you held true for the longest time that are likely to provide your undoing. You may think you are currently doing this, but the odds are that you are not, and it is an oversight that you suffer at your peril." Olson and van Bever note that it is common for an organization to stall, but very difficult to see a stall coming, and even more difficult to recover from one; also, that strategic myopia can occur at the highest executive levels even in organizations that are annually ranked among the most valuable, most highly admired, most profitable, etc. For example, 3M, American Express, Apple Computer, IBM, Rubbermaid, and Xerox. Of course, the degree of severity of consequences from a stall period varies from one organization to the next, as does the length of that period.
Many of those who are thinking about reading this book may well ask, "All well and good, indeed very interesting, but how specifically can this book help me and my own organization to avoid or recover from a stall period?" Hence the importance of the last of five appendices that provides a diagnostic test for senior managers to complete. Each respondent is asked to rate each of 50 "red flag warnings of an impending doom" in terms of having No Concern, Moderate Concern, or Substantial Concern about it. In my opinion, this diagnostic test (all by itself) is worth far more than the cost of the book. Olson and van Bever also offer five foundational recommendations (in the final chapter) for executive teams that find themselves struggling to recover top-line momentum, and briefly explain the importance of each. I appreciate the fact that after briefly identifying or suggesting a "what" (e.g. a challenge, question, problem, peril, or opportunity), Olson and van Bever devote the bulk of their attention to explaining the "how." For example,
How to recognize the limits of prudent growth
How to recognize a stall point
How to calculate the costs of a stall period
Why companies stall and how to avoid or recover from one
How to take into full account various strategic factors (e.g. "premium position captivity")
How to take into account various organization design factors (e.g. talent bench shortfall)
I also commend them on the provision of five appendices in which they identify the companies in their sample, explain their methodology, list case study companies for stall factor taxonomy (in business markets ranging from Asset-Intensive to Tech-Intensive), provide stall factor definitions, and then conclude with the aforementioned diagnostic test in Appendix 5.
April 25, 2014
This covers why companies stop growing and how to avoid this pitfall. In the last few chapters it also provides a handy "how-to" guide for strategy managers with a number of tools to be used.
It got most interesting when it talks about the critical assumptions that companies believe about the market and why their products/services are important and how they can get unaligned with reality. The author then suggests ways to correct these assumptions.
It's a good book, but only a 3 out of 5 as the ideas are good, but could be covered a lot more succinctly.
It got most interesting when it talks about the critical assumptions that companies believe about the market and why their products/services are important and how they can get unaligned with reality. The author then suggests ways to correct these assumptions.
It's a good book, but only a 3 out of 5 as the ideas are good, but could be covered a lot more succinctly.
October 8, 2008
This book is published by Corporate Executive Board, my firm, and is written by two respected colleagues of mine -- Matt Olson and Derek van Bever, A great business read about why most companies stall in their growth.
February 24, 2012
Fact based analysis of why companies stall. Very helpful insights that can be applied broadly.
February 14, 2013
Our CEO gave me this book to read. It was for a project on maintaining our phenomenal growth. Great read. I recommend it.
Displaying 1 - 7 of 7 reviews