Smart Growth—Creating Real Long‐term Value

Most U.S. business leaders appear to believe that all businesses either “grow or die”—and many act as if they believed that all growth is good, and that public companies should grow in a linear, continuous manner as reflected in ever‐increasing quarterly earnings. But if these tenets of “the U.S. Growth Model” inform the short‐term business view that prevails in many C‐suites and boardrooms, there has been surprisingly little analysis of the extent to which the pursuit of continuous growth translates into longer‐run success. In this article, the author reports finding no theoretical or empirical support in the fields of economics, finance, strategy, organizational design (or biology) for the idea that continuous growth is either a realistic possibility or a useful corporate objective. In business organizations, the pursuit of continuous growth can drive bad corporate behavior and inhibit real growth and innovation. Based on extensive research, the author suggests a new model of “smart growth”—one in which companies grow successfully by building internal comprehensive systems designed to encourage growth through specific kinds of culture, leadership, and processes. Smart‐growth companies use experimental learning processes designed to test growth ideas and build diversified “growth portfolios” while also attempting to limit the risks associated with the pursuit of growth.