Growth

The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of faith.

In 1989 Crowne Cork & Seal under the leadership of William Avery began a program of growth through acquisition.  They went on a buying spree and doubled in size.  They wanted to grow bigger and get better use of their resources to lay a world wide foundation for international growth.  They completed 20 acquisitions by 1997.

In 1998 troubles appeared. Technology shifted the market from metal to plastic containers and unit sales started to shrink.  The hoped for firmer prices from a more consolidated industry did not materialize and began to fall.  Competition from cheaper plastic container manufacturers also became a factor.  Crown's stock price between 1998 and 2001 fell from $55 dollars a share to $5 dollars per share.  

While Crown grew to be the leading container maker in the world, the stock holder return fell from 18% to 2.4 percent.   The carefully designed strategy of coordinated policies and short runs that captured more value from the customer was left behind in the quest for growth.  The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of faith.  As seen by the decline in return at Crowne, it is not always the case.

ACTION POINT: Beware of sacrificing your competitive strategic advantage for the sake of growth.