So how do we define growth? That's a tricky one. It's kind of like trying to define success. It's subjective to be sure. And yet, we all notice growth when we see it. It has a universal recognition.
In general, there are two types of growth: what is sometimes called Horizontal Growth, adding top lines sales in its various forms, and Vertical Growth, innovating and creating new markets. The easiest examples in the grocery industry would be Wal-Mart and Kroger (Horizontal Growth) versus Sprouts and Fresh Thyme (Vertical Growth). Can there be a combination of Horizontal and Vertical? Absolutely, but let’s go into some pros and cons of each.
First, growth in and of itself is easy to pursue. To obtain and sustain it is quite different. In Horizontal Growth we find drivers focused almost exclusively on numbers. Within this lie motivations and influencing factors that in most cases are top down. Clearly there is nothing wrong with this. Company ownership and leadership have vested interests in directing the enterprise, driving shareholder value and husbanding company resources. And as most inside a company would agree, Horizontal Growth feels validating.
However, when associates feel the full force of a top down agenda, growth resonates hollow. Particularly as they become facilitators of growth and don’t get proper recognition. Lack of continuity and morale issues therefore become problematic but rarely top items to address for the drivers. Consider, long-term growth rarely exists today in its original form. It’s short-term growth that creates both value and imbalance.
In Vertical Growth there is clearly more challenge, and yet, more reward to your associates. Innovation and creativity from all levels are the norm. Voices are heard throughout. There is more bottom up influence. To clarify, senior management still leads but ideas are engineered from the bottom up. Engaged employees? Yes! In Vertical Growth the byproduct is clearly growth of associates with the results likely to yield untold dividends.
To continue, in a lean but well-funded enterprise growth can happen at exponential rates. Also noteworthy is that Vertical Growth is not tied to nor interested in the traditional organizational framework or rules of the mainstream. These things allow them to break free of the norms. Liberating for sure, but equally dangerous if it gets out of control. So in a fast growing enterprise management’s job is to keep the organization from collapsing under the weight of its own complexity. Which would then yield bad growth.
Too much funding and the quest for rapid growth can oftentimes lead to bad business decisions. We also see obsessions with growth through customer acquisition, while neglecting customer retention. Nothing novel here, we see this every day. And yet the purveyors of each claim to be working with opposite intentions.
So which is better? Again, it’s subjective. More relevant here is, the more resources and energy your company has committed to one, the less likely they can pivot to the other. Typically, Horizontal is common with companies targeting mainstream customer markets and Vertical to companies targeting fringe customer markets. As an associate and stakeholder, which do you prefer?
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