Cisco Systems is one of those companies that, for a long time, could seem to do no wrong, with its knack for simultaneously “capturing today’s profit and driving tomorrow’s growth,” as senior executive Inder Sidhu put it in the subtitle of his book, Doing Both. Then came this week’s news.
Chief Executive John Chambers acknowledged in a memo to employees that “the once highflying technology company has lost its focus, lacks discipline and needs to overhaul its operations,” The Wall Street Journal reported.
What went wrong? Brian Modoff, an analyst at Deutsche Bank Securities, told the Journal that Cisco “may have gotten too big” and ventured into markets too far afield from its core networking business. “They’re realizing that growth for growth’s sake is not working for them,” Modoff said. “They need to focus.”
[EXPAND More]If “growth for growth’s sake” is indeed is at the root of the problems, Cisco would be far from the only company (or country, as Charles Handy has pointed out) to have fallen into the same trap. Toyota tumbled into it—a theme we’ve explored before. And rapid growth also undercut Starbucks, prompting founder Howard Schultz to retake the reins in a bid to turn things around. “Growth became a virus inside the company,” Schultz said earlier this week at the Drucker Business Forum.
Indeed, Cisco, Toyota and Starbucks all would have been wise to listen to Peter Drucker on the subject of growth—one that he had particularly strong feelings about. “Growth at a high rate and for an extended period is . . . anything but healthy,” Drucker declared in Management: Tasks, Responsibilities, Practices, his 1973 classic. “It makes a business—or any institution—exceedingly vulnerable. It makes it all but impossible to manage it properly. It creates stresses, weaknesses and hidden defects which, at the first slight setback, become major crises.”
Added Drucker: “The idea that growth is by itself a goal is altogether a delusion. There is no virtue in a company’s getting bigger. The right goal is to become better. Growth, to be sound, should be the result of doing the right things. By itself, growth is vanity and little else.”
What do you think: How do you distinguish between healthy and unhealthy growth?[/EXPAND]