Page 131 - MS Year in Review 2020

THE PROBLEM WITH HIGH-FLYING BUSINESSES

AND THEIR “DAZZLING SUCCESS”

Unfortunately, such “dazzling success” in High-Flying Businesses can create its own
problems. Extraordinary growth is typically accompanied by a classic set of

problems known as “Growing Pains. 111 ” The nature and causes of these growing
pains has been described in previous articles. In brief, growing pains are problems
in and of themselves, but also an indication and early warning of deeper systemic

problems. Specifically, growing pains indicate that the “infrastructure” of an
enterprise (i.e., the internal operational and management systems it needs at a

given stage of growth) has not kept up with its size, as measured by its revenues.
For example, a business with $200 million in revenues may only have an
infrastructure to support the operations of a firm with $50 million in revenues, or

one-fourth its size. This type of situation typically occurs after a period of growth,
sometimes quite rapid growth, where the infrastructure has not been changed to

adjust to the new size and complexity of the organization. The result is an
“organizational development gap,” (that is, a gap between the organization’s actual
infrastructure and that required at its current size or stage of development) which
produces the growing pains.

Our research has also indicated that growing pains are an early warning indicator of

future declines in profitability. 112 In brief, rapid growth leads to growing pains, and
growing pains are the classic precursor or early warning symptoms of the

susceptibility to the “Icarus Syndrome.”

Examples of Currently High-Flying Businesses: Tesla and Zoom

There are a number of current examples of currently high-flying businesses

experiencing “Dazzling Success.” For corporations, “Dazzling Success” occurs not
just in sales and products, but also in stock market valuation. For example, Tesla

111 See Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful
Organizations, Wiley 2016.
112 See Eric Flamholtz, “Is Tesla’s is being “Built for Sustainable Success?” Part 2: Empirical Research
Support for the Model Used to Assess Tesla’s Development,” Linkedin, September14. 2020.

130
© Management Systems Consulting Corporation, 2020. All rights reserved