Magnus Thinks about Growth

Last week we were eating lunch together in Happy Maki, a delicious vegan sushi bar in Brighton. They operate on ‘gift economy’ – they are not for profit and each order is a gift to the customer. They tell you the actual cost (break-even), and it’s then up to you if you pay that amount, lower or higher.

?It got us thinking… is there a better way for businesses to grow than pure economic growth – defined as profit and net new customer acquisition?

Teresa thinks

Growth in business terms is considered infinite. It’s the continual goal of most organizations to chase growth; more customers, more revenue, more profits. We are conditioned to believe that more is better. In economic terms, growth is intrinsically linked with increased living standards and improved human well being. However, there comes a tipping point, where business growth and the consumption of resources required to deliver this has a negative impact on wellbeing, environment and the greater good. Trying to change a belief is hard, especially at a societal level, in particularly where all things are not equal and competition is a natural instinct. Leading organisations, those who have experienced significant growth need to lead by example. Demonstrate how a business can thrive, without chasing the growth goal. Redefine growth as having deeper, more meaningful experiences with their customers to create loyalty, which ultimately leads to more robust business. Patagonia are leading the thinking here, I fear it may be some time before others follow.

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Danny thinks

The accepted most effective way to grow a brand (both B2B and B2C) is to reach as wide an audience as possible, and appeal to as many new customers. With new customer growth and higher brand penetration also helping with loyalty. Yes this is effective for the business, but what about for people, society and the planet?

There’s a bit of a myth that UK Company Directors have a legal duty to maximise profits (relating to section 172 of Companies Act 2006*). The reality is this isn’t true, it’s more nuanced and businesses themselves have no duty to maximise their profit. In fact, a 2020 change to section 172 reporting means companies now need to report on how they engage with their wider stakeholders, which includes their employees, customers and suppliers.

?Should businesses therefore be considering what the right growth is for them, and where it’s coming from?

?*If you’re interested… section 172 sets out a duty to ‘promote the success of the company for the benefit of its members as a whole’ including the need to regard other factors such as ‘the interest of company employees’, ‘the impact on the community and the environment’ and ‘the likely consequences of any decision in the long term’.

Lindsay thinks

Pure, endless, economic growth is not sustainable in the long term. But most businesses across the globe are set up and measured in this way. It’s a deeply embedded and accepted model that feels almost impossible to get out of. ?

There are alternative economic models, such as the doughnut model, which encourages growth to a certain point where everyone on the planet has what they need, but not overshooting the resources we have. This sounds sensible, ideal in fact, but would require a complete overhaul of our culture, buying behaviour and how businesses, societies and governments operate today.

So, what can businesses do about the problem? They can think about their success and how they measure it in a different way. This could be about how well they’re looking after their existing customers, how much loyalty they’re driving, how much they give back to society, how purpose-driven they are, what impact they’re making on the world, how they’re contributing to changing unsustainable behaviours and encouraging more sustainable ones.

As always, we don’t need one business doing this perfectly. We need every business doing this in an imperfect way. To start the conversations about how they measure growth, to get it on the agenda, to start the ripples of change.

Charlotte thinks

Not only is constant growth unsustainable and negatively impacting our planet, but as markets mature their total addressable markets will inevitably reduce, making it harder for organisations to grow through net new customer acquisition.

So, what if organisations adopted a customer-centric approach? It costs five times as much to attract a new customer than to keep an existing one, and there is a 60 - 70% chance of selling to an existing customer, compared to a 5 – 20% chance of selling to a new prospect.

Customer-centric organisations have a deeper understanding of their customer and can deliver real value to them, drive repeat purchases and increase their customer lifetime value.