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The Founder’s Mentality: How to Overcome the Predictable Crises of Growth

by Chris Zook & James Allen

Growth creates complexity, and complexity is the silent killer of growth. This paradox of growth explains why only about one company in nine have sustained more than a minimum level of profitable growth during the past decade and why 85% of executives blame internal factors for their shortfall, not external ones beyond their control. Companies’ increased internal complexity leads them farther afield from the clear values and attitudes that their founders put in place. The few companies that avoid such internal crises and sustain long-term growth are those that maintain a “Founder’s Mentality.” In fact, of the roughly one in nine companies that achieve a decade of sustained and profitable growth, nearly two-thirds are governed by a Founder’s Mentality. That’s why what counts is not how well a company plays in the outer game of quarterly earnings, returns to shareholders, market share shifts and profitable growth. Instead, it’s how well it plays the inner game of managing internal complexity with a Founder’s Mentality.

Whether you work at a founder-led start-up or a founderless multinational, The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press; June 7, 2016) by Bain strategists Chris Zook and James Allen empowers executives with the necessary mindset to safely steer their companies through every stage of growth and past the inevitable crises of internal complexity that follow growth:

  • Overload: The internal dysfunction and loss of external momentum that management teams of young, fast-growing companies experience as they try to rapidly scale their businesses.
  • Stall-out: The sudden slowdown that many successful companies suffer as their rapid growth gives rise to layers of organizational complexity and dilution of the clear mission that once gave the company its focus and energy.
  • Free fall: The most existentially threatening. A company in free fall has completely stopped growing in its core market, and its business model—until recently the reason for its success—suddenly no longer seems viable.

TThe authors’ research shows that more than 80% of a company’s major swings in value can be traced to the decisions and actions the company takes (or does not take) at these three moments of internal crisis. If it is addressed with a Founder’s Mentality, each crisis can be turned into a moment of huge value creation, but not addressed, it can destroy huge amounts of value—and even spell the end. In fact, more than two-thirds of large companies will stall out or be acquired within the next fifteen years, and the odds are that only one in six companies will recover fully after stalling out. Sony, Philips, Panasonic, Sears and Mazda are among today’s companies in stall-out, because their growth formula of the past stopped generating growth in the present.

That’s why a Founder’s Mentality isn’t just nice to have, but a must-have. The Founder’s Mentality consists of three elements: an insurgent’s mission, an owner’s mindset and an obsession with the front line. While it is undervalued, the incentive to have one is strong. New research conducted by Bain shows that companies that maintain a Founder’s Mentality as they grow large and complex—companies like AB InBev, L Brands, IKEA, Haier, and Google—achieve three times the economic returns of companies that don’t. And more than 80% of top-performing companies adhere to the traits of the Founder’s Mentality.

Based on the authors’ decades-long study of companies in more than 40 countries, The Founder’s Mentality identifies a profound connection between the traits of the Founder’s Mentality in companies of all kinds (not just start-ups) and their ability to sustain performance. With this powerful mindset, companies will grow safely and steadily past any crisis to reach their highest potential scale. Order the book >

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