High performance Sustainable Growth of an organization is equated to its ability to practice business excellence. And it is said that excellence is a journey. So how do organizations really build the path to this journey? This content presents the chapter 'Inside the Growth Curve' from the book 'The Path'.
INSIDE THE GROWTH CURVE
Increasingly it is being felt that a vast majority of organizations has huge
hidden capacity, and a good process of improvement could help in achieving
more on the existing resources quickly, without taking too much risk and
incurring costly trade-offs. Let’s dwell on this aspect by getting inside the
Case studies as well as popular non-fiction management books on business
transformation often depict significant improvement in organizational
performance as given in Figure A2-1. Of course, such a growth curve would
be an abstraction of the claimed growth over a reasonably long horizon of
Figure A2-1 Highest level of abstraction for representing growth
Subsequently, an algorithmic methodology of excellence is explained and
a step by step growth of the organization is presented, which would look like
Figure A2-2. It would give the impression that the growth is so systematic and
achieved perfectly as per design and plan.
Figure A2-2 Most often stepwise growth of an organization is shown as if the growth follows a
systematic, by design, a well planned approach
However, a vast majority of managers are used to commit their efforts to a
growth curve, as given in Figure A2-3.
Figure A2-3 With time, the growth rate slows down and is often assumed as a natural growth
Initially, the growth is faster but settles down to a slower rate as the time
progresses. People often relate the initial part of the curve to the ‘start up’ and
'early stage' entrepreneurial culture. The subsequent part is related to a
matured organization, with well laid out structures and procedures. There is a
belief that this is a natural phenomenon. In fact, this assumption is also
supported by physical phenomenon of saturation, which exists in the material
world. Think about growth of human body with age, saturation of a solution
with the quantity of solute or change in magnetic field of an electromagnet
However, growth specialists often question sustainability of this pattern of
organizational growth, since organizations are living entities, and are resilient
enough to jump out of saturation. Actually, organizations are started up with
an intention to live longer than one human generation.
Some organizations understand the danger of stagnating growth and
initiate actions well in time. For example, if the challenges in business
environment cause significant fluctuation in input cost, employee retention,
price etc, it is imperative that an organization must improve its performance
faster than the effective system variations. Otherwise, its growth would be
'lost in the noise'. It is not difficult to identify organizations with stagnating
growth, suddenly succumbing to the external noise and variability, and falling
down as shown in Figure A2-4.
when the growth is
variabilityand noise in
Figure A2-4 If the growth of an organization is less than the noise and variability created in the
system, it runs the risk of catastrophic failure
Of course, a vast majority of organizations can be found located on the
upper plateau of the S curve. And mistakenly, people believe that this
represents stability. In the garb of stability, it actually represents constrained
performance. The issue with this condition of an organization is that the
capability of the organization that would have fetched great growth in the
early part of its life cycle is no more sufficient to maintain the desired growth
trajectory. It is wise to assume that some big constraint prevents the
organization from growing. And it is this aspect that makes progressive
organizations focus on managing the constraint better and improving its
Actually, if you look at the growth curve of successful organizations that
are built to transform, you would find that the growth curve is more of an
upward exponential nature, Figure A2-5. Just do internet download of past 15-
20 years data of companies like GE, Microsoft, Google, Shell, Infosys,
TISCO, ABB, IKEA, Pfizer, GSK etc., to validate that it is indeed so.
Figure A2-5 A progressive organization actually has an exponential growth curve
Of course, every entrepreneur and business chief aims to follow on this
curve of exponential growth. However, this curve is also an abstraction of an
ever flourishing company over a long horizon. And it is important to further
understand the underlying construct of this characteristic.
Because an organization has high ambition but operates under limited
resource environment (including management attention), prudent
organizations take up limited growth initiatives at a given moment. So an
initiative that is started today, actually would have an S curve in terms of its
contribution to the organization’s growth. The top tapered part of the S curve
actually shows the maturity or stability or institutionalization of the new ways
of doing things, for that particular single initiative. The responsibility of the
organization is to see that this stability is built and strengthened, by an
ongoing process that institutionalizes the new rules. The institutionalization of
the new rules emanating from any improvement initiative must get into the
culture of the organization. Once the new culture is built, it consolidates
performance into a strong base. Now, the next improvement initiative, much
larger than the previous one, can be built on this strong base, without allowing
the organization to slide down on its growth curve, Figure A2-6.
Growth due to
Growth due to
Base created by
Figure A2-6 The S curve is the fundamental element of organizational growth. Each S curve
builds a stronger base for further growth, as the rules of the initiative are institutionalized.
Often organizations try to start too many initiatives when those in hand are
mid way or waiting to be stabilized. This only has the undesired effect of not
realizing enough benefits of the existing improvement initiative, as it leads to
creation of immature base. Often, it leads to conflicting interactions between
different initiatives, which jeopardize the prospects of most of the initiatives.
It is estimated that a vast majority of failures of such improvement initiatives
is linked to running too many of them at once than the organization can
manage. We have too often heard of ‘growth taking precedence over
organizational capability’ leading to collapse of businesses.
For an organization to grow on an ongoing basis without sliding down
dramatically, it is important that it continues to build the base (stability)
bigger with just the few initiatives and builds new initiatives on the ever more
Therefore, when a series of growth initiatives is built on previous base, the
concatenation transforms the growth curve of the organization into an
exponential curve, with distinct build up of the base, as shown in Figure A2-7.
Figure A2-7 Concatenation of growth curves leads to exponential growth
A better representation of such a growth curve is as shown in Figure A2-
8, where every new growth is achieved on a higher and stronger base.
The base created
Figure A2-8 The natural growth curve of progressive organizations is an exponential curve with
distinct build up of base or shoulder, on which successive growth is built.
This curve is also important for the change agents to acknowledge that
every claim of a new initiative offering significant benefit is built only on the
shoulders of giants (strong base provided by the previous good initiatives).
The underlying construct (S-curve) of the exponential growth curve has
next level of details.
Each level of growth or improvement does not follow a smooth S curve,
but within each S curve, there is a process of iterative maturity to build the
base (stability). This phenomenon is well detailed in TQM (Total Quality
Any particular object or system taken for improvement, passes through a
series of cyclical progression, and gradually builds along concept, actions and
standardization. Each iteration of the cycle is called a PDCA cycle (Plan, Do,
Check and Act cycle). As an initiative moves from one PDCA cycle to the
next one, it moves from initial concept levels to standardization of operating
procedures. It then becomes the way of life for the organization, which is
analogous to building a stronger base, as shown in Figure A2-9.
This process of iterative progression in seeking improvement through
small but significant initiative is fundamental to the culture of TQM. And
Terra Pharma’s team (the organization described in the Path) entered this
level of behavior in their quest for excellence. The behavior of following a
process of ongoing improvement was embedded in its DNA, and thus created
a long term and decisive competitive edge that was hard for its competitors to
perceive and replicate.
Building Stronger base
S curve of a single
Figure A2-9 The DNA of exponential growth is built iteratively in cyclic progression within
each improvement initiative
This is the way, the growth curve of a progressive organization shapes up
into an exponential curve.
For those who have spent reasonably long time in the process of ongoing
improvement in any organization, the growth curve would consist of a number
of iterations and loops, crisscrossing each other, as shown in the Figure A2-
10; and they would acknowledge that it is never smooth.
Figure A2-10 The actual operational growth curve of a progressive organization
We do see this pattern of growth in Terra Pharma, Figure A2-11. There
were moments of dip in performance as obstacles and constraints popped up
during Life2.0 (the transformation at Terra Pharma). The disruptions to the
flow in business are inevitable but it is the ability to figure out the way of
dealing with them keeps an organization on the path of sustainable growth.
Identifying Weakest link
Leveraging Weakest Link
Figure A2-11 The pathway of Terra Pharma during Life2.0