That's the premise of a book to be published next March, "When Growth Stalls," by Steve McKee. He writes that down-on-their-luck companies are most likely confronted with "subtle and highly destructive internal factors that conspire to keep companies down." These factors are "psychological, all are capable of ruining companies from the inside out, and all are preventable -- if you know what to look for."
Steve knows what to look for. Several years ago, his Albuquerque, N.M., agency, now called McKee, Wallwork, Cleveland, hit that wall. His shop had made the Inc. 500 list for fastest-growing new companies. But in the months leading up to the conference where his agency would be honored, "things started to get bumpy. There was no clear reason for it. Our clients were happy, the economy was stable, and we'd maintained our book of business. Still, our growth had slowed."
Steve commissioned research to study fast-growth companies (like his had been) to find common characteristics.
Even among those highfliers, more than half had experienced periods of slower growth during the past 10 years. Most striking was "the high correlation between stalled revenue growth and unhealthy internal dynamics -- issues involving trust and respect, the inability to make lasting decisions, a paralyzing lack of confidence, a tendency to overthink things, and, in a strange dichotomy, a propensity to either resist change or switch directions too frequently," Steve writes. He adds that the companies were more than three times more likely than others to say that the marketplace had changed "and they no longer knew their place in it."
And when uncertainty sets in, everything else begins to break down. A profile of turnaround expert Greg Brenneman in The Economist said that when he came to run Quizno's "the company was flailing around." The article said it's crucial to come up with a clear strategy and stick to it. "This is especially important in a crisis, when managers can easily lurch from one master plan to another in pursuit of profit, confusing employees and customers."
Steve McKee found that stalled companies are a lot less willing to take marketing risks. "They are less likely to say they're proud of their advertising efforts. And they're less likely to have award-winning advertising. Surprisingly enough, that's a telling indicator of a loss of nerve."
He argues that creating bold and different advertising "takes guts, and that's a risk that leaders of companies with stalled growth often can't stomach."
It's especially tough for companies that had been experiencing great success. "A leader who prides himself on patience and steadfastness may be seduced by their twin sisters, avoidance and denial," Steve writes.
"Fear of risk. Resistance to change. Reluctance to spend. All natural and understandable responses to slowing growth. All a reflection of a loss of nerve. ... The first step in dealing with a loss of nerve is to face up to it and determine that you will not let it hobble your recovery efforts."
Steve says increasing media fragmentation and media inflation (which he calls "fragflation") is "a big reason why ad-message consistency is vital. As media grow more expensive and less efficient, it's more difficult every day to seed any kind of identity in the marketplace. The more you can stay on point, the better it will enable you to adjust."
Steve's partner, Bart Cleveland, was the first blogger for AdAge.com's Small Agency Diary. He sent me Steve's manuscript in hopes I'd write a blurb. With the economy challenging us the way it is, I thought his message was needed right now.