Jumping the Growth Company Shark

Large growth companies like Microsoft are always in denial when the high-growth phase of their trajectory ends. They continue to wrongly pour money into new initiatives, acquisitions, and other fruitless forays as they try to return to their go-go days. This point is well made in a study that is cited here:

A study by Corporate Strategy Board found that of all Fortune 50 companies from 1954 to 1995, only 5% … were able to sustain a growth rate above GDP, and over half of these have stalled since the study. Once stalled, no U.S. company larger than $15 billion has been able to restart sustained double digit internal growth

[Emphasis added]

While I knew it was rough to restart the growth engine, seeing it in such stark terms is truly jaw-dropping. No U.S. company larger than $15-billion in revs has ever restarted growth? Remarkable.

Related posts:

  1. Name the Most Valuable P2P Company
  2. A Little Population Growth isn’t a Bad Thing
  3. Being a Company Founder is Apparently Overrated
  4. Google is a Media Company! Is Not! Is Too!
  5. Tips on Company Valuation

Comments

  1. Luis Villa says:

    Would be interesting to see what they define as ‘sustained’ growth, but is it really that surprising? The only thing surprising to me here is the market is so irrational as to apparently continue to demand this kind of thing from large companies, and does not give more credit to companies that try to make the transition to a value buy.

  2. Justice Litle says:

    Speaking of size challenges and long gone trajectories of yesteryear, could the same study apply to Bill Gates’ bosom billionaire buddy? i.e. has Berkshire Hathaway jumped the growth shark too? If so, ‘twould be truly ironic for Buffett and Munger not to take heed…

  3. So large firms can’t sustain growth, small firms have a shocker of a track record for even surviving the first 5 years, and the median vc investee returns a whopping -32% (or close there to).
    Ugly, ugly, ugly