How do Billion Dollar Companies fail? It’s not Fraud but …

But growth is good, right? Isn’t it the main goal of every company?

“CONTINUOUS GROWTH”

Let us try to understand why continuous growth is bad. What’s wrong with it?

Let’s discuss the case of the infamous GE’s downfall to better understand it, but before it, understand that.

every industry reaches a plateau. In the 1900s, material companies were the hot thing; their growth was phenomenal, but they ultimately reached their peak and slowly attained stagnation

in the 2000s; digital companies were the BUZZ, but they too eventually would reach the peak and slow down. We can better understand MR and MC

how initially MC rises slowly, but MR rises sharply and slowly; both take a u-turn in their approaches. It is the hard reality: initial customers are the easiest to attract, and slowly, while scaling, we face real issues after attaining a specific scale… remember this: this is the reality. It is why most businesses cannot cross that threshold mark of growth.

“Threshold everyone dreams of crossing”

Today’s tech giants all have attained almost profitable market saturation; for example, WhatsApp is used by a whopping 98% of mobile users in India and 97 in Brazil. Think about it!

How much more growth potential is left for WhatsApp in India or Brazil?

But what happens when growth becomes an obsession? Companies obsessed with posting higher and higher profit numbers every quarter, how do they dig their own grave?

Back to the Downfall of GE

Once the world’s largest, most powerful company in the world, today, has long lost its former glory and is now only part of what it used to be… It’s crucial to explore expert insights to gain a deeper understanding. Let’s turn to Bill Gates’ analysis, shedding light on the underlying factors contributing to GE’s demise and offering valuable lessons for businesses striving for sustainable growth.”

“GE’s fall is not the result of innovators developing a better jet engine or wind turbine. It’s also not a case of outright fraud, like Enron. It’s a textbook case of mismanagement of an overly complex business.

My first big takeaway is that one of GE’s greatest apparent strengths was actually one of its greatest weaknesses. For many years, investors loved GE’s stock because the GE management team always “made their numbers” — that is, the company produced earnings per share at least as large as what Wall Street analysts predicted. It turns out that the culture of making the numbers at all costs gave rise to “success theatre” and “chasing earnings.” In Gryta and Mann’s words, “Problems [were] hidden for the sake of preserving performance, thus allowing small problems to become big problems before they were detected.”

My second big takeaway from Lights Out is that GE didn’t have the right talent and systems to bundle together a dizzying array of unrelated businesses — including moviemaking, insurance, plastics, and nuclear power plants — and manage them well. Investors bought into the notion that the company’s world-renowned training made it better at managing things than anyone else, and that GE could produce consistent profits even in highly cyclical markets. And GE successfully persuaded people that its generalists could avoid the pitfalls that had tripped up big conglomerates in the past.

And GE successfully persuaded people that its generalists could avoid the pitfalls that had tripped up big conglomerates in the past.

In reality, those generalists often didn’t understand the specifics of the industries they had to manage and couldn’t navigate trends in their industries. For example, the authors make the case that CEO Jeff Immelt didn’t have a good handle on its huge banking unit, GE Capital. “Making money from [GE Capital] seemed shockingly simple to him at first, as it had to Welch, but the balance sheets were treacherously complex, and deep risks lurked there and were not always easily spotted in the quarterly profits and losses,” write Gryta and Mann. One former GE executive told the authors that “Immelt struggled with basic concepts — the difference between secured and unsecured debt, for instance, which was fundamental to a lending operation like GE Capital.

This dynamic was not confined to Immelt. It was rampant throughout the company’s top ranks. As a result, the ability of top executives to understand what was really going on was quite limited. The only people who could actually dig down into the numbers and see what was going on were in finance. And as I mentioned above, the finance people didn’t have much incentive to bring negative news to Welch or Immelt.

Reading this article from Bill Gates, we can better understand how GE’s pressure to post continuous growth numbers and profits pushed them to enter into totally unrelated businesses and sit on their own death, their own demise.

There is a limit to growth, a cap to potential, and no eternal growth formula. Always, the hero product shines. The only question is how big the market is and how far you can throw it.

Which modern corporation operates across several industries similar to how GE did in the 2000s? My favourite, the strategist, the beauty of distribution, the masterpiece, Microsoft. We discussed how Microsoft can manage multiple industries simultaneously, and would recommend you check the article for a better understanding. But the question is, how long can they hold this dance together? How long can Satya have the strings together?

How many more fingers do they still have before it all tangles down?

Only time will tell.