How much growth did you earn?

Transcript of Chapter 4

It can be helpful to think of your growth as earned or unearned. Let me explain: Imagine your business had 5% growth this year. So maybe next year you’ll shoot for 8% growth. After all you did grow your business 5%, right?

Well, not really. You see, there are three types of growth: inherited growth, market growth and earned growth. And you only control one of them: earned growth.

Inherited growth comes from differentiated products created by clever employees at your company in the past. These are the gifts that keep giving. Until they don’t. Your competitors are trying to match them and your customers want your competitors to succeed.

Most business leaders take credit for inherited growth. And take it for granted. It’s better to think of these past products as sandcastles on the shore. The only question is when will competitors knock them down.

Market growth is the second type of growth you cannot control. You’ll grow at the same rate as that market if your products are average—or mediocre—in the value they deliver. Think of market growth as the tide that lifts and lowers all boats.

Don’t take it for granted. If your competitor launches a great new product, you could experience negative growth. No more rising tide for you.

I know… I’m just a ray of sunshine. Fortunately, you can control earned growth, which only takes place when you understand and meet customer needs better than others. We’ll talk about this simple goal in chapters to come.

You may think your goal should be to maximize shareholder wealth. In the next video, we’ll explain why this is a mistake. Very common. But still a mistake.