Tag: strategy

Is Growth Necessary for Survival?

I shared one of those quick thoughts on Bluesky as a knee-jerk reaction to yet another message encouraging startups to get on a fast-growth path.

As luck would have it, Matt Barcomb challenged me on that remark. It turned into an exchange, where we quickly started uncovering deeper layers of strategy and portfolio decisions.

Survival versus Growth

The starting point is a basic observation that there are situations where survival and growth are aligned, even dependent on each other. However, there are also cases where this assertion doesn’t hold, up to a point where growth is harmful.

As a metaphor, no species in nature grows infinitely. While a tree sapling’s survival may depend on its growth, making the process indefinite would compromise the tree’s resilience.

Organizations work similarly, even if Bezoses and Musks of this world would deny it. That is, as long as we are willing to consider standard rules of the business game.

There’s obviously the too big to fail phenomenon, which we’ve seen in action many times. However, it applies only to very few companies, and even when it applies, the subjects of the theory don’t end up any healthier at the end of treatment.

For the rest of us, we may accept that growth and survivability are not always aligned.

What follows is that when forced to choose, we should select survival over growth. If we live to see another day, we can return to growing tomorrow. The opposite doesn’t work nearly as well.

Long-term versus Short-term

However, as Matt points out, prioritizing survivability may lead us toward short-termism. We may always play it safe, and as a result, miss potential opportunities for big wins.

Missing big opportunities may, in turn, be as well an existential threat, except it would develop in the long term. Consider the infamous Kodak digital photography fiasco as a perfect example.

By the way, that example showcases that survivability is as much a short-term concern as a long-term one.

Still, I understand that the “focus on survival first” mantra likely biases us toward what’s immediately visible in front of us. So, let’s explicitly consider survivability and time horizon as two separate dimensions.

Opportunistic Thriving

We can consider any combination of low or high survivability with either short-term or long-term focus.

Any strategy threatening the company’s existence and falling into a short time frame would be suicidal (bottom left of the diagram). No sane organization would consciously venture into this territory.

We may want, however, to stick with potentially dangerous plans with a long-term focus. This would be true when a risky move also has a huge potential upside (upper left part of the diagram). In this case, the scale of the possible gain would justify our risk-accepting strategy.

That’s the latter part of the “sure things and wild swings” approach, also known as the barbell strategy proposed by Nassim Nicholas Taleb.

However, if we go for the wild swings, we want to overcompensate them with sure things (Taleb suggests a 9:1 ratio). These safe bets consider primarily a predictable future and focus on preservation (bottom right of the diagram).

If we combine the two, we land with something we can call opportunistic thriving (upper right of the diagram). We would mix some high-risk bets with a largely conservative strategy and exploit emerging chances for growth, new business, etc.

At the end of the day, we align growth with survival, right?

Hold your horses…

Unfavorable Conditions

We’re free to explore all options if the conditions are supportive, i.e., the company is already in a safe place and has resources to allocate freely among different options.

But what if we had to make a choice? What if opportunistic thriving wasn’t an option? What if we had to make a trade-off between preservation and risky bets with huge potential upside?

Such a situation would happen when we face unfavorable conditions. One classic example would be whether to retain the team when a downturn hits the company.

Sticking with the proven team means maintaining options for the rebound once an opportunity arises. Here and now, however, we sustain the costs and, thus, incur financial losses.

Playing the preservation scenario would mean layoffs and improving the financials in the short term. It would also trigger all the additional costs of rebuilding the team once the unfavorable condition is over.

Sometimes, the trade-off is a point on a scale, e.g., how many people we lay off. Other times, it is binary, e.g., whether to engage in a risky endeavor.

In either case, it would be a choice to prioritize long-termism over preservation or vice versa.

Available Options

If we assess that situation from a helicopter perspective, we realize that not all the options are available.

To stick with the example of layoffs, we’d like to sustain the team and not incur losses. That would place us in the desired opportunistic thriving area.

A simple fact that we consider what to do means it’s not an option. In other words, the part of the landscape becomes unavailable.

We’d love to be as far into the upper-right part as possible, but that’s precisely the space that becomes inaccessible first. The greater the challenges an organization faces, the farther the unavailable area reaches.

In other words, under unfavorable conditions, we’re forced to make these difficult trade-offs.

Decision Portfolio

But wait! While any single decision may force us to choose, the whole portfolio of decisions provides an opportunity for a diverse distribution. That way, we can hedge our risks and, through that, push the “unavailability line” back.

That’s what the barbell strategy is all about. We actively distribute our investments across the landscape. It’s like Moneyball applied to business decisions.

Whenever you can’t get one ideal bet (hire a star, in Moneyball terms), make a few non-ideal ones that, when combined, would deliver a comparable result (hire a few role-players with the right skills/stats, in Moneyball terms).

Center of Gravity

All the decisions (or bets) create a center of gravity. Interestingly, it won’t necessarily be a simple output of the weight of the bets (the size of the dots in the diagram) and their relative position.

More forces are in play here.

The right combination of investments may push the center of gravity in the desired direction (up and to the right). Again, in Moneyball terms, it’s like winning having a team of underdogs.

From an organization’s perspective, what interests us most is how any decision in our portfolio affects the center of gravity. That one risky project with low chances of succeeding may be just what we need to improve our long-term relevance. Even if that swing is really wild.

Cost of Too Many Commitments

A brute force tactic of having a diverse enough decision portfolio may be considered. That, however, would create a whole different set of problems.

In the past, I wrote about how too many projects at the portfolio level is a major issue for any organization. I considered how portfolio decisions are, in fact, commitments. I analyzed how overcommitment affects the Cost of Delay and can ruin the bottom line.

It all boils down to the same conclusion: too many commitments are detrimental to (organizational) health.

To visualize it in the landscape we created, we need to add a pulling force. It will move the center of gravity toward the bottom left corner of the diagram. Yes, straight down to our Death Valley.

The strength of this pulling force will be proportional to the scale of overcommitment. And the relationship between the two will be exponential.

The more bets we make, the lower the chances we’ll be able to deliver on any. Once we are already overloaded, adding more commitments will make the situation increasingly perilous.

So, the balance we aim to strike is to have sufficient diversity in our decisions and, simultaneously, to have as few commitments as possible.

The Startup’s Challenge

The entire discussion with Matt began with my remark on the startup ecosystem, pushing aspiring entrepreneurs to grow at all costs.

While the reasoning stands true for startups—especially early-stage startups—two observations make the consideration more challenging for them.

First, by definition, they start under unfavorable conditions. And they stay so for a better part of their lifecycle. As a result, the simple shot for opportunistic thriving is unavailable for them from the outset.

Second, the degree to which the conditions are unfavorable for early-stage startups is far greater than what established companies face. There’s no core business to rely on just yet. The runway is typically short as the availability of funding remains limited.

The environment is challenging enough that the diversity of the bets portfolio must be compromised. And that’s precisely where my original thought falls into place.

Fledgling enterprises, way more than established businesses, will be forced to choose between preservation and wild swings exclusively. The latter is typically characterized by a strong push for rapid growth.

If that’s the choice, I’d go for survival. After all, dead companies don’t really grow.

April 17, 2025
Emergent Purpose

There are those presentations at conferences that stay with us for a long time, even if there seems to be no particular reason for that. And yet they keep coming back for one reason or another. One of such presentations for me was a discussion between Arne Roock and Simon Marcus from Lean Kanban Central Europe years back.

Even though the topic of the discussion was broader there is one context that keeps coming back to me. Autonomy and alignment. A recurring theme was that we can’t enable autonomy unless we have alignment around a strategy, a goal, or whatever is the thing that orchestrates individual efforts.

As Peter Senge in his classic The Fifth Discipline puts it:

To empower people in an unaligned organization can be counterproductive.

It obviously makes sense. I mean, distributing autonomy is all fine but also creates a risk that everyone would pull an organization toward a different direction. Alignment, which goes through understanding of a common goal, helps up to focus on rowing in the same direction.

At the same time, watching the session back then, I couldn’t help but thinking that we at Lunar Logic hadn’t been doing that. We’d been continuously distributing more and more autonomy to everyone and at the same time there hadn’t been any official strategic purpose set for the organization for quite some time.

It the spirit of the discussion between Arne and Simon, who I both respect a lot, that should feel wrong. And yet it didn’t.

I could even remember my earlier discussions with Jabe Bloom. Jabe was pointing how important were techniques he adopted to help people connect their everyday behaviors with strategic goals.

Nonetheless, I still felt like imposing a strategy onto Lunar Logic would be a bad move.

It was months later when I came across the concept of emergent purpose. In its spirit it’s all about understanding organizational culture. It starts with an assumption that everyone at an organization has their individual purpose and it is only natural to pursue that individual purpose. It means that, given no other guidance, everyone would work toward achieving their own personal goals. Some people would have goals similar to others. Some would have very distinct aspirations. Some would have much stronger drive to achieve their own goals than other who would be fine going with the tide.

If we tried to visualize that as forces pulling an organization in different directions it might have looked like this.

As a matter of fact it would also mean that there is an aggregated force pulling the organization in some direction. And that aggregated force is exactly an emergent purpose.

By its design we don’t set an emergent purpose. It’s simply the outcome of individual purposes. It also means that for some people in an organization the emergent purpose may be the exact opposite of what they individually want. That’s all fine.

Despite the fact that it’s an emergent property of any organization, we have means to influence the emergent purpose. It happens through hiring. When someone leaves an organization their influence on emergent purpose disappears. At the same the organization hires someone new whose expectations may be better aligned with the emergent purpose.

Through such a change the emergent purpose has been amplified.

There is interesting dynamics in that process. If my own goals are aligned with the purpose of the organization I’m with, it is less likely that I’d leave the organization than if it was otherwise. And corollary to that, my chance of being hired and wanting to join an organization is higher if there is alignment in place.

In other words emergent purpose tends to sustain and even amplify itself, even with no conscious effort from leaders of an organization.

The final, and most important bit about the idea of emergent purpose is that every organization has an emergent purpose. It doesn’t matter whether they have an official strategic purpose or not, or how strong it is, or whether there is alignment between a strategy and an emergent purpose. It’s always there, as the only way to get rid of it would be to make people stop having any ambitions, which is an equivalent of not having any people in an organization, I guess.

That’s exactly where the fun starts. Given that there always is an emergent purpose, we’d be dumb not to listen to it. Now, I don’t say we necessarily need to pursue it actively, yet understanding it is crucial.

The reason is that whatever strategy we choose there will likely be a gap between that strategy and the emergent purpose. The bigger the gap the more people would get disengaged and likely eventually leave. From that perspective there is a price to pay for any strategy and, simply put, the better we understand the emergent purpose the better we are suited to achieve our strategic goal. Also, in simple economic terms, there may be strategies that simply are too costly to pursue.

Ideally, you can do what we did at Lunar Logic. We basically turned our emergent purpose to a company strategy. Instead of imposing a strategy on everyone we listened to each other and figured what’s the most desired path we want to pursue for the time being. That’s how we evolved our aspiration from helping to build products for our customers efficiently to helping the customers to succeed with their products. The latter isn’t focused on the building part nearly as much as the former.

Interestingly enough, out of the potential strategies that we discussed there was one which would make me leave the company eventually. Luckily for me it didn’t end up being our emergent purpose after all.

Of course I understand that few companies would go as far as we did. Even though I think it is an awesome idea I don’t encourage organizations to make that bold move. Nevertheless, knowing what the gap between aspirations of leaders of a company and everyone else is crucial if we look for any reasonable level of sustainability.

Finally, emergent purpose is also one of possible answers for autonomy and alignment issue. As long as we understand what an emergent purpose is we can decide to stick with it or just slightly shape it instead of building alignment externally through officially set strategic goals.

June 1, 2018