Posted on May 15, 2014 @ 11:27:00 PM by Paul Meagher
Today's blog title, "Limits to Growth", is inspired by the work of Donella Meadows whose work I've been reading lately. See my last few blogs.
"Limits To Growth" was a pioneering and best-selling book from 1972 whose main author was Donella Meadows. This book has been updated 3 times since then,the most recent version was published in 2005 (4 yrs after her death). It is a foundational book on sustainability.
For me, "Limits to Growth" also refers to a specific section in Donella's posthumously published book "Thinking in Systems" (2008, 7 years after her death) in which she provides some very insightful advice to startups. The specific passage occurs between pages 100-103 in a section
called "Layers of Limits". The basic idea is that startups grow by overcoming limits. They stop growing if they can
not overcome such limits. Simple ideas, but operating in reverse to the way we might normally think about growth (i.e, focus on positive growth factors only if you want a recipe for growth).
You can focus on trying to "grow" your company by listening to advice about how to grow your business.
Donella would argue you should focus on identifying and overcoming the "limits" of your company to grow your business.
There are four key paragraphs in "Thinking In Systems" in which Donella lays out her argument for the importance of
overcoming limits as the key to startup growth:
It was with regard to grain that Justus von Liebig came up with his famous "law of the minimum." It doesn't matter how much
nitrogen is available to the grain, he said, if what's short is phosphorus. It does no good to pour on more phosphorus, if
the problem is low potassium.
This concept of a Limiting Factor is simple and widely misunderstood. Agronomists assume, for example, that they know
what to put in an artificial fertilizer, because they have identified many of the major and minor ingredients in good soil. Are
there any essential nutrients they have not identified? How do artifical fertilizers affect soil microbe communities? Do they
interfere with, and therefore limit, any other functions of good soil? And what limits the production of artifical fertilizers?
There are layers of limits around every growing plant, child, epidemic, new product, techological advance, company, city, economy,
and population. Insight comes not only from recognizing which factor is limiting, but from seeing that growth itself
depletes or enhances limits and therefore changes what is limiting. The interplay between plant growth and the soil, a growing
company and its market, a growing economy and its resouce base, is dynamic. Whenever one factor ceases to be limiting, growth occurs,
and the growth itself changes the relative scarcity of factors until another potential limiting factor is to gain real understanding
of, and control over, the growth process.
The company may hire salespeople, for example, who are so good that they generate orders faster than the factory can produce.
Delivery delays increase and customers are lost, because production capacity is the most limiting factor. So the managers expand
the capital stock of production plants. New people are hired in a hurry and trained too little. Quality suffers and customers
are lost because labor skill is the most limiting factor. So manage the order-fulfillment and record-keeping system clogs.
And so forth.
So, in one book, Donella argues that there are ecological limits to growth in general. In another book, she argues that startup growth
is also subject to "layers of limits". The concepts of growth and limits appear to be inseparable in many ways and at many layers of a company.