Bigger Isn't Always Better: The New Mindset for Real Business Growth

Overview

"You want your business to grow. But don’t confuse growth with expansion. To be sure, increased size can be an important component (or fortuitous by-product) of business success, but companies that expand too much, too quickly, or too myopically may soon find themselves too big for their britches.

What, then, is real growth? Simply put, it’s progress, and it is based on moving the business beyond the self-imposed limits that have come to define and constrain it. Good “growers” know that true success is fueled by ...

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Overview

"You want your business to grow. But don’t confuse growth with expansion. To be sure, increased size can be an important component (or fortuitous by-product) of business success, but companies that expand too much, too quickly, or too myopically may soon find themselves too big for their britches.

What, then, is real growth? Simply put, it’s progress, and it is based on moving the business beyond the self-imposed limits that have come to define and constrain it. Good “growers” know that true success is fueled by imagination, not by a stream of mergers, stock price manipulations, or clever accounting. These individuals share seven characteristics that enable them to foster real, sustainable growth.

Bigger Isn’t Always Better reveals these traits, why they are effective, and how to apply them in your organization. The book shows how successful companies and growers:

• Know where to look

• Know what they want

• Tell the truth

• Create tension to generate forward movement

• Win hearts and minds

• Master momentum and bounce

• Know when to let go, and share the wealth

Distilling a decade of research and personal interviews on three continents, author Bob Tomasko illustrates the seven traits with examples from companies—large and small, well known and less so—that have profited through innovative strategies that focus on genuine growth opportunities instead of the appearance of growth. Profiles include:

Darcy Winslow, who helped testosterone-fueled Nike grow by creating a range of products for women that opened a new and profitable market

Chris Mottern of Peet’s Coffee, which carved a niche by slipstreaming around the wake created by Starbucks

Roger Enrico, the Pepsi veteran who created The Pepsi Challenge and established Pepsi as the Coke of snack foods

Bill Greenwood of Burlington Northern, which found a way to turn truckers, the railroad’s most difficult competitors, into its best customers

Al Bru, who got health-conscious consumers to embrace Frito-Lay’s snack products by eliminating trans fats

Carlos Gutierrez, who restored Kellogg to a growth path by eliminating its fixation on volume

Bigger Isn’t Always Better also offers stunning examples of the failure of the Big-Is-Good philosophy, including the ill-fated Hewlett-Packard/Compaq merger and its highest-profile casualty, CEO Carly Fiorina.

After years of cutbacks, growth is in again. But instead of assuming that an inflated business can dominate a market through sheer size or manufactured numbers, the new model shows how engaged growers use positive psychology to drive robust and sustainable growth. Combining real-life stories, thorough scientific research, and insightful analysis, Bigger Isn’t Always Better shows how your organization can move forward—without tripping over its own feet."

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Editorial Reviews

From the Publisher

Washington Post: "...chock full of good tips and sound advice for managers of any sized operation."

Washington Post
"The book is chock full of good tips and sound advice for managers of any sized operation."
Soundview Executive Book Summaries
Based on 10 years of research and interviews, Tomasko has determined that the major component to obtaining real growth within a company is to change the way it’s thought of—it’s about maximum potential, not greatest size. Tomasko reminds readers to avoid confusing growth with expansion, while claiming real growth is progress. Bigger Isn’t Always Better suggests seven main habits that lead to real growth and how they have been successfully applied globally. Copyright © 2006 Soundview Executive Book Summaries
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Product Details

  • ISBN-13: 9780814408667
  • Publisher: AMACOM Books
  • Publication date: 1/28/2006
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 272
  • Product dimensions: 6.20 (w) x 9.42 (h) x 0.98 (d)

Meet the Author

Robert M. Tomasko is a specialist in organizational effectiveness and has advised companies including Coca-Cola, Marriott, and Toyota. His previous books include Downsizing and Go for Growth. Based in Washington, D.C., he has consulted to organizations and spoken to audiences around the world.

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Read an Excerpt

Bigger Isn't Always Better


By Robert M. Tomasko

AMACOM BOOKS

Copyright © 2006 Robert M. Tomasko
All right reserved.

ISBN: 0-8144-0866-4
0

Chapter One

Growth Is About Moving Forward

When paradigms change, the world itself changes with them. -Thomas Kuhn

BEYOND THE LIMITS THAT DEFINE THE BUSINESS

Growth is about progress, not bigness. The point of growing is to achieve full potential, not maximum size. A business grows whenever it moves beyond the self-imposed limits that define and constrain it.

Examples

When Howard Schultz focused on selling his customers an experience, not just a good cup of coffee, Starbucks grew.

When Darcy Winslow championed a range of products for women who did not fit into the testosterone-defined market segments that had come to define her employer, Nike grew.

When Bill Greenwood found a way to turn truckers, his railroad's most troublesome competitors, into its best customers, Burlington Northern grew.

When Roger Enrico set his company on its own course, rather than defining it by its rivalry with Coca-Cola, PepsiCo grew.

When Al Bru, one of Enrico's managers, spent $57 million to eliminate trans fats from Frito-Lay's snack foods, Frito-Lay's owner, PepsiCo, grew.

When Deborah Henretta changed the mission of the troubled division she led from "producing the most technically perfect products" to giving customers a brand that "met the goals thecustomers themselves defined," Procter & Gamble grew.

When Bill Ford turned his predecessor's (Jacques Nasser) expansion plans on their head and said that his goal was to give up market share and make more money by selling fewer automobiles, Ford Motor Company grew.

When Arkadi Kuhlmann created a bank with no fees, minimum deposits, or branches; a narrow range of handpicked products; and a willingness to reject customers if they were looking for services he did not want to provide, his company, ING Direct, showed that it was possible to grow by challenging the central pillars of its industry's conventional wisdom.

When publisher Jane Friedman developed plans to create in the minds of its readers a brand identity for her company as strong as that of its individual superstar authors, HarperCollins began to grow by reducing its economic dependence on blockbuster books.

When Internet seller Jeff Bezos gave prominent placement on his web site to links that would take his customers directly to his competitors, Amazon.com grew.

When Yvon Chouinard dropped 30 percent of his clothing line as runaway demand threatened to turn his outdoor sports apparel company into something he did not want it to be, a mass marketer, Patagonia simultaneously got smaller and grew.

When Kenneth Chenault unwound his company's long-time strategy of becoming a giant financial services supermarket by spinning off its brokerage business, American Express grew.

This approach to growth is not limited to the business world. Martin Seligman grew psychology when he started a movement to broaden the field beyond its traditional fixation on rescuing people from mental illness and toward giving equivalent attention to discovering science-based ways for humans to thrive and flourish.

Roger Conner contributed to the growth of the "social activism industry" when he stopped being a passionate crusader for the human rights causes he believed in and became a broker who now helps dueling interest groups convert win-lose struggles into a search for common ground.

What Is Going On

Something similar happened in each of these instances of growth. The 14 individuals who drove progress all gave attention to:

1. Putting aside an old way of perceiving their situation

2. Assimilating, first within themselves and then in their organization, a new perspective

3. Building the capabilities needed to support that new perspective

4. Reorienting their organization, and its surroundings, around this new possibility

HOW TO THINK ABOUT GROWTH

Real, lasting growth is hard to pull off, which may explain why a narrow focus on expansion so often substitutes for it. Not only does growth require moving beyond current boundaries, which themselves may be moving as well as hardened targets, but the business must also stay at the new destination long enough to reap rewards for having made the journey. And it has to do all this in a way that allows its newly found wealth to be shared with those who have contributed to its success.

For growth to be sustainable, it needs to offer some benefit to the environment in which the business operates as well as to the business itself, giving customers, shareholders, suppliers, and surrounding communities a stake in its ongoing success. This might sound like altruism, but the broader the base of people with an interest in a growing company's game, the greater the "home-field advantage" that company will enjoy. You can call it prosperity through reciprocation, the Jeff Bezos model for Amazon. Contrast the affection and support that is felt for Apple Computer and Google with the distrust and wariness that Yahoo engendered when, in reaction to a financial downturn, it changed its privacy policies to allow customers' personal information to be used to target them for unsolicited sales pitches. Yahoo endangered a great deal of accumulated goodwill when, according to industry observer John Ellis, it began to think narrowly of its user base as a revenue-extraction resource. Yahoo made a common mistake: It attempted to expand blindly, without considering its actions in the context of its broader environment.

Seeing What Others See

Wise growers have the ability to see things as others see them, allowing them to anticipate the reactions that others will have to their moves. They are as sensitive to their context as they are to their intentions. They know that they are part of a broader marketplace that may not necessarily revolve around them and their immediate needs.

This is often where they get their growth ideas in the first place: by starting out with a different perspective on opportunities from the one that most of their rivals have. Deborah Henretta's way of doing this was very direct. She literally brought the consumers of her baby-care division to the floor on which she worked. By setting up a diaper-testing center a few doors down from her office at Procter & Gamble's headquarters, she made it impossible for her team of product designers and marketers (and herself) to avoid getting a firsthand earful of what was on their customers' minds. They learned that these mothers cared more about getting help with their baby's development than about having the world's driest diaper. This insight led to the creation of a broad range of new products, from training pants to baby wipes, that enabled Henretta's brand, Pampers, to gain share over rival Huggies for the first time in almost a decade.

Growth has a number of markers: increased sales, greater profits, and (sometimes) a rising stock price. But, as we have seen, these indicators can move upward for reasons that have nothing to do with real growth. When growth occurs, a company will always have a different view of its place in the market, and the market's perception of the business will also have changed. Each view will be re-formed based on new experiences and perceptions. Reorientation happens as new possibilities are envisioned, goals relating to them are set, and actions are taken to bring them to reality. If the grower is especially skillful and fast, there will be a time lag between a company's advance and its competitor's realization that something has happened (call it "perceptual arbitrage"), allowing room for midcourse correction, gain consolidation, and profit taking.

Growth Has a Direction

Growth is an ongoing process, not a state of being. It is movement, not a destination. The appellation "growth company" is a misleading categorization. It is a label that stock peddlers use to describe last year's flash in the pan. There is no such thing as a growth company; there are only companies that grow. Buddhists know that it is silly to talk about someone "being enlightened." Enlightenment is not a state of being. Being enlightened is always being enlightened about something, says Zen scholar Thich Nhat Hanh. Growth always refers to growth toward something.

Progress in business, like evolution in biology, does have a direction. Natural selection affects organisms the way the market shapes organizations: Both tend to adapt to changing conditions by becoming more complex. Complexity implies that their component parts simultaneously become both more differentiated and more integrated; they are increasingly specialized while becoming increasingly better able to work together. Complexity allows new skills and capabilities to emerge; internal resources that were not previously available are manifested.

Complexity leads to greater awareness of an organization's surroundings. It is the opposite of inbreeding or hunkering down. Howard Schultz added music and wireless Internet access to further refine his idea of the Starbucks experience; Martin Seligman complicated psychology by calling on it to address happiness as well as illness. The payoff from all this is greater diversity-an enhanced adaptability to changing circumstances because a broader repertoire is available to draw from. The marketplace offers an incredible array of opportunities. The kind of complexity that accompanies growth allows more of this variety to be noticed, experienced, and exploited.

Complexity is not the same as clutter, which is diversity that cannot be digested. Both Kenneth Chenault and Bill Ford realized this when they refocused American Express and Ford, respectively, on the parts of the businesses with the greatest potential to move forward as integrated entities. Arkadi Kuhlmann's tightly edited version of a savings bank, ING Direct, avoided from its outset the clutter tendency that plagues most large banks, which frequently confuse their customers more than they serve them with ever-broadening ranges of products and packages.

ACCION International. Maria Otero, like Kuhlmann, has taken a segment of traditional banking and turned it inside out. But unlike Kuhlmann, who built a bank just for savers, the organization that Otero leads, ACCION International, has turned people with almost no money at all into good banking customers. Otero is the leading banker to the world's poor. She is a champion of the idea of microlending-making small loans to poor people with no education, no collateral, and no credit history. The loans provide them with affordable working capital, allowing poor people to buy bananas that they might sell on a street corner, flour for tortillas that they would cook in a small marketplace stand, or leather that they might tool into belts. The loan recipients are members of the "informal" or underground economy, people who seldom show up on most bankers' radar screens. Before microlending began, the raw materials for these microbusinesses would be "financed" by local loan sharks, often at rates exceeding 10 percent a day. Most of the profits went for interest payments, locking the business operators into a daily struggle for survival, with no money left over to expand their businesses and work their way out of poverty.

Otero's organization changed all that. ACCION's lender network operates in 20 countries, and in the last decade it has made almost $6 billion in loans to over three million borrowers. First loans are typically small, about $100. Interest sufficient to cover the expense of making the loan is charged, but the rate is still much lower than the borrowers could otherwise obtain. ACCION's default rate is low-over 97 percent of its borrowers pay back their loans. Microcredit works so well because it is often extended to a group, not an individual borrower. This generates peer pressure on individuals to repay the loans or risk losing this source of funding for their community.

Since ACCION was founded, it has made significant advances beyond its previous limits four times, with each stage involving a sharpening of its focus and an increase in its complexity.

ACCION, an acronym for Americans for Community Cooperation in Other Nations, began as a private-sector version of the Peace Corps. Its founder, Joseph Blatchford, was an amateur tennis player. In 1961, he completed a goodwill tennis tour of 30 cities in Latin America. While traveling, he was deeply affected by what he saw of urban poverty, hunger, open sewers, and overcrowded shantytowns encircling every major city. When he returned to the United States, he spread word of these conditions among his law school friends, raised almost a hundred thousand dollars from several corporations, and started a community development effort aimed at helping the poor help themselves. Blatchford began by flying himself and 30 volunteers to Venezuela. They built sewer lines, youth centers, and school buildings; installed electricity; and taught nutrition and job skills. Over the next 10 years, the program spread to Brazil, Colombia, and Peru and involved over a thousand volunteers. Blatchford received a good deal of recognition for his accomplishments, and he was selected to be the third head of the U.S. government-sponsored Peace Corps.

By the early 1970s, however, his successors at ACCION were becoming increasingly uncomfortable with the results of their work. While they were clearly improving some people's living conditions, it was less clear that their efforts were actually moving people out of poverty. They felt that they were reorganizing resources in a community more than increasing them. With these concerns in mind, they looked hard at an ACCION experimental program in Recife, Brazil. The staff there had wondered whether, if the small-scale entrepreneurs in Recife had access to capital at commercial loan rates, they would be able to lift themselves out of poverty. Over a three-year period, the program gave out 885 loans and found that over a thousand new jobs were created as a result, along with scores of self-sustaining businesses. Soon all of ACCION's programs were reoriented toward microlending.

Most of the money ACCION had available to lend out was raised through contributions and grants. As the scope of its operations grew, ACCION's capital needs outpaced its ability to obtain such gifts. While a half-million-dollar grant from the Inter-American Development Bank took 18 months to receive, ACCION lent this money out in two weeks. This led to a second major reorientation with the creation of BancoSol in La Paz, Bolivia. This was the world's first commercial bank dedicated solely to serving microenterprises, such as market vendors and seamstresses. BancoSol, the first of 15 for-profit financial institutions that ACCION started, raised its capital by selling certificates of deposit in the U.S. financial markets. By the mid-1990s, ACCION's role had changed again, from directly providing loans to poor people to organizing and supporting private-sector enterprises that would fill this need.

Otero's organization has an enviable ability to adapt itself to changes in its environment and avoid being a prisoner of its past formula for success. As the banking industry becomes dominated by large cross-border banks, many of the traditional national banks in Latin America are finding their middle-class and corporate customer base being eroded as megabanks from the United States and Europe set up branch networks in their home territories. ACCION is now having a big impact on these traditional bankers as they seek advice about how to find what is for them a new customer-profitably serving their country's poor with microloans. For Maria Otero, this evolution of ACCION's strategy has brought her career back full circle-she was born in La Paz, Bolivia, the daughter of a banker.

This development in Latin America has encouraged Otero to look to other regions of the world for growth. No longer focusing only on Latin America, she is now replicating ACCION's successes in Africa, Asia, and parts of the United States, hoping to triple the number of people receiving ACCION-supported loans by 2008. Fast Company magazine has called ACCION one of the top 20 groups that are changing the world. (Continues...)



Excerpted from Bigger Isn't Always Better by Robert M. Tomasko Copyright © 2006 by Robert M. Tomasko . Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

"Acknowledgments

Introduction

PART 1 What Growth Is and Isn’t

1. Is Bigger Better?

2. A Bigger Stock Price Is Not Always a Good Thing

3. Growth Is About Moving Forward

4. Are You a Fixer or a Grower?

PART 2 What Growers Do

5. Know Where to Look

6. Know What They Want

7. Tell the Truth

8. Create Tension to Generate Forward Movement

9. Win Hearts and Minds

10. Master Momentum and Bounce

11. Know When to Let Go -- and How to Share the Wealth

12. Epilogue

Notes

Index"

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