Disciplined Growth Strategies - A Review

Peter Cohan, Inc. columnist and Forbes contributor, serial entrepreneur and professor, recently wrote his twelfth book entitled Disciplined Growth Strategies, which is now available on Amazon.com.

I caught up with Cohan and asked him to elaborate on three points that he highlights throughout his book.

Q: In the book you mention three keys to success: intellectual humility, ability to attract and motivate top talent, and willingness to bet on growth. Can you provide some real world examples of successful companies that encompass these three qualities?

I am happy to do that. A great example of intellectual humility is what Reed Hastings, CEO of Netflix, did when he realized in 2007 that the iPhone was going to make Netflix’s DVD-by-Mail business obsolete.

Rather than trying to preserve its existing business, Hastings looked at the online streaming business and realized that it would require different skills. He cut back on people who were involved in ordering and stocking DVDs and, after realizing that he would not be able to afford to license streaming video from movie studios, started hiring people who could produce Netflix-made shows such as House of Cards and Orange is the New Black.

When it comes to attracting and motivating the best talent, Mark Zuckerberg at Facebook has done a masterful job. His vision for the future and his ability to execute is so exceptional that he was able to hire Sheryl Sandberg as COO to do the many things which Zuckerberg realized were essential for Facebook’s growth but that he did not do well.

And when it comes to making bets on growth, there is no leader who comes close to Jeff Bezos. When Amazon was started, it was a web front-end for ordering books. But as Amazon grew and started selling more goods online, Bezos realized that he would not be able to provide outstanding prices and service unless he made the enormous investments in warehouses, robots, systems, and logistics networks needed to make excellent service a consistent reality for its customers.

Q: What about company culture: can you speak to how vital that is to success? Any examples of good company culture at start-ups and culture gone wrong?

I have examples in the book of great and terrible company cultures. Identity management software provider, SailPoint has created a 4I’s culture (integrity, individuals, impact, innovation) which has helped the company achieve 100 percent employee satisfaction and 40 percent bookings growth. Culture contributes to growth because it attracts talented people who are motivated to act according to values that give ever-better products to customers.

Q: The main premise of the book is the importance of achieving disciplined growth: what do you mean by this?

Disciplined growth means sustaining high revenue growth as a company scales – at least 20 percent a year – that is based not on short-term gimmicks but on creating sustainable value. Companies can fall off the disciplined growth track by growing much more slowly than investors expected – that’s what caused LinkedIn stock to lose 44 percent of its value in a few minutes in February 2016 – ultimately costing the company its independence, albeit for an attractive price of $26.2 billion, when Microsoft bought it.

On the other extreme, you can have companies that grow much faster than the industry for reasons that are not sustainable and when those reasons come to light, the stock plunges. That’s what happened with Valeant, a pharmaceutical company that enjoyed a 1,000 percent spike in its stock from 2008 to 2015 as revenue rose 13x to $10.4 billion. With massive price hikes and fake accounting exposed – its stock fell 96 percent.

Q: Can you provide some real world examples of seemingly successful companies that ended up failing and describe why they didn’t make it?

Benefits software supplier Zenefits hit a $4.5 billion valuation based on what seemed to be unstoppable growth. But that growth was based on faking it – when news of licensing exam cheating became public, the company’s valuation plummeted 56 percent and about half its employees were fired.

Q: What role do you attribute to PR in making a company successful? What companies do you think you "know" because of good PR?

Good PR is better than free advertising because it adds the credibility of a media brand to a company that readers might not otherwise have heard of. What makes PR good is if the company is able to craft a story that the reporter believes to be a compelling narrative based on solid reporting.

Q: You speak to dozens of start-ups weekly as a reporter. Do you quickly gain a sense of which start-ups will still be around next year?

Yes – the ones that will survive can tell a story of profitable growth, a culture that enables the company to attract talented people, financing by highly-reputed investors, happy customers, and a proven ability to adapt to change and keep growing.