An Interview with Ed Hess

The following is an interview with Ed Hess, author of Smart Growth: Building an Enduring Business by Managing the Risks of GrowthnnQuestion: Your book Smart Growth challenges the validity of long-held business beliefs that a business must “grow or die” and that such growth should be continuous and linear. What motivated you to research these issues?nnEd Hess: I too accepted those beliefs without examination when I was in the business world. As I taught Executive Education at Darden over the years, I became impressed with the awesome power those beliefs had in driving short-term business behavior. Many companies are obsessed to their long-term detriment with making short-term numbers. So I started to look into the history of those beliefs, and the more I looked, the more it became apparent they were not based on empirical data.nnQ: What are some of the key lessons from your research?nnE.H.: Some findings are (1) “Grow or die” is not based in science or business reality; (2) consistent above-average growth for five years or more is the exception not the rule; (3) growth creates risks that need to be managed because it can stress culture, customer value proposition – the business’s differentiating value delivered to the customer, – quality controls, and employees; (4) growth is much more than just a strategy. Growth is a mindset; an experimental learning process; and growth requires an internal enabling growth system.nnQ: In your book you seem concerned about systemic inhibitors to real growth and innovation. Why?nnE.H.: Yes, I am concerned about the dominance of both a short-term mentality in our system and short-term “renters” of stock. I am also concerned about the prevalence of earnings created solely to meet quarterly earnings estimates that are not authentic earnings and represent illusory earnings. It makes me wonder whether we have a built-in “earnings bubble.”nnQ: What will corporate managers and executives learn by reading your book?nnE.H.: I hope they will come away with a more nuanced realistic research based view of growth. Growth can be good and growth can be bad. I put forth our seven-step Darden Growth Model based on research designed to create a diversified growth portfolio and I introduce a Growth Risks Audit to illuminate risks to be managed so that growth does not destroy value. As importantly, I document the importance of high employee engagement and customer co-creation in producing consistent above-average growth. Growth is much more than a strategy. It is a complex change process that involves the right mindset, the right processes, experimentation, and an enabling environment. By reading my case studies of Best Buy, Sysco, UPS, Home Depot, Starbucks, Costco, Tiffany & Co., McDonald’s, and other companies, readers will learn about good growth and bad growth.

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