Monday, April 7, 2014

Decline -- Maturity -- Growth

A few thoughts about decline, maturity, and growth insofar as they affect the choice of projects, given scarcity (and there's always scarcity):
  • The real test between maturity and decline is whether or not there is new investment going into the business.

    In the decline stage, the emphasis is on cost control, efficiency, and getting the most out of existing product with existing customers; there's little or no investment beyond required maintenance. Over time, product will obsolesce and customers will move on.
  • If there's investment going into finding new customers with existing product, that's probably a mature organization surviving.
  • Working back to compare maturity with growth, the difference here is that with growth investment is going into both customers and product, keeping both fresh and competitive.
  • Also bear this in mind: These ideas are not limited to private sector businesses; government agencies and NGO's have all these same attributes.

And, here's a challenge question:
When is an expenditure a cost and when is it an investment? Sponsor attitudes are usually quite different depending on the view point.

My answer: It's an investment when it goes toward making the future different from the present. That is: it's aimed at strategic differentiation -- to wit: start-up and growth. Else, it's a cost required to keep things moving along as in the present for maturity and decline.

People, too
And, you can extend the argument to people: the CFO carries people on the liability side of the balance sheet -- creditors (they provide time and talent) to whom we owe benefits, salary, etc. in return.

But, what if you're out to hire the one best person to do a task and make a strategic difference toward growth? Investment (asset) or cost (liability).  If an investment, hopefully you've got their scorecard set up to reflect the ROI demand.

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