Did you ever carve into a tree, then return to look at the carving years later?  If you did, you would have seen that the carving is the same distance from the ground.  The tree grew from the outside, from its branches, not from the bottom.  The roots and trunk feed the growth, which occurs where the tree meets the environment – growing toward the sun for photosynthetic feeding. 

Too many organizations, however, try to grow from the bottom rather than from the branches.  Instead of looking to the environment for growth, they look inside. Instead of seeing the roots and trunk as sources of water and minerals (resources for growth) the strategists and leaders spend most of their time thinking about how to protect, or even grow, the "core" source of the tree.  Far too little time is spent thinking about the environment and how to push resources where greatest growth can occur.

In a recent Harvard Business Review web posting "The Strategic Imperative Not to Hire Anybody" the author points out that many CEOs are now desirous of growth.  But their approach is very flawed.  They are enamored with all the headcount reductions of the last few years, and want to grow revenues without adding any additional resources.  They are impressed that they grew profits by cutting employees, and now want to grow revenues and profits without any new ones.  They "saved the core" by pruning branches, and expect the growth to rematerialize easily.

Discussing how these CEOs came to such a surprising position, that they should be able to grow without adding new resources, the author Walter Kiechel points out that most strategy in corporations has little to do with understanding new markets, new needs – new sunlight.  Instead, strategists have been trained in how to improve the efficiency of the root system and trunk supply chain.  Their focus has been on optimizing what exists, cutting resources, improving efficiency.  What passes for strategy today has little to do with finding new sunlight, and competing effectively with other plants to get it. Instead, strategy is almost all internal analysis to improve how the existing tree maximizes its use of the dirt.  How the tree will re-bark the old carving, and sustain its old position.  Even ignoring other ground plants that are leaching away minerals and moisture, and other rapidly growing trees that are interfering with sunlight – each year coming closer to the original tree and making it impossible to find sun where it used to be plentiful.

Bloomberg-BusinessWeek makes note of this phenomenon discussing the problems at Goldman Sachs in "Goldman Sachs: Failure of Innovation."  Author Rick Wartzman points out that within Goldman, and almost all other banks, the very smart MBAs from Harvard, Stanford, Columbia, Wharton and elsewhere really weren't developing products which would help the banks grow.  They weren't developing new financing or investing opportunities that would generate economic growth.  Instead, an internal focus led them to develop collateralized debt obligations (CDOs) which had only the intent of reducing risk and increasing return for the existing business.  These were defensive, protective products intended to Defend & Extend the old products – not create anything new.  Goldman wasn't creating economic growth for its clients, or itself, with CDOs.  They were implementing classic D&E behavior – trying to protect the trunk.

Growth happens from the branches.  On the edge of the business, where it meets the environment.  Growth happens when we focus on how to competitively acquire more sunlight, and use that to maximize the value of our resources.  An efficient resource delivery system is helpful, but continued optimizing of that system does not create growth.  Unless there is a robust method of identifying new markets, and pushing resources toward those, you simply cannot grow.  What strategists need to do is spend a lot more time thinking about markets and competitors if they want to create growth – and a lot less time thinking about how to optimize the "core."  If the bankers at Goldman, Bank of America, Merrill Lynch, Citibank, etc. had done that we would have a far more robust economy now.  And if leaders want to start growing in  2010 and 2011 they need to change the focus of their strategy group – and figure out how to put new resources into growth areas of the environment!