HBR: Limits Needed on Business Growth

Last Updated Aug 21, 2009 9:12 AM EDT

It was almost a sin over the last decade to suggest we should accept limits on how fast our businesses could grow. Smart growth, yes. But holding back growth on purpose? Try telling that to your investors.

But things have changed; we now are entering an era where we acknowledge that resources such as energy are not unlimited. Stan Stalnaket, in his provocative post The Next Evolution in Economics: Rethinking Growth on Harvard Business Review argues that unrestrained growth, which is the definition of cancer in organisms, is not only unhealthy but unsustainable.

But nature also shows us a solution: regeneration.

''Cellular economic theory suggests an alternative to linear growth: circular growth. In the body, cells grow. Cells die. New cells grow. New cells die. On and on. We sustain ourselves through regeneration. In business, a form of staged, regenerative growth could become the norm. The growth may not even change the size of the 'economic body.'''
It's an fascinating concept: We can grow the bottom line without producing or selling more product.

Stalnaket offers up the example of brewery that grows not by selling more beer but rather by using its chaff and grain detritus to create fertilizer and biofuels, in essence regenerating resources to cut costs.

"When it becomes bad business to waste resources in pursuit of profit, then the regenerative model takes hold and we can kiss goodbye to the things we know we don't need but can't seem to give up," says Stalnaket. "Wasteful packaging. Super-sized food portions. Environmentally damaging newspapers. Gas-guzzling SUVs."
Harvard Business Publishing blogger Umair Haque calls this notion "constructive capitalism," drawing a distinction between profit that harms society -- such as those built on unethical labor practices -- and those that help society -- Wal-Mart's decision to create a "sustainability index" used to rate vendors. See The Value Every Business Needs to Create.

Capitalism has been based largely on the value of the transaction. These thinkers argue that the transaction will become less important to the success of companies and that social factors such as environmental sustainability and ethical practices will be the basis of competitive advantage and profit growth in the future.

Do you agree?

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.