Bigger Isn’t Always Beautiful — Five Growth Traps to Avoid
There’s a pervasive assumption in boardrooms, strategy offsites, and MBA classrooms: that an increasing top line is the objective of a winning strategy — and therefore, that strategy is all about growth.
But that assumption is flawed.
Strategy isn’t about getting bigger. It’s about creating value, sustainably. More specifically, long-term returns on invested capital (ROIC): creating more value from the resources you deploy than your competitors can.
Yes, growth can be a path to value. In fact, a lot of research shows it often is. But only when it’s the right kind of growth: focused, intentional, and anchored in winning capabilities.
History is full of companies that grew fast… and destroyed value just as quickly. Yet corporate memories are often short and the same mistakes reoccur.
Here are five growth traps I commonly see, and alternatives that should be considered to ensure your strategy adds value.
Trap 1: “Big Means Better”
Yes, large companies typically benefit from economies of scale and scope. And, in private equity, larger companies can enjoy multiple arbitrage. But economies of scale and scope aren’t infinite and, at some point, diseconomies creep in.
Growth in size brings more layers, more silos, slower communication, and more complexity. Bureaucracy thrives. Speed dies. Capabilities stretch. Culture sags. And before long, the whole organisation can start to creak under its own weight.
In the mid-2000s, Tesco aggressively expanded into the US, Eastern Europe, and Asia; it expanded into new channels (online, home delivery); and built out new lines (e.g. F&F clothing). The problem wasn’t ambition, it was complexity. The business became harder to manage, leadership lost control, and performance faltered. By 2015, Tesco had written off billions, exited multiple markets, and retreated to its UK core.
The consolidation of NHS Trusts in the UK, in the belief that these would miraculously result in efficiencies, has equally proved to be flawed thinking. The most notorious being South London Healthcare, a three-way merger of three small Trusts in 2009 that collapsed into special administration 4 years later.
Trap 2: Growth Without Focus
Most companies have many potential growth paths: entering into international markets, cross-selling to existing segments, launching more products, acquiring adjacent businesses etc. But if the chosen path is not guided by a clear logic, it can do more harm than good.
When everything becomes an immediate priority, nothing is. Capital spreads too thin. Organisational uniqueness erodes. Leaders get distracted or focused on short-term gains over capability building. Strategy becomes a to-do list rather than a coherent theory of value creation.
GE grew into a sprawling empire: from jet engines to sitcoms to financial services. But by the 2010s, even insiders struggled to explain how it all fit together. Whilst engineering capability and sizeable balance sheet were historical advantages, these become diminished in a world where conglomerates trade at a discount. GE began dismantling itself and has now completed its split into three focused companies – each with clearer purpose and (seemingly) better prospects.
Trap 3: Growth Without Advantage (Means Attrition)
Companies often run out of headroom in their industry and grow by entering new sectors (often through acquisition). Sometimes they even dare to call this movement “innovation.” But if you’re not bringing something genuinely new or better, what you’re really doing is trespassing onto someone else’s turf. And that usually means a bloody fight with an incumbent willing to fight harder to defend what is core to them. It is exactly the type of move that Mauborgne and Kim warn against in Blue Ocean Strategy.
Over the years, Nestlé expanded from chocolate and coffee into everything from skincare to pet food. But returns lagged. And current CEO, Laurent Freixe, commented this year (2025) that such growth had "weakened the fabric of the organisation." The business has since refocused on nutrition, health, and wellness, where its advantage is real and the economics are stronger.
Sanofi spent years trying to match Novo Nordisk and Eli Lilly’s pipeline in diabetes, but its market share continued to decline. Despite resources, its moves into GLP-1s and biosimilars have largely failed to disrupt incumbents.
Trap 4: Growth Hiding Flawed Fundamentals
A great growth story grabs headlines, boosts share prices, and keeps investors smiling... at least for a while. But rapid top-line growth can sometimes distract from weaker fundamentals: broken business models, thin margins, saturated markets, or hidden risks. The message is always that growth will lead to increased earnings, eventually. But if you’re selling something unprofitable (or with diminished profits), doing more of it just means losing money faster.
Nampak, Africa’s largest packaging company funded its sub-Saharan expansion in the 2000s with US dollar debt, betting big on consumer demand in oil-dependent economies such as Angola and Nigeria. In the short term, markets responded favourably. But when oil prices dropped and local currencies fell, the underlying economics of the expansion collapsed. Dollar debt became unaffordable, and growth turned into crisis.
Trap 5: Growth That Crowds Out Smarter Moves
It’s relatively easy to chase growth. What’s harder is confronting the uncomfortable or unglamorous choices: letting go of underperforming businesses, slimming down teams, focusing on the basics, or exiting markets you’ve been in for decades. But these are often the moves that can create real value. Shrinking isn’t failure, sometimes it’s the smartest thing you can do.
In the early 2000s, LEGO tried to grow in every direction: theme parks, clothing, media. Revenue rose, but margins crumbled. In 2004, the company was near collapse. Its turnaround came not from new initiatives, but from focus: stripping back to the core product (the brick) and reconnecting with customers. Value followed.
Strategising for Value, Not Volume
Many firms grow simply because they can, not because they should. But without clarity on what the growth is meant to achieve, they end up overextended and destroying value. This is the exact opposite of what they should be aiming to achieve.
If strategy is about creating long-term value – not just for shareholders in the next quarter, but also for customers, suppliers, and employees – growth is one of a few possible levers. Smart firms consider strategic options that fall into all three alternative paths (with sub-choices):
Path 1: Stay
Fix
Pause
Defend
Harvest
Path 2: Advance
Share gain
New markets
New offerings
Path 3: Retreat
Shrink
Carve out
Exit
I’ll unpack this model more in future posts as well as what is required to achieve value-creating growth. For now, the important point is this: good strategy doesn’t always need to sound like “we want to double in size over the next five years.” Often it sounds more like:
“We’re narrowing focus to the three markets where we have real differentiation.”
“We’re consolidating our brand portfolio to reclaim pricing power.”
“We’re selling a business that someone else can grow more than we can.”
“We’re investing in fewer customers, but serving them much better.”
Final Word from the Savannah
In the savannah, not every animal grows to dominate. Some thrive by adapting. Some retreat to safer habitats. Some seek out spaces where the competition is sparse. The winners are typically the ones who know when to grow, when to pause, and when to walk away.
I help clients navigate exactly these kinds of choices. So if your strategy reads more like a wish list of objectives rather than a winning playbook, let’s talk. I’ll help you find the path that fits your terrain.
