Growth and Maturity

Growth is not maturity

Growth and maturity are related concepts that differ in important ways. These differences are worth exploring as we seek to understand and mitigate the reasons why organizations that are trying to grow become stuck.

We conflate growth and maturity because they are correlated. We measure growth more easily than maturity. So our brains have developed a naive heuristic which assumes that larger things are more mature than smaller ones of the same kind.

But this heuristic can deceive us in catastrophic ways. Some full-grown adults have the emotional maturity of toddlers. They got older, but they never grew up.

Bigger does not mean more mature

Bigger does not mean more mature

Large organizations can also be deceptively immature. Organizations that are in the right place at the right time often grow in the short run despite their immaturity. But they rarely sustain their luck in the long run. They inevitably find themselves stuck until their maturity catches up with their size.

Other organizations were once mature and growing, but later regress and stall due to mismanagement. Many acquisitions follow this pattern. The leaders who established the healthy culture and mature practices that created the growth cash out and retire. The new owners obsess over maximizing free cash flow to pay for debt service. So they install new leaders that change the culture, cut expenses, and eliminate mature practices they neither understand nor value. Growth stalls, then reverses, and the business becomes a turnaround situation.

An organization whose size exceeds its maturity must shrink to the level of its immaturity in order to become stable. Customers, employees, and investors all suffer when leaders fail to recognize that immaturity is at the root of an organization’s problems.

Smaller does not mean less mature

Just as large organizations can be deceptively immature, small ones can be much more mature than we might expect. Under the right leadership, small organizations with a healthy culture and a sound strategy can mature very quickly. Growth inevitably follows. Small, mature, healthy organizations with sound strategies can be magnificent investments.

Case study: MediServe and Microsoft

I spent more than ten years prior to graduate school working at MediServe, a small healthcare technology company that my dad founded in 1985, long before being a healthcare technology entrepreneur was lucrative or sexy. The company matured slowly at first, and then very rapidly, and by my graduation in 2008 it had a healthier culture, a sound strategy, and more mature practices than ever before.

That year I took a job in Microsoft’s Health Solutions Group (HSG). I was thrilled to work for one of the great technology companies, one that I imagined to be among the most mature in the world due to its massive scale, deep pockets, past dominance, and brilliant people.

Only it wasn’t. HSG was exceedingly well-funded and more than twenty times the size, but it was less mature than MediServe by an order of magnitude.

Unsurprisingly, Microsoft spun off HSG’s assets within a few years, and shut the business down a few years after that. Microsoft spent a decade on the sidelines and only recently began another attempt at building software specifically for the healthcare vertical.

MediServe, on the other hand, continued to grow steadily. It was acquired once, and then again, and today its revenue exceeds what HSG produced at its peak. MediServe’s total invested capital to date is less than 1% of what Microsoft invested in HSG.

Maturity wins

Maturity is the leading indicator of growth. It’s more important than unlimited capital. It’s even more important than having every room full of the smartest people in the room. Mature leaders often inherit organizations — sometimes large ones — that are stuck at the level of the organization’s immaturity.

In the long run, increasing organizational maturity wins. It’s among the best investments you can make. Contact us to learn more.