Chicken or the Egg? What comes First?

Recently I was making a pitch for growth at an Information Technology Solutions company and I was just through my first segment drawing the inference of the External Environment with reference to the trends in macro economic  conditions, Technology, Competitive and Innovative trends when I was interrupted and challenged by this very senior officer in the corporation who had also been a successful local entrepreneur. He said “if we examine business history, those who adopted LPG Mantra (Liquidity, Profitability, Growth) and in that order, succeeded. So Liquidity comes first and growth comes last. Why are you talking about growth first”?

I tried to explain and my arguments are as follows:

  • First of all, it is not about an order. All the three are mutual causing phenomena. It is possible / true that some established large corporations may as a matter of prudence choose to give precedence for one over the other at various lifecycles of one’s business as a short term fix. However, it cannot be employed for long term advantage.
  • Fundamentally, growth includes Profitability and Liquidity whereas the converse cannot be true. Every business comes to a position of liquidity only after experiencing growth.

The officer got more aggressive now and quoted Michael Dell. Now, I have a great respect for Michael Dell and the way he has shaped the success of the Dell Corporation business. I had not read (and I still haven’t as I write this piece) and so had to pause in my defence. All I could muster was, I don’t know what would have been the context for Michael Dell to make such a statement and therefore I will have to research the same as well as read the book. This subject also kept me thinking and I tried to draw several inferences from general life as well.

For example, do we ever think what is more important from a nature’s perspective – Ice, Vapor / Clouds or Rain? Is it worth debating about the solid, vapor and / or liquid state of the same substance? Isn’t this debate about what comes first with respect to Growth, Profitability and / or Liquidity akin to a similar argument? Further, is liquidity confused with stagnant pools of dirty water or is it the flowing river that creates fertility for fresh growth of crops and life over a larger territory? Is business removed from life that we cannot be inspired to learn from nature and incorporate the basic principles of physics to the structure and systems of business?

I did some research on Michael Dell and though I am yet to read this purported book in which he has made this statement, the link I have hear seems to suggest the opposite (http://www.performance-measurement.net/news-detail.asp?nID=12) . Far from suggesting that Dell focused on Liquidity in place of growth, the article clearly shows methods that balanced the three to produce more robust growth. In this very interesting interview titled “Executing On Innovation” (http://youtu.be/bQpNhZ1SndQ ) Vijay Govindarajan, Earl C. Daum  Professor  of International Business Tuck School of Business Dartmouth, makes an amazing revelation; Studying the recession patterns of over the last 200 years, his research has revealed that every period of recession is followed by a twice or thrice the period of greater expansion in every society.

We are living in an increasingly democratic world in the throes of an Information Revolution that is guided by Experiencing Knowledge. When leaders tend to take a unidimensional mutually exclusive stance on subject such as growth, they are letting themselves and their corporations down of exploring great opportunities and pursuing them concurrently; not just because it a fancy new way of doing things. Rather, the external engineering of technology and systems today facilitates us to engage in this multitasking and therefore the luxury of mutual inclusivity; mutating the cycles of Mind 2 Market (M2M) and Time 2 Market (T2M).

The world is coming through the grips of a global recession and is in desperate need for new business models that will mutually address growth and productivity; Invention, Innovation and Improvisation concurrently. Understanding their distinct differences and providing the impetus for their enterprises and the managers who work there, the empowerment to collaboratively participate in their ecosystem facilitating growth not only for themselves but for the entire value chain.

I would love to hear your perspectives in shaping this debate further.

About Subbu Iyer

Subbu Iyer is an Innovation & Transformation Leader as with 28 years of serving customers globally. He is currently the Chief Designer & Transformer at Energizing Innovation, an enterprise that is being founded to facilitate continuous growth in enterprises and as a consequence create societal wealth. The Radical Shift that this enterprise intends to employ is focusing on the Potential rather than the Performance of a business. He has been a serial entrepreneur and an intrapreneur in his past life, having founded Nihilent Technologies and Nandaki Systems besides being associated in senior leadership roles with firms such as Coopers & Lybrand, Cambridge Technology Partners, Tata Consultancy Services, Wipro Technologies and Steria.
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3 Responses to Chicken or the Egg? What comes First?

  1. I like the way you have articulated your thoughts.
    From the discussion it reveal that both of you agree on the point that Liquidity and Growth are essential phenomena of business and their co-existence only can depict success.
    In my view Liquidity and Growth are two different point of force of the business wheel which makes the wheel to move through the success path. If we break the path in time scale we might see Growth and Liquidity interchanging their position but eventually without their co-existence business wheel does not move.
    During the initiating phase liquidity is essential to establish the growth engine. But for liquidity initiative might fail. On the other hand established growth engine brings liquidity.
    Thus liquidity work as catalyst to growth and also derived out of growth. On a growth phase we must think beyond sustainability while admitting the pressure on liquidity.

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