The Alchemy of Growth

by Stephen Coley, David White and Mehrdad Baghai

In The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise, Stephen Coley, David White, and Mehrdad Baghai argue that managers should manage their organizations three dimensionally. That is, at any given time they need to be focusing on their current organization (tier one), organizations emerging from their current organization (tier two), and the "seeds of tomorrow's businesses-options on future opportunities" (tier three). The authors provide examples that such a tri-partite approach is an effective way to sustain growth over time.

What's best about the book is the clarity of the thesis and the book's organization, as well as the many examples of well-known high-growth firms recreating themselves-Gillette, Charles Schwab, Wells Fargo, Johnson and Johnson, Emerson and 25 others that are outlined in an appendix. The thesis, organization, and the specificity of the examples are surely the reason Alchemy of Growth was read by so many chapters of the Young Presidents Organization. It's one of those books that spurs serious thinking about the future of one's firm.

This reader's first thought was, "Wow, it's hard enough to manage the current firm. Who has the time necessary to manage their current organization, the recreation of their business and be visionary enough to create and start managing the tier three ideas?" The authors' answer to this question is, "The winners have the time-those who will be around long after most firms have died."

Coley, et al, then present their argument in four parts. Part One is called Understanding Growth and it deals with the three tiers and the need for, "active management of three distinct stages in a pipeline of continuous business creation so that leaders' attention to managing their core business is balanced with efforts to develop new enterprises." Part Two is called Overcoming Inertia and discusses "two essential preconditions for profitable growth: earning the right (getting financial healthy enough to grow) and developing the resolve to grow." Part Three is about Building Momentum and presents a step-by-step method for assembling the necessary capabilities and organizing to protect and nurture new business initiatives. It shows how companies can successfully invest in business creation." Part Four, Sustaining Growth, lays out the organizational approaches, management processes, and leadership actions that are required to foster continuous idea generation and new business development." Each part is peppered with solid examples of firms that are succeeding on the several tiers the authors recognize.

While I thought the book was thought provoking, I did have a few difficulties. The authors list a few failures as growth champions, most unfortunately Enron--although the authors do admit that some of their examples have fallen. The other, more serious weakness I see with this book is that, while the author's suggested approach has a high face validity, they admit that they have no best-in-class example of a growth organization that has developed customized management systems for each of the three tiers. They see having these three management systems as the key to sustained growth. Then they argue that it is the absence of such a best-in-class model that is one of the main reasons firms (including some of the examples cited) have failed to grow. The problem I have with this notion is that Enron, for example, did not fall simply because it lacked the three customized management systems for creating businesses. This logic stream, presented on page 137, seems a little too neat to me and did a better job positioning the authors' consulting services than in effectively concluding their thesis.

My overall conclusion: read the book because you will be able to apply its points and examples regarding business creation to your own organization. But approach some of its arguments with a boulder of salt.

Reviewed by S4 Consulting

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