Spotify founder and CEO Daniel Ek learned one of his favorite business lessons from a chocolatier. The story changed how he looked at growth and what it does and doesn’t mean to a business. The implications are broadly applicable to any business, and especially any business owner.
In Ek’s story, he meets a chocolatier at a dinner in Dubai and starts pestering him with all sorts of questions. Who are your customers, who do you buy from, how’s it work, etc. The chocolatier describes it all, including how he is growing at about 10% per year, is wildly profitable, and is loving his life. Ek, with his exponential user growth-curve mindset, starts asking what the boundaries are. Why not grow at 30%? Why not 50% if things were so good? What’s the limit to how much he could grow in a year? Why not get huge?!
Finally, the chocolatier has to tell him to stop. Ek wasn’t understanding. Business was good and he was really enjoying life. He was happy. If he started to grow at more than 10%, he’d add all sorts of other responsibilities and wouldn’t be able to enjoy life in the same way anymore. More sales meant more production runs meant more space meant more people meant more training meant more work… and to what end? Growing just enough but not too much was a conscious trade-off he was making. He didn’t care about the market’s boundary, he cared about his lifestyle’s boundary.
Growth is an obsession in many industries these days. To grow well, we need all of the processes and systems to anticipate the new problems growth brings. Without them, growth stalls, or worse – our jobs/projects/companies come crashing down under their own weight. We can’t talk about growth without talking about how to accommodate an increase in size and scale.
When we match our willingness to work on our processes and systems with our expected growth rate, we can target a state of consciousness and even happiness. For Ek and Spotify, it was in exponential growth towards absolute market share, with the businesses infrastructure as an evolving boundary they would continue to push. For the chocolatier, it was in a steady-state of growth with his happiness as the target and the boundary. Each business has its own sweet spot and it’s always based on the desired rate of investment in processes and systems.
Growth is a nuanced topic. It may solve certain problems, but it also creates others. It can raise profits, but it can also raise costs. It can have a boundary set by market forces, or it can have a boundary set by us. Ek’s big takeaway, which should be ours too, is to not think about growth one-dimensionally. Seek growth, but respect all that comes with it.
*Want more? Listen to Invest like the Best Podcast, episode 147, “Daniel Ek – The Future of Audio”