When growth is necessary.
There are several reasons why growth may be necessary for the survival of a company.
Companies that don't grow are more likely to disappear.
Often this is because they become targets for acquisition, in other cases, the companies could go
bankrupt.
One of the most basic reasons to grow is to achieve economies of scale.
It's quite possible that your larger competitors are operating more efficiently because they've been
able to spread their fixed costs across increased revenue.
This means they can sell their products at a lower price than you do and still be just as profitable.
This is economies of scale.
Growth is often even more essential in the tech industry and especially in companies that rely on networks
and network effects.
For example, you may have heard of the term critical mass, this is the point at which growth becomes
self-sustaining.
But until you reach that point, you're vulnerable to being usurped by a competitor.
Think of social networks such as Facebook that rely heavily on getting massive amounts of people interacting.
If a competitor were able to reach scale faster, these networks would be rendered irrelevant.
There is some evidence to suggest that once you hit 15 percent of the population, you've achieved critical
mass.
Think of two sided markets like Airbnb and Uber.
Here you have a chicken and egg problem.
If there aren't enough Uber drivers, no riders will want to use Uber.
On the flip side, if there aren't enough riders, no driver will want to participate.
Growth is necessary to provide sufficient value for the riders and the drivers.
This kind of business model just doesn't work unless you achieve scale.
Software works the same way if there isn't enough developers or content creators, then users won't
want anything to do with your platform.
Consumers don't want to engage with a platform that has no content.
Your platform has to grow quickly just to justify its existence.
Often you need to grow and unprofitable ways just to incubate the network, for example, you may need
to give away a product for free.
The one group of users, once you've built up a massive user base, content creators will be compelled
to join.
Subsidizing one side of the network can be a key to growth.
Many tech companies today sacrifice short term profits in order to get massive quantities of users.