Many companies are born from the accumulated knowledge and experience gained over years working for large corporations. They are usually highly skilled professionals who decide to become independent and form a small firm to offer specific services, often starting with former clients with whom they have built commercial ties. They establish themselves, operate, grow, and almost without realizing it, they become a Company—with everything that entails.
The problem begins when that initial success is interpreted as undeniable proof that growth will be continuous and predictable. Many founders fail to design a true growth strategy. They don’t model scenarios, study market evolution, or consider the inevitable entry of new competitors attracted by the profitability of the niche. Instead, they assume they can grow linearly, year after year, by simply repeating what they have already done. In the case of emerging technologies such as AI or cybersecurity, overly optimistic growth estimates are common.
This mistake worsens when projected growth rates significantly exceed total market growth or the country’s GDP, leading companies to overestimate their capacity for expansion without considering the entry of dozens of new players who will inevitably seek a slice of the same pie. The sector’s actual growth may not meet individual expectations, putting margins, customer loyalty, and profitability at risk.
In our conversations with clients, a fundamental question often arises: If the business is viable and there is demand, why can’t it grow without limits?
This is where what we at mb&l call ‘The Law of Diminishing Returns from Accelerated Growth’ applies.
My fellow consultant Héctor Isoldi often refers to Michael Porter to explain this phenomenon. As early as 1980, Porter warned: “The threat of entry in an industry depends on the existing barriers and the expected reaction of established competitors. When new entrants are attracted by higher margins, rivalry intensifies and profitability declines” (“Competitive Strategy”, 1980).
And he’s not the only one who warns about it:
Jim Collins, in “How the Mighty Fall” (2009), describes the first stage of decline as “the undisciplined pursuit of more,” warning: “Great companies often fall not from lack of ambition, but from undisciplined ambition, expanding beyond what they can effectively manage.”
Philip Kotler states in “Marketing Management: Analysis, Planning and Control” (1967): “When a company attempts to grow faster than the market, it begins to experience diminishing returns: each additional unit of effort brings less return than the previous one.”
Peter Drucker, in “Managing for Results” (1964), adds: “The successful entrepreneur is not the one who sees opportunities everywhere, but the one who knows how to say no to most of them in order to focus on those that truly fit their structure and strengths.”
The consequence of this linear growth mirage is well known: some companies never grow, others grow poorly, and a few reach a certain scale without having the structure or processes to sustain it. The result: poorly executed projects, dissatisfied clients, deteriorating margins, and unmotivated teams.
A realistic growth strategy is not based on desire, but on analysis. It involves studying the context, estimating market evolution, and anticipating competitive reactions. It requires understanding whether growth will come from market share or market expansion, and what internal capabilities need to be developed to sustain it. There are no shortcuts: growing well means thinking before acting.
At mb&l, we help our clients transform their technical knowledge into real businesses. And that includes designing a coherent, sustainable, and well-executed growth strategy. Because knowing how to do is not enough—you have to know how to grow.
Here is the bibliography. You can get the books, read them, analyze them, and apply what you’ve learned to your strategic planning.
Or better yet, skip all that and give us a call—we’d be happy to help.
