The Self-Destructive Habits of Good Companies: ...And How to Break Them

Chapter 7. Volume Obsession: Rising Costs and Falling Margins

Perhaps a more businesslike term for this self-destructive habit would be “cost inefficiency.” But it comes to the same thing: Your costs are too high for the revenue you’re generating, or, in the simplest formulation, you’re spending too much money to make money. In a nonmonopoly situation, this occurs when prices have crashed due to intense competition or excess industry capacity, but your costs remain the same.

Like most of our self-destructive habits, this one usually seems to be a by-product of growth. The human analog would go like this: After I am past my “growth spurt,” I stop burning my calories productively, and I end up storing unused fat in my body. I’m using my energy ...