The Growth Debt

Companies are comfortable with the idea of technical debt. You build quickly, make compromises that are sensible at the time, and eventually discover that some of those decisions make the next stage of development harder.

I think companies accumulate something similar as they grow.

A founder-led sales process may be exactly right when the business is doing $500,000 in revenue.

Three talented people doing five jobs each may be far more effective than creating departments.

Depending heavily on one acquisition channel is perfectly rational if that channel is producing exceptional returns.

A broad product portfolio may emerge because the company is still discovering what customers really want.

None of these are necessarily mistakes. In fact, they may be the decisions that allow the company to reach its first $10 million.

The problem is that a good decision can outlive the conditions that made it good.

I call the accumulated cost of these old decisions, systems and dependencies Growth Debt.

It is the debt created when something that enabled previous growth begins constraining future growth.

The difficult thing about Growth Debt is that it rarely looks like debt while it is accumulating. It usually looks like success.

The $1 Million Company Inside the $10 Million Company

A company can become ten times larger without redesigning some of the things that made sense when it was small.

There are more employees now, but important decisions still travel through the founder.

Marketing has a larger budget, but most acquisition still comes from the channel that worked five years ago.

The product has expanded, but much of that expansion consists of features and offerings accumulated in response to customers and competitors.

There are managers, departments and processes, but many responsibilities still exist because a particular person happened to take them on years earlier.

From the outside, it is a $10 million company, but parts of the organisation may still be operating like the $1 million company with more people, products and revenue attached to it.

This happens because companies are rarely designed for the scale they eventually reach.

They accumulate.

A customer asks for something, so the product expands. Someone proves unusually good at solving a problem, so that problem becomes their responsibility. A marketing channel works, so more money goes into it. An enterprise client needs a different workflow, so the workflow gets added.

Each decision is reasonable on its own. Growth Debt appears in the accumulation.

Where Growth Debt Hides

You can usually find Growth Debt by looking at the things the company depends on most.

Decision Debt

Appears when the organisation has grown but its decision-making has not.

The founder or a small group of executives remain involved in decisions that should increasingly be made elsewhere, not necessarily because they refuse to delegate, but because the organisation has never developed enough context, authority or capability to make those decisions without them.

Distribution Debt

Appears when a historically successful acquisition engine becomes difficult to replace.

An EdTech company that built an extraordinary SEO presence should absolutely exploit it, but if years of cheap organic acquisition prevented it from building direct audience, partnerships, enterprise distribution or other routes to customers, an advantage has gradually become a dependency.

Product Debt

Accumulates when the portfolio becomes a record of everything that worked in the past.

Products, features and customer requests keep being added, but very little gets removed. Eventually the company has a large portfolio without a particularly clear view of what the portfolio should become.

Positioning Debt

Appears when the business evolves faster than the story it tells about itself.

The company may have new products, customers and capabilities while continuing to occupy the category it became known for years earlier.

This matters because positioning does more than describe the company; it influences what customers consider it capable of doing next.

Organisational Debt

Appears when roles and processes are built around the people who happened to be there rather than around what the company now needs.

This works surprisingly well for a long time because good people compensate for bad structure. Eventually the organisation becomes dependent on that compensation.

The common pattern is that the original decision was often sensible. What changed was the company around it.

Competition Creates Its Own Kind of Debt

There is another form of Growth Debt that I think is becoming particularly important.

Companies naturally respond to competitors.

A competitor launches an AI tutor, so the roadmap gets an AI tutor. Another introduces hands-on labs, so labs become a priority. Someone adds certification, so certification gets strengthened. One company offers personalised learning paths, and soon everyone has personalised learning paths.

Each individual response is understandable. The problem appears after several years of doing this. Everybody gets better, but everybody also starts looking more similar.

I think of this as competitive convergence: the more companies compete feature-for-feature, the less meaningful the differences between them become.

This is especially dangerous because management can feel that the company is becoming more competitive while the opposite is happening strategically. The product is objectively improving, yet the customer’s reasons for choosing one company over another are becoming less distinct.

At that point, the answer may not be to build an even better version of the same thing.

The more interesting question would be whether the basis of competition itself is moving.

If every learning platform has an excellent course library, perhaps the advantage moves from content to outcomes. If everyone has AI tutors, perhaps AI assistance stops being meaningful differentiation and becomes expected infrastructure. If everyone offers certificates, perhaps the value moves toward whether employers actually recognise those certificates. If educational content becomes abundant, perhaps the scarce thing becomes practice, verification, community, workflow integration or employability.

The exact shift will be different in every market. The principle is more general:

When everyone improves on the same axis, advantage usually moves to another axis.

This is why blindly keeping up with competitors itself create Growth Debt. The company invests more and more deeply in winning yesterday’s competition while the market quietly starts rewarding something else.

The Debt Usually Sits Where the Success Came From

If I were looking for Growth Debt inside a company, I would not begin with the things that are obviously broken. I would start with the things that have worked unusually well.

If 60% of customers come through search, I want to understand search. If one product generates half the revenue, I want to understand that product. If the founder closes most large deals, I want to understand the founder’s role.

The question is not whether these are strengths because they clearly are.

The better question is: what did the company build while that strength was working?

If SEO produced years of inexpensive acquisition, did the company use that advantage to build other routes to customers? If one flagship product generated exceptional cash flow, did the company become better at creating the next one? If the founder was brilliant at selling, did the organisation learn what the founder knows and turn it into a repeatable capability?

The strongest companies do not necessarily eliminate their dependencies; they use today’s advantage to build tomorrow’s.

That distinction matters because concentration itself is not the problem. Trying to diversify away from everything that works would produce a very mediocre company. If one channel is producing exceptional returns, exploit it. If one product is exceptional, sell it aggressively. If the founder is the best salesperson, keep the founder in important deals.

Growth Debt accumulates when the company repeatedly benefits from an advantage without deducing how much its future depends on that advantage remaining unchanged.

Netflix Didn’t Scale DVD Rentals

Netflix is an interesting example because the company had several opportunities to become trapped by its own success.

Its DVD-by-mail business was not a failed experiment that needed rescuing. It was an enormously successful business model. Netflix had built logistics, recommendation systems, customer relationships and a subscription model around delivering physical DVDs efficiently.

If the goal had simply been to improve what already worked, there were plenty of ways to do it. Better logistics, larger selection, faster delivery and more sophisticated recommendations could all have strengthened the existing business.

Instead, Netflix moved into streaming while the DVD business still mattered enormously.

That transition is often described as foresight about streaming technology, which is obviously part of the story.

I think the more interesting strategic lesson is that Netflix did not confuse the mechanism through which it currently delivered value with the value customers actually wanted.

Customers did not fundamentally want DVDs arriving in red envelopes. They wanted convenient access to entertainment.

The DVD was the mechanism available at the time. Once a better mechanism became possible, the company’s existing capabilities could easily have become reasons not to change. It had spent years becoming exceptionally good at a system whose importance was going to decline.

That is the uncomfortable characteristic of Growth Debt: the more successful the old system is, the harder it can be to justify replacing parts of it.

Keep a Growth Debt Ledger

I would make this a regular strategy exercise rather than something companies do only when growth begins slowing.

Take the major things responsible for the company’s success today: products, channels, people, customer segments, processes, positioning and competitive advantages.

For each one, ask four questions:

• What got us here?
• Is it still an advantage?
• What dependency has it created?
• What would eventually replace it?

The point is not to replace everything. Some answers may be that the existing advantage is still exceptionally strong and deserves another five years of investment. The useful part is knowing which assumptions you are deliberately continuing and which ones simply survived because nobody revisited them.

Growth Debt is rarely created by stupidity. It is usually created by sensible decisions that worked so well that the company kept them beyond the conditions for which they were designed.

That is why the shortcuts that helped build the first $10 million can become the things that make the next $10 million harder.

And once you can see them, a more uncomfortable question follows naturally:

If we know some of these things need to change, why haven’t we changed them?

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