By Dr Steven McCabe – Birmingham City University’s Business SchoolDr Steve McCabe

The BBC website contains a story about a San Francisco-based online fashion company American Giant which describes what happens if you experience sudden success, in terms of customer orders, which cannot be fulfilled.

Nobody who starts a business wants to be anything less than successful.

However, as the example of American Giant clearly shows, if what you provide to customers is perceived to be really good and word gets around – as happened when magazine Slate published an article claiming their sweatshirt to be the “greatest hoodie ever made” – then incredible success can be immediate and dramatic.

There is something very sad in seeing business ventures that were wildly over-optimistic; full marks for enthusiasm but resources cost money and the skill is in starting cautiously and developing the brand.

American Giant appears to be one of those businesses that has done all the right things but ended up in a situation of what is termed ‘catastrophic success’.

There appears to be little that American Giant can do; even if it raises prices in the future (standard economic theory when there is excessive demand), this will not deal with the current backlog of disgruntled customers.

As Terri Levine the ‘business mentoring expert’ quoted in the article suggests, if American Giant’s products really are perceived by customers as being excellent then it probably should raise its prices.

The dilemma being experienced by American Giant is a dilemma that few companies tend to experience and the reality is in generating interest in the product or service you have which requires significant effort and, all-too-often, considerable expense.

So, whilst catastrophic success might appear to be virtuous, and most certainly better than failure, it brings problems.

Managers should attempt to develop their businesses in a way that is consistent with whatever resources likely to be available.

Rapid expansion may promise much and seem seductive but it comes with great risk.

What do you think?

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School