Leader: The misguided desire to grow, grow, grow

Yahoo! announced yesterday it is trashing plans to offer enterprise instant messaging, putting the end to an effort started in 2000 to sell web portals and video conferencing for corporations' internal use.

The company said it is unprepared to play in the enterprise space - among other factors, it is not able to offer the sort of support required by corporate customers.

Let's sidestep the issues particular to Yahoo! for the moment. Sure, it was a poor management decision to step into a new market - one quite unlike its core consumer business - and not commit the sort of long-term resources necessary to succeed. But 2000 was a heady time during which far stupider decisions than this were made.

What this signifies is a larger trend in business, which IT is affected by but extends to all sectors.

That is, the need to always grow.

We all know the story. Company A is good at X and so becomes the world's leading provider of X. It makes loads of cash. It starts to think: 'Maybe I could make even more'. So it decides to go into Y, which may or may not have anything to do with X. When it succeeds at Y, everyone's happy but when it fails it means redundancy and losses that could bring down the core business, X.

Why are companies always looking to grow? Sometimes it's ambition on the part of a CEO. Sometimes it's pressure from the board and shareholders to raise share value and make them all a little richer. In the US, corporate offices are bound by law to increase the company's market value. And though this may not be as much of a concern in Europe, companies here are undoubtedly influenced by US corporate practice.

The upshot is that lots of companies end up in businesses they should never be in - and so waste untold millions and billions of pursuing these markets.

This is not to say companies shouldn't ever take chances. It's not to say they shouldn't expand if it seems prudent to do so. But they should not ever have to expand.

With the growing ratio of public to private companies in the last decade or two, this is becoming an increasingly common problem.

Yahoo! took a risk on enterprise and failed. It came out OK in the end. It's actually pretty healthy compared to its many peers that withered or died in the dot-com crash.

A company with relatively more enterprise experience - like a Microsoft - may well come along and succeed at IM and online services for business use.

Yet expansion for expansion's sake has taken a toll on many.

The morals? Be content with your successful core businesses - not everyone can or should be a mega-corporation. And don't allow shareholders to control CEOs and pressure them into pursuing markets they wouldn't otherwise go after.