In the business cycle, companies grow and stagnate. Similarly, on a macro-level, they aggregate and decouple.
I’ve already talked extensively on the micro lifecycle of a business, so I won’t spend too much time discussing it here. Rather, I’ll assume you read that post and go into the macro theory.
This theory I consider macro because it involves firms interacting with others firms, either via M&A or product differentiation, most likely a combination of both. Firms in the growth phase tend to also be in the aggregation phase. Take Google, for example — a company that began in search engine and advertising at its start has now gone on to take up email, geography, videos, group chats, and word processing, just to name a few. Corporations, insistent that they keep up growth, become unsatisfied with their original market and seek to expand and conquer.
But it never ends in world domination. In the slow decline phase, companies begin to decouple. This doesn’t literally mean sell off assets (though it could), but rather the vulture-picking of products by faster growing startups. Think of the famous picture of Craigslist’s front page, showing off all the companies that grabbed up pieces of the portfolio.
There’s a few lessons that could be learned from this. One might be that constant expansion is fruitless, because it eventually involves going back to zero. But I would say it’s a bit more nuanced than that — really, it’s based on how high you want to go, and when. You can make a million dollar company that lasts decades, or a billion dollar company that lasts years. Both have different payoffs, and different disadvantages.