Business model

The profitability crisis

Why growth alone can't save a broken business model.

The company everyone wanted to believe in

In 2019, WeWork looked like the kind of company investors love: revenue climbing, new locations opening globally, significant capital flowing in, and a story that promised to transform how the world worked. At its peak, private investors valued the company at roughly $47 billion.

Then, as the IPO process forced a closer look at the numbers, questions surfaced about governance and the underlying economics. The valuation cratered, leadership changed, and expansion stopped. The lasting lesson is not that ambition or growth is inherently dangerous. It is that rapid growth can hide a business model that is not working.

Growth does not change a business. It amplifies whatever is already there.

A pattern that repeats at every scale

Most businesses will never make global headlines, but many make the same assumption: more revenue will eventually solve the problems that require structural change. Thin margins, rising costs, and cash pressure can look like problems of scale. Sometimes they are. Often they are signs that the economics below the top line need attention.

A strong model compounds value as it scales. A weak one compounds complexity, cost, coordination demands, and pressure on margins. More customers, products, and locations are not a cure when the cost-to-serve or return on capital is already working against the business.

Activity is not the same as value

Busy businesses can still become economically weaker. New customers, new products, faster sales, and expanding markets create visible motion, but visible motion is not the same as durable value creation. In the early stages, growth and value often move together; then complexity creeps in, acquisition costs rise, decisions slow, and margins quietly erode.

This is the moment to move from asking “How do we grow faster?” to “How do we grow better?” The first question is about volume. The second asks whether every customer, product, and operating decision strengthens the economics of the business.

Profitability is the foundation

Revenue reflects demand. Profitability reflects the quality of the system underneath that demand: customer economics, retention, cash flow, cost-to-serve, operating discipline, and returns on invested capital. Without it, growth eventually relies on outside funding or increasingly desperate expansion tactics. With it, growth becomes self-sustaining.

Profitability is not the reward collected after growth. It is the foundation that makes lasting growth possible in the first place.