It's the business cycle my friend!

Here is the fun of it: the market demands constant growth. For whatever reason we are not OK with stability, the only thing that gets our motor going is growth baby!

So, a new company starts, let's call it a coffee and donut shop. They have a differentiating product, and experience initial growth. Amazing! They have so much room to go up! They start expanding, more stores, more revenue, the gods of capitalism are satisfied. They product remains good because they are still in the initial growth phase of "make your customers happy to grow". Then they run out of markets... ok, let's try diversification! So instead of just coffee and donuts, they introduce sandwiches and shit. Boom, more revenue! I mean at this point their sandwiches are... probably mediocre because that wasn't what made them popular in the first place, but their brand is strong and their loyal customers are eating the sandwiches. Revenue growth is great, the gods are still pleased.

Now we have a problem though. We have saturated all of our markets and diversified our offerings past the point of sanity. We have hit a lull, and cannot find a path to revenue growth. Do we say "we're happy with our current market share, let's maintain it and keep our customers satisfied"? Hell no we don't! Now we're in the "profit growth" phase of our business! If you can't grow the top line, you gotta work on shrinking the bottom! At the start this is easy, you grew fast and likely not in an efficient way. So start looking at some inefficiencies that have basically no impact on the final product and you're cooking. The problem is, even those opportunities start drying up. Now you have to make changes that have SOME if small, impact on your customers. Eventually you move to frozen donuts instead of fresh, don't throw out the day olds because "they're good enough", and make decisions driven by increasing the profit margin, even if minor.

Now here is the fun part. By this time in the cycle there is some brand loyalty associated because consumers are not acting on perfect information, and there is a lag in their info. So people still consider your coffee shop "a good brand" even though the product has gone to shit since they formed that opinion. So the accountants all high 5 themselves on their great initiatives increasing profit, without realizing they have already signed the death warrant of the company, it just takes time to degrade a brand enough to overcome the savings they are realizing.