The core concept is that focusing on serving a fixed number of customers, rather than seeking to constantly increase the number of customers served, is a more plausible long-term strategy because it facilitates planning and operational efficiency.
Much of the waste in business operations is pinned to the hope that the firm will sell more product next year than last year - managers ramp up production and staffing to provide products (goods or services) for 20% more customers in the next year. When those new customers fail to materialize, the cost of the extra capacity is waste, which causes the firm to lose money on unnecessary expense and, in some cases, collapse from the financial burden of having spent an unnecessary amount of money to provide capacity that cannot be sold.
It is also a problem if more customers than anticipated are gathered by the various efforts to grow the firm, in that the company finds its staff and facilities insufficient to serve the massive influx of customers and its inability to provide service as promised is a disappointment to new customers (who are turned away) and old ones (whose quality of service diminishes as the company struggles under the strain) as well, and damages the reputation of the brand.
Both of these problems can be avoided by assuming a fixed customer base, which renders a fixed level of demand, which requires a predictable amount of production. That is to say that a business is capable of profitably serving a certain number of customers, beyond which point growth becomes unprofitable and the firm becomes unsustainable. Hence, a firm should be managed for long-term stability rather than constant growth.
All of this makes perfect sense, but for one thing: avarice. I would not go so far as to claim all businesses are greedy and want to suck up as many consumer dollars as they can get - but I can say that I have never heard of a firm that doesn't covet growth and is willing to focus on providing quality of service to a limited market - and whose long-term strategy is to serve only as many customers as necessary to cover costs and generate a fair profit, and to the rest say "No thanks, we have as much business as we can competently and profitably serve right now."
To my knowledge, there is only one kind of company that seeks sustainable operations as a long-term strategy, and that is a monopoly.
Monopoly Efficiency
A monopoly exists when one firm serves 100% of the market and there is no competition. This is generally considered by panic-mongers to be a bad situation because the monopoly "controls" the market and can use this power to charge exorbitant prices - though reason tells us this could not happen in a free market because entrepreneurs would quickly recognize the opportunity to underprice a monopoly and would enter the industry, thus ending the monopoly. The only way for a monopoly to occur in a free market is if one firm provided service of acceptable quality at a fair price (what's wrong with that?) or for government to favor one firm and prevent competition (which, ironically, is called a "natural monopoly").
For the latter reason, monopolies exist in otherwise free markets, generally in the form of "public" utilities. In most markets, there is no competition for electricity, water, waste disposal, and other services of that nature because local governments support one provider and prevent competition. And what can be noticed is that these businesses run their operations with exceeding efficiency because of the predictability of demand.
Granted, there can be some objection to the suggestion that utility companies are efficient - though it is based largely on ignorance. Most people complain about their monthly bill but haven't run the numbers. Had they done so, they would quickly recognize that compared to the cost of purchasing an electric generator and paying for maintenance and a constant supply of fuel, the local electric monopoly's prices are in most cases very low.
The reason a monopoly is able to be efficient and reduce waste is that demand is highly predictable. Except in rare instances, people do not move into or out of a service area in large numbers. And in aggregate, there is very little fluctuation in the amount of power or water consumed by a population. The monopoly can therefore make accurate plans for serving a fixed number of customers and eliminate the waste of overproduction.
Adopting Monopoly Thinking
In non-monopoly markets, there is a great deal of delusion. Companies assume they have the ability to grow their business infinitely, and every firm in an industry assumes a 5% or 10% growth rate in the following year - even when there is not any reason to expect the same level of growth in aggregate market demand.
For example, take firms that produce diapers for babies under one year old. In the United States, about four million children are born each year - a figure that has not fluctuated much in twenty to thirty years. These firms should be well aware that this means there are four million customers per year (given that last year's customers "age out" of their product) and this figure is unlikely to fluctuate by much. There is no significant increase or decrease in need, hence none in demand. The only way these firms can grow is by stealing customers from one another - such that one firm's gain is another firm's loss. In that situation, it is completely irrational for any firm to expect a 10% increase in business each year for the next decade (unless it can offer a significantly and sustainably better value proposition to consumers).
It would be far more rational, and efficient, for one of those firms to recognize that it has a 20% market share, and will not likely increase it, and so should set its production budget to manufacture and distribute enough diapers for 800,000 families and its marketing budget to merely replace any customers who may defect - then price its product to provide a reasonable and consistent return to long-term investors.
But this is not done: the combination of avarice and delusion lead firms to the belief that they can somehow manage to grab more of the market from competitors - often without making any improvement in product quality - and that its competitors will not be siphoning off their existing customer base. The net result is an exorbitant expense of marketing and waste in the manufacturing operations - which causes firms to become inefficient, unprofitable, and unsustainable.
The reason firms do not collapse on a regular basis can be attributed to consumer surplus. The customers pay not only the cost to manufacture and distribute the products they need at a reasonable profit to the providers, but they also pay for the waste of their providers' inefficient business operations.
It would also stand to reason that the firm that plans for a sustainable level of business could minimize this waste and more competitively price its product, resulting in a slow but sustainable growth in its market until it has reached the point of saturation in terms of the value proposition that is acceptable to its market segment.
Segmentation and Monopolization
While it is likely not possible for a firm to establish a monopoly in a regulated economy (regulators would prevent this, even if the market favored a single company's value proposition), many firms do seek to monopolize market segments - and doing so should likely give them the ability to apply sustainable monopolistic thinking to their operational strategy.
Consider the previous example, in which demand for diapers could be predicted according to birth rates in a given market. A firm that proposed to sell all diapers to all ages would likely be recognized as a monopoly and shut down by regulators. A firm that proposed to sell diapers for first-year infants would draw less attention. And a firm that proposed to sell diapers for first-year infants of middle-income families in twelve states would draw even less attention.
To win a monopoly over such a well-defined market segment should be more feasible, as the firm could readily identify the needs and price sensitivities of a specific target with a relative degree of accuracy - and so long as it could find a way to manufacture a product that served their needs well at a price that customers found to be attractive, it should have little difficulty creating for itself a sustainable market.
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I'm aware, at this point, that I've taken off into a realm of speculation based on a plausible theory and have perhaps gone a bridge too far. But I expect the core theory is plausible: that a firm can define a specific market segment, plan for a specific market share, and thereby eliminate waste and gain operational efficiency at a level that is both profitable and sustainable.
The primary obstacles to doing so are likely cultural challenges: the present culture of "more and more each year" in defiance of all logic is likely difficult to impossible - and attempting to use reason to dispel irrational beliefs is a difficult proposition indeed.
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