Archive for July, 2013

The One Thing You Must Do To Grow Your Business

Tuesday, July 30th, 2013

Here’s the single biggest thing that I think separates companies which grow successfully from those that don’t.Learning to give up control to grow your business

It’s that the owners of successful businesses understand that they personally will have to change – and they are willing to make those changes.

I said that back in March of this year.

Today, I read about Clay Mathile – who sold his company for $2.3 billion in 1999.

In case, like me, you hadn’t heard of him, he owned “Iams” the pet food company. And he built annual sales from $500,000 in 1970 to $1 Billion in 2012.

For the first 10 years he put all of his energy into growing the business, working 12 to 16 hours a day. Sales reached about $10 million annually.

He realized then that he couldn’t run the business alone. So he hired the best plant manager he could find – so far so good.

But a month later the new plant manager took Mathile out to lunch and asked, “Are you going to let me run the plant?”

That’s when Mathile realized that not only was he unable to let go of control of the company but, worse still, it was an obstacle to the company’s success.

Shortly after that he signed up for a professional management program. In one session he was asked to write all of Iams’ production and manufacturing challenges on white boards.

In another flash of insight, Mathile recognized that he’d created 75% of the problems that were up on the wall.

That’s when he stepped back, looked at what he was doing and learned to let go of his desire to control everything and listen to the experts he had hired.

This was a key part of what allowed him to lead the company to achieve consistently high rates of growth.

Mathile knows from experience that giving up control can be a challenge for entrepreneurs who have poured so much of themselves into their business.

He describes it as not only a shift in how the business owner thinks of his/her role, but also a shift in how they have to behave – in what she or he gets up in the morning and does each day.

“You need to let go instead of holding on so tightly,” says Mathile. “If you don’t bring on expert employees and begin delegating responsibility, you will prevent your business from growing to its full potential.”

Realizing that he had to change must have been difficult for Mathile. But making those changes to his thinking and behaviour must have been excruciating.

He did it and he was successful.

I rest my case.

You can read Catherine Clifford’s article about Clay Mathile here and you’ll find details of Mathile’s new book here.


If you enjoyed this post you’ll also enjoy To Be Or Not To Be … In The Room That Is

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Why Conflict In A Family Business Is Bad For Strategy

Tuesday, July 23rd, 2013

We’ve worked in a lot of family businesses over the past 12 years.The negative impacts of confrontation and infighting on strategy

During that time we’ve had assignments disrupted, even brought to a premature end by family conflict.

I’ve seen family members say, and do, some terrible things to each other.

It’s not as if it’s a new experience. I saw some ugly political games in the 25 years I spent climbing the corporate ladder.

Confrontation and infighting are bad for any business. Their impact on the strategy, however brilliant and well executed, can be enormous.

There’s a difference though. In a family business, the damage isn’t just to the company.

The unpleasantness spills over into private lives, and relationships that should be close – parents and children, brothers and sisters – are shattered. And sometimes they remain unrepaired until it’s too late, because one of the parties dies.

I’d realized that the conflict in family firms seemed more intense than the ones I’d seen in my corporate days. But I hadn’t realized why until a blog post I read recently made it clear.

Corporations have barriers that prevent conflict becoming too ugly. Rules, processes and structures govern the behavior of every employee, from the lowest to the highest. For example, if a manager talks or behaves inappropriately, he will find himself on the wrong end of disciplinary action initiated by HR.

The same rules exist in many family businesses, but they apply to everyone except the owners.

Why? Family members apply the dynamics from their personal relationships to business situations – even though they know they shouldn’t. For example:

•  When a child becomes an adult and joins the family firm, the parent who raised her remembers her missteps and miscues from childhood and adolescence.

•  Parents try to resolve disputes by forcing everyone to toe the line.

•  Siblings deal with difficult circumstances by withdrawing, avoiding, or undermining each other.

Even if the child has left the family home, the plant or office can become a replacement.

As the owners of the business, the family can ignore the rules or processes. So there is nothing to stop conflict, caused by the ineffective behavior of both generations, blowing the lid off the family’s assumed harmony and threatening the success of the business.

Does this mean that every family business is fated to erupt into a bitter fight? No, of course not.

Some families use their values, long-term orientation to their investment and loyalty to employees and customers to maintain a “professional management” approach to challenges, problems and conflict.   In the other cases, family members can be helped to understand that conflicts can result if there are no formal boundaries on their behavior.

And, in fact, we have been able to help families like these, put greater structure in place. Which enables focus to go back on the execution of the strategy and getting results.

If you want to read the full blog post you can find it here.


If you enjoyed this post you’ll also enjoy Little Things Can Have a Big Impact

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Is Innovation Part of Your Growth Strategy?

Tuesday, July 16th, 2013

My friend Lisa Taylor is the founder of Challenge Factory, which offers unique career services for individuals and talent programs for companies.Innovation as a growth strategy for Canadian business owners

She, quite accurately in my opinion, describes her company as Canada’s innovation leader in career and talent management.

So it seemed only appropriate that Lisa would see, and forward, an article about a survey on firm-level innovation in Canada¹.

The results contain some interesting lessons about innovation as a growth strategy for Canadian business owners.

1.  The most successful innovation strategy is to provide products and services to new international markets. According to the survey, firms that do this earn between 10 and 30 per cent more net income than their counterparts using other approaches.

Yet more than 85% of Canadian firms prefer to operate within provincial or national borders, or in North America, rather than competing in international markets.

Perhaps this is a result of our conservative nature.

2.  More than half of the Canadian firms surveyed pursue a “user needs-driven” innovation strategy. This means they get new ideas for developing products and services from customers.

In comparison, about one-third of the respondents adopted a technology-driven innovation strategy – one that relies on exploiting advances in technology to gain a competitive edge.

The user-needs approach is probably less risky and may produce faster returns than the technology-driven.

3.  The most common challenges which slow down or prevent innovation include – fear of risk, lack of funding, lack of leadership focus and the organization’s culture.

The fear of risk and lack of focus make perfect sense as challenges to innovation and reflect what we see in our own practice. You can argue that, since a company’s leadership directly influences the culture, those 2 are related also.

4.  Internal cash is the number one source of funding for innovation in Canadian firms. Government financing comes second, ahead of private equity and bank financing.

And firms looking to expand the size of their markets/territory make more use of internal financing and less use of government funding or private equity than do firms with user- or technology-driven innovation strategies.

It’s not clear if the use of internal cash is by choice or by constraint. Either way, it’s interesting that neither private equity nor government financing is more readily available for market expansion, given the fact that the companies doing this achieve better average financial performance than other firms do.

5.  There is a strong correlation between the intensity of innovation efforts and company performance – but only if the innovation activities are well managed.

This should not be a surprise to anyone who follows my blog because it’s confirmation of a point I make often. If company A executes its strategy more effectively than company B, then company A will obtain the best results, even if company B has the better strategy.

You can read the article Lisa sent me here.


¹  2012 Survey Findings: The State of Firm-Level Innovation in Canada, published by The Conference Board of Canada’s Centre for Business Innovation.


If you enjoyed this post you’ll also enjoy 3 Things That Shape A Good Strategy

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Succession Planning and Human Nature

Tuesday, July 9th, 2013

Many of the business owners we meet consider their own sudden or unexpected death to be so unlikely as to be impossible. So, they see absolutely no need to plan for it.Succession planning is so important for business owners

A few even ridicule the idea.

Life has, however, repeatedly demonstrated it won’t be influenced by what business owners think.

As a result, an event, which was deemed to be impossible, becomes all too real. Recently it happened to the founder of a company we’d worked with.

It’s tragic when these situations occur.

The business owner’s family, like any other family, has to cope with their grief – that’s unavoidable.

But they also have to deal with a company which has not been prepared for this situation – and which may be struggling financially. And this, it can be argued, is avoidable.

The need for succession planning has been widely discussed for a number of years. There are books available; accountants and lawyers have been holding workshops for a long time; and, of course, there are consultants offering succession-planning services.

So, there was a solution – it just wasn’t taken. It’s tempting to sit on the sidelines and, hindsight being the only exact science, say that.

But to do so is to deny human nature.

Most of us find dealing with our own mortality somewhere on a sliding scale that begins at difficult and ends at impossible.

Business owners are no better than the rest of us at dealing with mortality, if anything they’re worse.  They’re used to being in control of what’s happening around them. And becoming ill or dying is way outside of anyone’s control.

Some entrepreneurs find a way to rationalize succession planning so that they can at least tackle it. Or they force themselves to look at it as just another job that has to be dealt with.

But some can’t do that and so they avoid it.

The strange thing is that those who can’t deal with it love their families just as much as those who can. They often started their business as a way to provide a good way of life for their partners and children.

Yet they expose them to a very difficult situation at a time when they’re already dealing with one of the worst events in their lives.

I don’t know what is happening to the family of the founder we worked with. She loved her work and had difficulty letting go of any aspect of the company. And so she also had a hard time believing a succession plan was necessary, despite the fact she’d already had a bout of bad health.

I can only hope she had changed her way of thinking and implemented a succession plan.


If you enjoyed this post you’ll also enjoy 4 Things Every Business Owner Must Think About

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Should The Business Owner Remain CEO?

Tuesday, July 2nd, 2013

From time to time a business owner we’re working with will ask if we think he or she is the right person to take their company to the next level.Should business owners remain in or relinquish the position of CEO?

This concern has its roots in a broader question.

Can entrepreneurs scale the companies they start or should a professional manager/CEO be brought in at some point?

Arguably this is a leadership not a strategy issue. But the two are interwoven, perhaps even inseparable.

Randy Ottinger nicely summarized the alternative approaches in a recent article.

1.  The founder stays on as CEO

This theory, like the others, is supported by research from very credible sources.

The conclusion – founding CEOs consistently outperform professional CEOs on a broad range of business and financial measures. The founders of technology companies, in particular, have core competencies an outsider may not have.

Some high profile companies with successful founder CEOs are Starbucks, Amazon and Apple.

2.  The founder forms a partnership (not necessarily in the legal sense) with a professional CEO

This time, the research concludes that founders maximize the value of their equity by giving up the CEO position.

The founder of LinkedIn supports this alternative. He argues that retaining the founder prevents the loss of the essence and entrepreneurial nature of the company, while at the same time gaining the expertise to scale the company in the professional CEO.

Other companies, which went this route, were eBay and Google.

3.  The founder is replaced by a professional CEO (brought in from another company)

The third alternative is to replace the founder with an outsider.

But Jim Collins, amongst others, concludes that great companies have a much greater chance of success if they hire from within rather than go outside to find a CEO.

So where does all of this leave us?

4.  The fourth alternative – common sense at work?

Clearly, not all situations are the same.

So, perhaps it’s not about choosing either a founder/CEO or professional/ CEO, but about using the leader whose skills and abilities best match the requirements of the task at hand.

Founders typically are innovators with entrepreneurial drive who may not have the skills needed to execute. Professional managers typically know how to execute or scale but are not strong on innovation.

The question, in both cases, is does the individual have at least some of the missing skills and the desire to build on/improve it? (Which ties to one of my theories.)

If the answer is “no” then a “team” approach may be more effective. Titles can always be massaged (e.g. 1 person is President, the other CEO; 1 is CEO, the other COO).

But the job responsibilities must be clear and unambiguous.

You can read Randy Ottinger’s article here.


If you enjoyed this post you’ll also enjoy Don’t Shoot Your Strategy In The Foot.

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