Posts Tagged ‘companies’

3 Lessons About Successful Business Growth

Tuesday, January 27th, 2015

Two books, published 19 years apart, yet saying similar things about a key aspect of successful business growth:Lessons about successful business growth

‘Built To Last’ was published in 1994. In it, Jim Collins analyzed 18 companies that he called visionary because they were the best in their industries – and had been that way for decades.

Collins argued that the core values and enduring purpose of all 18 could be separated from their operating practices and business strategies. And that, while the former never changed, the latter changed constantly in response to a changing world.

In her book ‘The End Of Competitive Advantage’, published in 2013, Rita Gunther McGrath studied the performance of large, publicly-traded companies from 2000-2009.

She found that only 10 of them grew their net income by at least 5% every year. All 10 had found ways to combine tremendous internal stability with tremendous external flexibility.

McGrath argues that to win in volatile and uncertain times, companies must learn to exploit short-lived opportunities quickly and decisively.

If you look at the things that Collins’ companies kept unchanged and those that gave McGrath’s companies their internal stability, you find, in my opinion, a number of similarities:

  • Collins’ companies all had a sense of purpose, a lofty aim. So did McGrath’s – to become world class. Neither talked about making money.
  • McGrath’s companies focus on values, culture and alignment. Collins’ had ‘cult-like’ cultures, only employees who shared their values stayed.
  • Collins’ companies invested in ongoing employee education, some building learning centres. McGrath’s also invest heavily in employee education and ‘upskilling’, increasing peoples’ internal mobility as the strategy changes.
  • The most senior executives in all 10 of McGrath’s companies were promoted from within. Collins’ companies showed amazing consistency promoting ‘home grown’ senior management and CEOs.

I think there are 3 lessons for the owners of smaller, privately-owned companies:

  1. Think about why you started the company. I’ll bet it was not ‘to make money’. Communicate that constantly, use it to shape the company’s values and vision, build your strategy on that foundation.
  2. Be clear about your values. Hire only people who share them and train those people to grow with you.
  3. View the company as something that can contribute to your community, long after you have moved on and develop people who will carry on your vision.

There are other lessons from these books. More on that later……..

 

If you enjoyed this post you’ll also enjoy 4 Things That (Positively) Affect Growth

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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Good Strategy Execution Pays Off

Tuesday, October 28th, 2014

I’ve believed for many years that how a company executes its strategy is more important than how it develops the strategy.Good strategy execution pays off well when you focus on these 7 key capabilities

I’m talking about the business strategy, the one that deals with all parts, departments or functions of a company.

My point could also apply to departmental or specific strategies; for example, sales or marketing strategies, since theoretically, these all flow from the business strategy and are integrated with it.

Previously, I’ve never had any evidence to support my belief since common sense, apparently, does not qualify as evidence.

No more.

Earlier this year, no less an authority than McKinsey & Company¹ gave me evidentiary support for my arguments.

They used their Implementation Capability Assessment to separate companies that are good at execution from those that aren’t. The survey then found that good implementers:

  • Maintain twice the value from their prioritized opportunities after 2 years.
  • Score their companies 30% higher on a series of financial performance indicators.

So there! Executing well pays off – literally.

How do you know if your company is a good implementer or a poor implementer?

McKinsey identified 7 key capabilities for executing well. Every company may have them to some extent. Yet businesses which are good at execution, are almost twice as good at them.

The 7 capabilities are:

  1. Ownership and commitment to execution at all levels of the company.
  2. Focus on a set of priorities.
  3. Clear accountability for specific actions.
  4. Effective management of execution using common tools.
  5. Planning for long-term commitment to execution.
  6. Continuous improvement during execution and rapid reaction to amend plans as required.
  7. Allocation of adequate resources and capabilities.

Finally, here’s the good news. Good implementers believe that execution is an individual discipline, which can be improved over time.

Does this confirm my belief that how a company executes its strategy is more important than how it develops the strategy?

Partially. More importantly, it does demonstrate that time spent improving a company’s ability to execute is time well invested.

As for the comparison to developing a strategy – I’ll just have to keep on looking.

______________________________________
¹ “Why Implementation Matters”, McKinsey & Company Insights, August 2014

 

If you enjoyed this post you’ll also enjoy To Grow or Not To Grow – That Is The Question

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

2 Risks To Business Growth – And How To Avoid Them

Tuesday, June 17th, 2014

We’ve worked with well over 100 companies since we started ProfitPATH.2 of the 4 risks that affect business growth and how to avoid them

A couple of posts ago, I commented that we did some, or all, of the same 4 things for the companies that achieved the results they wanted.

Was their success solely attributable to what we did for them? I can’t prove that with certainty.

But I can say this,

  • Ignore these 4 things and you will not get the results you want and your company will not achieve its potential. (That’s why we call them the 4 Risks.)
  • On the other hand, if a company deals with all 4 regularly, it will improve its results.

Here are the first 2 and some tips on how to deal with them.

1.  Have A Clear Growth Path

Having a clear growth path means having a picture of what you want your company to look like in 3 years’ time.

The best pictures are rich in detail and sharp in focus. In this case:

  • Detail comes from the depth of analysis that goes into building the picture.
  • Focus is a result of the choices that are made about the initiatives required to get there.

Using other language, this is your Vision, your Mission and your Strategy.

Bear in mind that we update photos of things we love – children, pets – as they grow and change. The same applies to a company.

2.  Link It To Action

The 3-year picture is what you desire. Turning it into reality takes action which yields results.

The key is to break what has to be achieved in 3 years into 3 sets of annual goals. Figuring out what has to be done in 12-month bites provides the flexibility to adapt as you learn more than you knew when you started out.

However, this requires a process and the discipline to use it every fiscal year.

  • Where must we be in 12 months? Where are we now? What’s the gap? How do we close it?
  • Prioritizing the list of “to do’s”; allocating resources to the high leverage items; and putting action plans in place to complete them.

This process drives the annual financial budgets – not the other way around.

I’ll touch on the other 2 Risks next time. For now, ask yourself this: “Where do you want your business to be in 3 years’ time?”  And, “What do you think you have to do to get there?”

 

If you enjoyed this post you’ll also enjoy A Vision – Is It Worth Investing The Time?

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Targets Are Targets, Results Are Reality

Tuesday, May 27th, 2014

Hubris can be the first of the 5 stages of decline.In the last few days, the weather, in the parts of Canada I’ve been in, has gone from chilly to hot.

About time, too!

It’s almost the end of May. The golf courses are open.

Another month and the schools will break up for summer and vacation time will begin.

And, just in case it’s overlooked in the excitement, companies with a calendar fiscal will reach the mid-point of the year. I know. I’m a dour, Scottish buzz kill.

Some business owners will go off on vacation pleased that results are ahead of expectations. Others will not be so satisfied – and some will be unhappy.

But all 3 types of owner share 1 thing in common. They know more now than they did when they set their expectations for the year.

Why is that worth mentioning?

We live in an achievement-oriented society. So we’re programmed to focus on the latter 2 types of companies – those that haven’t made their targets and those who are barely doing so.

They’re the ones who are underperforming. So they need to figure out why because they need to do better.

And that’s where our thinking often stops.

However, what about the companies that are doing well against their targets?

Is it possible that’s because their targets were low? After all, they were set around 6 or 8 months ago.

And, despite having been in the consulting business for over 12 years, I have yet to meet someone who can consistently predict the future.

Some of the owners, whose companies are doing well, will take the time to review their performance. And, if needed, change their activities to drive for even better results based on what they now know about this year’s performance.

In fact, I notice that the owners who take the time to step back and review their performance regularly, tend to have successful businesses.

The alternative, simply accepting the results as good fortune or, worse, as being their “due”, is a sign of complacency born of hubris.

And, as anyone who has read Jim Collins book “How The Mighty Fall” knows, hubris can be the first of the 5 stages of decline……..

 

If you enjoyed this post you’ll also enjoy Too Early To Tell If It Will Be A Good Year? Think Again!

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Slow and Steady Growth Is The Key To Success

Tuesday, March 4th, 2014

My last post introduced Inc. magazine’s study of over 100,000 U.S.-based, mid-size companies.The key to success is slow and steady growth

Their goal was to find “sustained growth champions”, which they defined as companies that added head count each year from 2007 – 2012.

Less than 1.5% of the companies qualified.

The magazine selected a sub-sample of those to help them find the managerial DNA of success, and called it The Build 100.

According to Inc., companies grow in different ways. They might, for example:

  • Have several years of expansion before their growth rate slows and then declines.
  • Grow sporadically either with the economy or industry, or as a result of the business owner taking, or missing, opportunities.
  • Grow quickly and then plateau.

The Build 100 companies didn’t, however, do any of those things. They grew slowly and steadily.

The conclusion being that incremental growth, repeated over time, achieves better results than short – or long – bursts of growth.

And that finding corresponds closely with what Jim Collins and Morten Hansen found when they were researching “Great By Choice”.

Collins and Morten describe how John Brown, the CEO of Stryker, set a goal of 20% growth in net income – no more, no less – every year.

Was he successful?

A $ invested in Stryker from its IPO in 1979 until 2002, multiplied more than 350 times. The return on a $ invested in a comparable competitor fell well below that.

Let’s go back to the Inc. project. They studied companies over a 20-year period and found 3 very interesting things.

  • The faster a company grew in one period the less likely it was to grow again – and the more likely it was to fail. (Why? Perhaps because they stretched their processes, resources and everything else too far and either ‘broke’ them or had to do some serious repair work.
  • Growth over several periods had no influence on the odds of future survival or growth.
  • The more frequently a company added people (head count) year over year, the more likely it was to grow again.

I find that last point particularly interesting. Remember 3 of the 5 things the Build 100 have in common are related to employees. Is the timely addition of people who “fit” a key to fuelling steady growth?

What do you think?

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Sustainable Growth – How To Achieve It

Tuesday, February 25th, 2014

I don’t think I’ve mentioned it for a while, but I’ve been a big fan of Inc. magazine for many years. Founded in 1979, Inc. provides small business ideas and resources for entrepreneurs.Advice to business owners on achieving sustainable growth

I’ve been a subscriber since 1997 (I think) and have followed it through 3 changes of editor, 2 changes of ownership and more changes of format than I care to think about.

It’s been interesting to watch how a magazine that gives advice about how to start and grow companies has fared itself. Inc. has had its challenges but it has dealt with them well – thus far at least.

Recently they set out to answer a question very dear to my heart. Why do so few companies manage to grow consistently?

They carried out a study of more than 100,000 U.S. based, mid-size companies (85 to 999 employees). The goal was to identify those that added head count each year from 2007 – 2012.

Less than 1.5% of the companies qualified.

Inc. selected a representative sub-sample and asked those companies – who now form the Build 100 – to help them find the “managerial DNA of their success”.

The project will run through 2014 but they’ve already come up with some fascinating information.

The companies are not all in the same industries; they don’t all serve the same customers; they’re spread throughout the U.S.; and some have been in business for much longer than others.

Here, however, are some of the things they do have in common:

  • Over 80% said that sharing financial success with their employees helped them grow. (I don’t know if that’s just sharing the information about success, paying rewards based on success, or both.)
  • More than half of them say that people/talent and customer service were the only drivers of competitive advantage.
  • 1 of the top 3 things, which triggered growth “breakouts”, was a big change in leadership/senior management.
  • 2 of the top 3 obstacles to growth were attracting top managerial talent and training future managers and supervisors.
  • 81% said the sudden loss of a key employee was a major concern.

Notice that all 5 of them are about people? I find that fascinating!

Stay tuned, I’ll offer more of my thoughts on some more of their findings over the next few weeks.

If you enjoyed this post you’ll also enjoy The People Pipeline

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

To Grow or Not To Grow – That Is The Question

Tuesday, January 14th, 2014

Our business is all about helping companies grow.To grow or not to grow your business

But there are owners who deliberately keep their companies at around the same size, year after year.

And I don’t think that’s wrong. There are good reasons to support this point of view.

At the other end of the spectrum are the owners who blindly pursue growth.

That can be wrong. Edward Abbey, an American essayist, said, “growth for the sake of growth is the ideology of the cancer cell.”

So where’s the middle ground? What is right?

The answer is, it’s what’s right for each individual.

We’re all different. So, I’d define what’s right as pursuing and reaching the goals each individual sets for him or her self. And, of course, being satisfied with that.

Coming back to Abbey’s point, owners who grow their companies successfully usually have a reason for doing so.

It can be to invent or improve something that will give consumers (or businesses) more quality of life. Some examples that spring to mind are a different way to access music (Apple); air travel at affordable prices (Southwest); a new way to share information (Facebook).

The reason is rarely to make pots of money. That can be the result of growth. But if that’s the only purpose for trying to grow, it won’t work.

Assuming you have the “right” motivation for pursuing growth, how do you do it?

A good place to start is to remember 2 sayings. Never confuse success with a growth market and you can’t cost cut your way to long-term success.

Some companies make the second mistake as a result of making the first.

Then, assuming you’ve got at least one clear advantage over the competition, follow this well-proven formula.

•  First, expand your existing business i.e. sell more of what you have
•  Then take opportunities related directly to your existing business – introduce complimentary products, move into new markets or find new distribution channels.
•  Only after fully exploiting those two, consider moving into new businesses.

Despite what we read in the press, books or on the Internet, some things don’t change. The pace at which we have to adjust and adapt has definitely changed, as have the ways in which we can do that.

But the fundamental, common sense concepts haven’t.

And that’s true of everything in life.

If you enjoyed this post you’ll also enjoy 2 Key Questions Every New Product Must Answer.

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

3 Reasons Growth Slows In Good Companies

Tuesday, June 18th, 2013

It caught my attention immediately.Periodic slow-downs in growth are inevitable, even in solid companies

A blog post about why successful companies stop growing. A topic I was tempted, only last week, to call an obsession.

While the examples Ron Ashkenas uses are all large corporations, it really doesn’t matter.

The points he makes apply equally well to business owners and family businesses.

Ashkenas argues that periodic slow-downs in growth are inevitable – even for solid companies. That doesn’t mean that business owners and their management teams can’t do anything to slow the decline or to reverse it quickly.

First, however, they have to understand the 3 forces that Ashkenas says always slow down high-flying companies. Here they are.

1.  The Law of Large Numbers

When revenues are $5 million, targeting annual growth of 20% means adding $1 million to the top line. When they’re $50 million, chasing 20% growth means adding $10 million in sales in 12 months.

It takes significantly more resources to support $10 million in new sales than it does to add $1 million. And some of them, e.g. people with the skills and experience required, can’t always be found quickly and easily.

Then there’s the size and growth rate of the market. If it’s $100 million and growing quickly, adding $1 million in sales means taking, at most, 1% more market share. However, adding $10 million in a mature or declining market means getting 10% more market share – and that probably means taking it away from competitors.

2.  Market Maturity

When a market turns hot, competitors multiply like mosquitos. That limits the potential for price increases, which are a relatively easy way to increase revenues.

Some companies build stronger brand loyalty than others, slowing the ability of the weaker competitors to grow. Some products become commoditized, price becomes king and margins become thin, affecting bottom line growth.

Eventually markets become saturated and the bigger, stronger players either gobble up the weaker ones or force them out.

3.  Psychological Self-Protection

Ashkenas describes this as pressure to maintain the base business and unwillingness to risk it with innovative new products.

In the companies we’ve worked with, it often appears in a different form (and perhaps deserves a different name). As these companies grow, the management team spends more and more time focusing on meeting the increasing demand while maintaining quality. This is often caused by weak processes, lack of discipline and lack of accountability.

In both cases, however, management is the cause of the declining growth.

No company grows forever without hitting some bumps along the way. The challenge for the business owner is to recognize what’s really going on and to deal with it.

Sometimes it takes an external, third party to be able to do that.

You can read Ron Ashkenas’ full post here.

 

If you enjoyed this post you’ll also enjoy Why Would Anyone Hire A Management Consultant? and Why Would Anyone Hire A Management Consultant? – Part 2.

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8 Things That Hinder Growth

Tuesday, September 11th, 2012

How often are you surprised by the results of a survey?

It usually happens to me when the survey is about an area or topic I think (or I assume) I know something about. A case in point is one of the questions in the Inc. 500 CEO Survey.

The question is “What Could Possibly Hinder Company Growth?” The CEOs were asked to rate 8 factors on a scale of 1 to 5, with a score of 5 indicating the greatest obstacle to growth.

Before I even finished reading the question I was confident that offshore competition was going to be a major factor.

Was I ever wrong! Competition from abroad received the lowest score (1.43) i.e. it ranked 8th out of 8.

Once I saw the other factors I began to understand why it wasn’t number 1. But I didn’t expect Taxes (which scored 2.5) and Government regulations (2.4) to be considered significantly more of a hindrance to growth.

However, I’m getting ahead of myself. Let’s take it from the top.

According to the CEOs of these very successful companies, the biggest factor getting in the way of growth is finding talented workers. (It scored 3.31.)

The obvious question is why that should be the case given the current level of unemployment. And the answer is (I’m going to make another assumption here) what it has always been. There’s a mismatch between the talents that are available and the talents that are required.

Keeping up with demand (with a score of 2.67) came in second. I thought that was interesting given how weak the economic recovery is.

The companies in this year’s Inc. 500 are spread across 25 different industry sectors and so they’re not concentrated in one part of the economy. But they are, by definition, the fastest growing, privately owned companies in those sectors, outpacing the rest of the pack because, presumably, there’s great demand for their products or services.

Factor number 3 was domestic competition (2.55) which came in just ahead of Taxes (2.5). It’s interesting that local competition was also considered a significantly greater threat to growth than offshore competitors.

Steady cash flow (scoring 2.43) ranked fifth and I’ve already mentioned Government regulations (2.4), factor number 6.

The final factor was getting financing, which came in at number 7 with a score of 2.06. The explanation for that may lie in the answer to another question in the survey.

42% of the CEOs said that they had no need for outside funding. And only 4% said they had encountered difficulty in accessing capital to the extent that it had impeded their growth.

I’ve spent the last 15 years working with owner managed companies. And I spent 25 years working my way up the corporate ladder before that. The greatest lesson I’ve learned in that all of that time is that people have a greater impact on growth or success than anything else.

So, while I was surprised by the results for competition from abroad, I’m not in the least surprised that finding talented workers is the biggest factor getting in the way of growth.

If you enjoyed this post you’ll also enjoy 5 Tips for Fast Growth in a Slow Economy

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Cannonballs And Email – Or Anything Else For That Matter…..

Tuesday, February 28th, 2012

Cannonballs and email – really, what could they possibly have in common?

A couple of things – I found myself involved with both last week and one of them applies to the other. You see “cannonballs” is a metaphor and email, for this purpose, is a marketing tool.

Other marketing tools are direct mail, adverts (on-line or traditional), newsletters and any other printed or electronic promotional piece.

And cannonballs apply to them too – and other things……

Cannonballs first

I’m reading Jim Collins book “Great By Choice”. In it, as you may know, he contrasts pairs of companies in 7 different industries. His goal is to find the reason(s) why one of the pair did incredibly well in uncertainty, even chaos, while the other company very definitely did not.

Collins and his team wanted to determine the role of innovation in the relative performance of the companies.

They found that, contrary to their expectations, the better companies did not always “out-innovate” their less successful competitors. In fact, the opposite was often true.

What the better companies did do was to combine innovation with discipline. Collins introduced the cannonball metaphor to illustrate the point.

Imagine a company has to fight a battle (with its competitors). It has both bullets and cannonballs (products/services) but a limited supply of gunpowder (resources) to fire them with.

Should the company fine tune range and direction to the target? If so how?

Bullets are the obvious choice because they use least gunpowder. Get the range and bearing right and then use cannonballs to put a dent in the competitor.

Now email………

Last week I was talking to a client who was considering lead generation ideas.

He had a proposal recommending email campaigns and some other things. Our client said he didn’t have much faith in these campaigns because the results had always been poor in the past.

I asked him which of the variables – the layout and content of the piece, the quality of his list or both, timing of the drop – had been to blame. He didn’t really know.

We hear this all the time.

So I suggested he get 2 or 3 alternative layouts for a campaign. Each should have different graphics and copy than the others.

I told him to take them to 6 to 12 customers who he trusted to tell him what they thought. Then show the alternatives, one at a time, and ask the customer what the piece told him. Saying nothing, he should record the comments word for word.

This would give him quality control for the most difficult variable – layout and copy. When he heard that a layout was communicating the message he wanted, he could email or mail it to everyone.

There are variations on this approach. He could mail different layouts to larger parts of his list (say 10 % of the list for each layout) and compare the responses. He could also email or mail the pieces at different times on different days.

But whichever variation he chose, he would be firing bullets. Only when he found the layout which got the response he wanted should he fire a cannonball – emailing it to everyone.

Finally, anything else………..

The metaphor has wide application.

Why launch a new product before testing it with a portion of the market first? Why move into a new region, Province or country before firing bullets at part of it first?

And yes, why adopt a change in strategy before testing that first too.

This approach may take a little longer but it will dramatically reduce the risks and conserve valuable resources.

Any thoughts?

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