The Growth Illusion or… How Does a Ferrari Leap a Canyon?
- Image via Wikipedia
People think there’s some kind of continuum between the smallest and biggest business – an unbroken line between me and the mouse on my desk and Microsoft – and that there’s some magical moment where you transform from being a small to a midsize to a large business. In fact, research shows that to be very far from the truth. Each form of business is a totally separate beast, and there are vastly different skill sets in running each one.
The real difference between a small business and an enterprise is the owner’s attitude toward growth. A Silicon Valley start-up is completely focused on getting big, and naturally risks failure to get there. A true small business, on the other hand, is focused on becoming profitable, feeding a family, and staying in business. That’s a fundamental psychographic and cultural difference.
Ridgely Evers, Co-founder of Intuit and Quickbooks, From American Express OPEN BOOK
She’s driving her new Ferrari with the top down. It’s a beautiful day in SoCal and the needle is creeping over 115 mph. Speed increases and life is good. What she doesn’t see is a 1000 ft. chasm she has to jump a mile down the road. Entrepreneurs riding a growth curve often can’t see the curve for the chasm. Ridgely calls is a “magical moment”, my company calls it No Man’s Land. ALL companies go through it. No Man’s Land is an inevitable, unavoidable growth transition every Entrepreneur must face.
The illusion of growth is as subtle and sublime as any Copperfield act. If the Ferrari driver does not recognize the chasm is coming, she’ll re-enact this classic, and far-too common company scenario:
Whatever “beast” (as Ridgely identifies) your company becomes, it must ask the “Small Giant vs. Gazelle” question I mentioned in previous posts, and then review the business in the context of No Man’s Land. Is my company nearing the chasm? Am I already in the chasm and need thrusters to clear it?
Don’t wait, it may be a glorious SoCal day, but the chasm is coming.
The Occam’s Razor of Corporate Culture
Image via CrunchBase
Confidence is a by-product of predictability – Bob Biehl, author and nationally recognized consultant
What is THE definition of corporate culture? Well, if you Google “corporate culture definition” you’ll get this version that rambles in vague ambiguous phrases such that by reading it you feel like you’re trying to tattoo a soap bubble:
Corporate Culture definition by BusinessDictionary.com
I’ve got a better definition, in fact it’s a definition so powerful and simple that even Sir William of Occam, creator of Occam’s Razor would be proud. Occam’s Razor is a principle built on the concept that the simpler the message, the more likely it is to be correct. The best definition of corporate culture I’ve heard was created by my partner, Doug Tatum, author of the best-selling book No Man’s Land – When Companies are Too Big to be Small and Too Small to be Big. And here it is:
Corporate culture is a trusted decision making process
Wait, where’s the “atmosphere of…” or “the freedom to…” or “the experience of…”. Sorry, no blah-blah here. So many corporate maladies are blamed on culture, including the ability or inability of a new executive to “fit in”. My favorite consultant and author, Bob Biehl makes this statement: confidence is a by-product of predictability. A corporate culture is defined by the confidence of it’s members in the predictability of how decisions are made on a daily basis. Culture, by any definition crumbles in an environment of distrust. On the other hand culture galvanizes when a predictable, trusted decision process is in place – from the top down.
This definition doesn’t imply that company decisions are easy or simple – including excruciating decisions like employee layoffs; it means that the process of making those decisions is understood and predictable. Without a trusted decision process Google’s culture would implode despite it’s sensory-blowing “resort” headquarters that includes 7 gourmet restaurants, a top-tier spa and exercise facility, in house salon services, etc.
A wise man once said, “It doesn’t take much ability to take a complex principle and either keep it as complex or make it more complex; but to take a complex principle and make it simple – that’s genius.” If you’re a Entrepreneur and/or CEO – be the genius; simplify your definition of culture and create confidence in your organization by your trusted decision process. Then you can add the spa.
The Entrepreneur’s Greatest Pain
Cover via Amazon
My close friend, Dr. Bert Chandler, enjoys a reputation as one of the most highly regarded Pain Management Specialists in the country. Icon medical organizations like Medtronic pursue him to participate on their advisory boards. He is innovative, passionate and brilliant in his ability to diagnose and treat chronic pain. According to a Time Magazine article several years ago, Pain Management has a reputation more for “Narcotic Management” rather than productive therapy. My friend often sees patients who come to him with a long history of drug dependency inflicted by physicians who were satisfied to scribble a non legible prescription for Vicodin or Oxycontin.
Bert has heard this tragic dependency story a thousand times; and almost always he refuses to supply it. Instead, Bert seeks to provide relief to his patients, not with a quick-fix but rather a strenuous therapy that involves nutrition, technology and discipline. Bert listens to their plea, and then responds, “I can help you to get better, but I can’t help you unless you will do exactly what I tell you to do. Do you really want to get better?”
Listen to my partner, Doug Tatum, describe the Entrepreneur’s greatest pain:
The decision to replace some existing management positions with more experienced talent is often the most painful experience entrepreneurs face during the second stage of growth, which I identified earlier as No Man’s Land. An entrepreneur,who is committed to growing his/her company to the next level, must sometimes fire their friend – that individual who came into the business with a title rather than a salary in order to be on the ground floor of an idea. The idea became successful and now it’s grown to a level that requires different individuals with previous success leading a company 2x the size of the current venture.
It is an excruciating decision to replace loyal comrades in order to fuel the company’s future performance. But – in order for the company to survive No Man’s Land and transition to higher levels of profitability, which also involves creating more jobs, CEOs must be ready and willing to make tough decisions. That is, of course, if they really want to get better.
Unique is a Relative Term for Many Companies
I’ve worked with over 200 companies in the past twelve months. I used the new Inc. Compass as my analysis engine for all of these businesses, an online experience that generates a concise and comprehensive report on the company. When asked to respond to the question, “What is our company’s unique competitive advantage?”, leadership team members almost universally provided varied and often rambling statements. These companies did not know how to communicate their product’s primary value to customers, which means they did not have an economic model in place to scale that value, which also means they probably lacked an accurate assessment of the funding required to grow.
Listen to my partner Doug Tatum describe the necessity of a scalable Value Proposition:
This might not shake you, but if a company is not aligned on a unique and scalable value proposition, it’s shouting – “We don’t know why we’re in business!” If “unique” is relative term when it comes to your value proposition, you might want to schedule a meeting with the leadership team and brew some Storyville coffee (www.storyville.com); you’re going to be there a while.
Give me a call. I’ll bring the Inc. Compass; we’ll lock and load on what makes your company unique. And please save me a cup of Storyville.
The Best Way to Fail
I know failure doesn’t scare you, but just in case you were wondering – here’s the best way to fail, and it will surprise you:
Would you have guessed that the best way to fail is to grow? Growth can produce failure, UNLESS you’ve created a scalable value proposition and model that enables the company to do what you as CEO do best.
The Adrenalin Grass of Company Growth
Author and physician Donald H. Hilton described an interesting observation he experienced with his family on a safari in Africa:
While on a game drive along the Zambezi River, our ranger commented on the adrenaline grass growing along the banks. I asked him why he used the word “adrenaline,” and he began to drive slowly through the grass. Abruptly, he stopped the vehicle and said, “There! Do you see it?”
“See what?” I asked. He drove closer, and this also changed the angle of the light.
Then I understood. A lion was hiding in the grass watching the river, just waiting for some “fast food” to come and get a drink. We were sitting in an open-air Land Rover with no doors and no windows. I then understood why it was called adrenaline grass, as I felt my heart pound.
For the moment, let’s change the angle of light slightly on your business. Have you considered the possibility of danger lurking in your company’s growth enough to make you heart pound?
A few months ago I consulted with the CEO of a fast-growing product company in the online gaming industry. His business had developed a cool wireless device for the World of Warcraft addicts. After engaging in the 4M online experience, his X-RAY report exposed an interesting, but all too common revelation concerning the future growth of his company. Here are the benchmark results of his business compared to 400 competitors nationwide in our database:
Remember that 1500 foot ravine every business has to hurdle in its “adolescence”? Here it is in blue and white. Although my client currently experienced excellent growth, he immediately recognized that his EBITDA would drop dramatically in next three stages of revenue.
No Man’s Land is a stage that requires increased capital to fund growth – both physical capital, and human capital (new management) in order to access the higher profitability of subsequent revenue zones. My client knew he had an immediate decision to make: pull back on the reins and wait out the recession, or seek private equity to fortify his growth through the next three stages. He chose, as Economy Heroes often do, to throttle up!
This financial “ravine ramification” occurs with almost all companies, industry neutral. My client was fortunate enough to see through the adrenaline grass before he walked into it.
How’s the angle of light on your company’s growth? I know, you don’t scare, but don’t wait too long. Once you hear the growl, it’s too late.
Why are so Many Adolescents in No Man’s Land?
The reason is: No Man’s Land is the home state for all business adolescents. I only described half the story when I stated that over 90% of all companies fail; I know, I know you don’t scare that easy. The “rest of the story” (as Paul Harvey used to say) and the Freakonomics of the reason behind such an outlandish percentage, is what my 4M Navigator partner, Doug Tatum describes in his best-selling book as No Man’s Land:
It’s adolescence, the stage we all go through when we’re too big to be small and too small to be big. We’re confused and unfocused, and we’ve got significant transitions ahead that are hidden like mines in a minefield. Imagine your business is a Ferrari 575 M Maranello. You’re plowing down the Autobahn at 145 mph and you’re increasing speed. Here’s the good news: you’re driving the vehicle of your dreams, you’re moving at a fast and reckless rate, and the road is clear. The bad news: there’s a 1500 foot wide bottomless ravine hidden in the fog about ¼ miles ahead. Are you ready to jump it? We should call this chasm DeadCo Drop because all companies must, at some point in the second stage of growth, jump it.
I’ll discuss DeadCo more in my next post, even though I know a bottomless drop doesn’t scare you.
Brent Sapp
