--Henry David Thoreau
This is the second installment on the topic of business growth. We begin where we left off in our 1 March 2014 post, "The Mystery of Process."
Here's a long-held belief underscored in the instructive book, "The Alchemy of Growth:"
That a one-dimensional strategy is insufficient to achieve sustained growth and create a future for the enterprise. And healthy growth, with the right people and processes, is as much "mystery" as it is intended strategy.
What does a healthy business look like? The authors use the term "horizons" and there are three:
- Horizon I: The core of an existing business is extended and strengthened
- Horizon II: New entities are developed
- Horizon III: There is a learning process for creating viable options (H-III, a mind-stretching time for future possibilities, is often the missing piece to the pipeline puzzle)
- The core is in poor shape
- There is little in the pipeline
- Nothing new is on the horizon
Very few businesses (and nonprofits) sustain average growth year after year. Think about that statement and what it means if you're the owner, shareholder, or person in charge--maybe all three. For most the road to profitability is an uphill climb.
Additionally, businesses mature and decline.
As the authors point out, "Successful organizations can and must outlive their individual business units. If continued growth is the goal, the pace of replenishment must be faster than the pace of decline," they write.
The challenge is to innovate at the core and build new ventures at the same time. That's easier said than done for the smaller business but can be as difficult for the largest of corporations.
Dr. Mark Perry, Professor of Economics at the University of Michigan, posted on his Carpe Diem blog:
Comparing the Fortune 500 companies in 1955 and 2011, there are only 67 companies that appear in both lists. In other words, only 13.4% of the Fortune 500 companies in 1955 were still on the list 56 years later in 2011, and almost 87% of the companies have either gone bankrupt, merged, gone private, or still exist but have fallen from the top Fortune 500 companies (ranked by gross revenue)."
Who's managing the pipeline?
It's a juggling act to run a business.
So as we come back to the idea of stewarding the pipeline--short, medium, and longer-term--the reference to juggling multiple product or service ideas, along with processes, needs further attention.
How to convert promising ideas into future generators of profitable income is what someone has to contemplate even while running the company or one of its units. That's precisely why management should periodically step aside from the urgent to think ahead. This requires moving outside the press of daily operations (preferably away from the office) and into a future mindset with others where things like budgets and reviews are off limits, at least in that setting.
A "future mindset" practice should be on the calendar just like staff meetings and lunch.
Growth in a business comes from thinking and acting a certain way. Having said that, the book cautions about an excessive focus on growth, which can be just as much of a problem as ignoring it. This has more to do with being "obsessed" with all things new and the novelty of new opportunities.
Keep in mind that if everyone is in charge of the pipeline no one is in charge.
What about efficiency?
There's no question that overhead and other types of expenses have to be carefully monitored and controlled. That may be the biggest lesson from the "great recession"--the importance of liquidity and cash flow.
Those who impose financial controls stay in business longer than those that don't. However, expense management has its limits.
Everyone needs to find ways to develop and take advantage of new opportunities that are a good match with the company's values and capabilities--as well as the needs of its current and potential customers. That means freeing up cash to fund new ventures.
What are your top two or three priorities and possible sources to fund them?
How is the future created?
- The core business is strengthened and extended
- New products or services are created
- The creation of new ideas is institutionalized
- Offerings that have run their course are abandoned
Up next: Overcoming inertia in the organization
(C) Bredholt & Co.