What You Think You Know May Blind You To Growth Opportunities

TexasCEO magazine just published my latest thoughts about partnerships. In addition to correcting myths about partnerships in general, it describes major types of self-fueling partnerships and the series of steps you can employ to accelerate the growth of your business.

As always, let’s hear your feedback, either below or the TexasCEO web site.

 

How Infoglide Enhanced Its Acquisition Options

How does a company get acquired? FICO’s acquisition of Infoglide provides an excellent example of applying deliberate steps to increase the odds and accelerate the process.

CEO Mike Shultz graciously allowed us to describe the backstory in a short case study. Read it to discover what you can do to attract potential acquirers. 

 

>> CASE STUDY: How Infoglide Enhanced Its Acquisition Options

 

 

Is Your Company Geared Up for Growth?

“Gear up” means “to prepare for something that you have to do” or “to prepare someone else for something” (source: Cambridge Dictionary). To assess whether your company is prepared to grow, ask whether your management team has clear answers to 4 questions:

1. Does the company offer something special enough to compel customers to spend money?

The instinctive answer is “of course it does.” After all, a customer base exists and the company is stable, even if growth is slow. But can the management team relate a shared, crystal clear vision of the company, its category, and its primary benefit? The kinds of companies it sells to? The roles of people within those companies that are involved in purchasing? Other unique qualities that differentiate you from competitors? Answers to these questions comprise a company’s strategic positioning, and a lack of team alignment on it leads to huge inefficiencies.

2. How does the company fit into the bigger picture of the market served?

Understanding which companies are competitors and which are potential allies is essential for sales success. Companies often assume competition exists when there may be a chance to partner effectively instead. Understanding the needs of other key companies leads to a clearer understanding of current opportunities, where value exists in your market space, and the potential to leverage the success of potential partners to provide better customer solutions.

3. What relationships with other companies can accelerate growth?

Most CEOs are skeptical about partnering with another company because it’s perceived as too difficult to be successful. While most partnerships fail because of poor analysis, poor planning, and poor management, a well-planned partnership can enable a company to leapfrog its competitors.

4. How can the company operate more effectively to bring the CEO’s vision to reality?

Having the right growth strategy is important, but execution ultimately determines success. Once a company reaches a certain size, growth can be limited by having outmoded or inappropriate processes in place. “We’ve always done it this way” is not an acceptable answer. Outside help may be required to drive the strategy into successful execution.

The chart below illustrates three levels of “gearing up” that a company can find itself in: stalled, moving, and accelerating.




 

 

 

 

 

 

 

Learning how to accelerate your vision and take your company from “stalled” to “accelerating” will be the topic of a subsequent post.

20/20 Outlook’s Third Anniversary

It’s been three years since the launch of 20/20 Outlook as an advisory service for CEOs, and I’ve been blessed with wonderfully rewarding and interesting experiences along the way. By acting as a sounding board for creative business leaders and helping them get clarity about their purpose, value, and relationships, each one has accelerated the quest to achieve his/her business vision.

Recently, Brad Young came into the 20/20 fold as another trusted CEO advisor, bringing with him a whole new set of gifts and talents. His major focus is on initiatives that complete strategies with flawless execution.

Our client discussions cover every aspect of each business, and we often discuss areas of personal challenge and growth. Similar to traditional executive coaching, building trusted CEO relationships has enabled discussions of their strengths and weaknesses, passions, and even the personal search for meaning and purpose. A side benefit that clients have cited is more effective communication with board members, leading to more productive relationships.

Along the way, a wonderful network of people has evolved around us. Each one has generously supported 20/20’s steady growth with introductions and recommendations, suggestions for new offerings, adoption of 20/20 processes, and partnering to help clients. Because of this network, LinkedIn recently recognized my profile as among the top 1%  frequently viewed profiles in 2012.

To our friends and colleagues, thank you for your continuing support!

 

 

Five Disciplined Steps to a Successful 2013

If you lead a business and haven’t yet committed to your resolutions for 2013, here are five ways to start the year off right:

  1. Take Time for “Disciplined Dreaming”
  2. Choose the Right Focus
  3. Find Your Breakout Strategy
  4. Avoid Strategy Mistakes
  5. Move Past the Second Chasm

1. Take Time for Disciplined Dreaming: If you ignored our sole suggestion for 2012, you can redeem yourself in 2013. It’s tempting to work “heads down” all the time, but “heads up” thinking moves your company toward growth much faster.

2. Choose the Right Focus: Key factors in opting to narrow or broaden your focus include available market opportunities, strength of brand, and the company’s ability (e.g. capitalization) to execute, including integrating, partnering, and acquiring. Read more to understand where you stand and where you’d like to move.

3. Find Your Breakout Strategy: If you’re unfamiliar with the term, breakout strategies free your business from current growth-limiting constraints. Even the most visionary CEO may need help in translating a vision for growth into clear, actionable strategies that move the company out of the the plateau it’s mired in.

4. Avoid Strategy Mistakes: In a 2012 Harvard Business Review post, Joan Magretta identified five common strategy mistakes that we believe derive from two common antecedents – lack of clarity and lack of focus. Become familiar with these mistakes so you can avoid them.

5. Move Past the Second Chasm: The most delicate yet most important action for a consultant is pointing out the elephant in the room, especially if it involves challenging the CEO to learn how and when to let go. “Crossing the second chasm does not call for securing a second beachhead. Instead, the challenge is personal: the CEO must modify the way the business operates without losing the uniqueness that created its initial successes.”

Start your year off with disciplined thinking and greatly improve your odds of success.

Happy New Year!

 

Crossing the Second Chasm

Two momentous tipping points threaten most businesses during their lifetime. The first is an external threat that challenges startups, and the second is an internal threat that challenges established, growing businesses. Failing to address either one adequately can result in disaster.

In 1991, Geoff Moore introduced a powerful concept in Crossing the Chasm that became a key concept in the universal business vocabulary. He observed a startup company must leap from (a) an early market dominated by early adopters who seek new solutions to (b) the mainstream market where buyers are more conservative but sustainable financial returns are available. To survive, an emerging company must cross this chasm to secure a beachhead in the mainstream market.

The second chasm is described in Doug Tatum’s 2007 book called No Man’s Land. While less publicized and not as universally understood, this second chasm is no less real and just as inevitable. It’s encountered during “the adolescent stage in which an established but rapidly growing firm is too big to be small, but too small to be big.”

Crossing the second chasm does not call for securing a second beachhead. Instead, the challenge is personal: the CEO must modify the way the business operates without losing the uniqueness that created its initial successes. Tatum identified four “M word” dangers confronting the CEO of a company negotiating this second chasm: misalignment, management, model, and money.

Misalignment of the company with its market requires clarifying the purpose and uniqueness of the company, then focusing all its resources on activities that leverage its best strengths. To paraphrase Tatum, avoiding the hard work of clarifying and systematizing the core business has killed many companies after they make it well past the startup phase. Understanding the strategic positioning of the company (e.g., primary audience and target customers, primary benefits delivered, competitors, and unique differentiators), then aligning everyone in the company with this shared vision is vital to survival.

Outgrowing its management team is the second danger of an established company attempting to grow. Small companies are highly dependent upon the talents of the founder and CEO, but a growing company inevitably exceeds the bandwidth of its CEO and early management. Getting to the next level requires that the CEO relinquish his/her tight control over every aspect of the business in favor of bringing in established managers in key areas. The CEO’s challenge is to retain direct responsibility for key areas, where he/she is most talented, while delegating the other areas to managers who have already developed critical systems and processes before at larger companies.

Outgrowing the model is the third challenge faced by companies crossing the second chasm. The financial model of most young companies depends upon high performance of cheap labor. The CEO works for little or nothing while dedicated employees work crazy hours too for lower-than-industry-standard pay, but this doesn’t scale. As the company outgrows its management, a new financial model accommodating competitive pay, more intense competition, and maintenance of profitability must be quickly developed.

The fourth challenge is money. Entrepreneurs are often surprised that, when the growth they crave starts to happen, cash becomes more scarce rather than more abundant. They are even more surprised by the difficulty they find in getting the financial backing needed to finance more growth. What looks like good news to the CEO looks like significant risk to investors. “The key to raising money is reducing the real and perceived risk of the company” and the key to reducing risk includes taking the previously described three steps.

If you’re a CEO of a growing company and you missed No Man’s Land when it came out, reading it will provide a clearer picture of your business and the challenges you face in growing it.

 

Three Steps Will Recharge Your Business

Washington Post, July 2, 2012: “Outlook for U.S. economy dims as manufacturing shrinks for the first time in nearly 3 years… ‘Our forecast that the U.S. will grow by around 2 percent this year is now looking a bit optimistic,’  said Paul Dales, an economist at Capital Economics.”

Being the CEO requires committing to a “no excuses” life. Others may offer plausible reasons for non-performance, but if your company plateaus, CEO excuses aren’t an option – you must take action:

  • Softening economy? Find a way to take advantage of a changing business landscape.
  • Lengthening sales cycles? Determine how to identify highly motivated prospects.
  • Shrinking margins? Examine whether your company is leveraging its strengths.

Changing your business to address these and similar challenges incurs risk, but the risk of doing nothing is greater. How can you adopt an effective breakout strategy that will recharge you and your executive team?

Here’s a rational, three-step process guaranteed to provide direction: (1) reexamine your company’s true value and what sets it apart; (2) in light of market conditions and competition, determine an altered direction that will maximize value; and (3) identify new business relationships that will open doors to new business. In other words, you need to clarify, comprehend, and connect:

Clarify – Who are you as a company and what sets you apart? What truly separates companies like Apple, Southwest, Berkshire Hathaway, and the NE Patriots from the rest, year after year, is a sense of purpose. Clarifying the organization’s purpose and unique assets beyond a simple mission statement actually increases efficiency. It’s imperative to get this right.

Highly successful companies perform at a high level because they focus on a clearly identifiable market with a differentiated solution. Even successful companies eventually let pressure to increase revenue force acceptance of business outside their primary focus. Since profitability grows by exploiting core competencies, losing focus erodes margins. Having a crystal-clear shared vision of who your company targets and what customer problems it uniquely addresses enables employees to make decisions more rapidly (fewer meetings and emails needed) so more gets accomplished faster and margins increase.

Comprehend – Once you understand your company better, update your understanding of your immediate market. What change in direction will maximize value? Finding the right direction in a complex and competitive market accelerates growth. How do you define who’s in it and who isn’t? What is your relationship to other companies in your space?

One proven method is to pretend you’re selling your company and identify a number of companies that could acquire you and another set that you might acquire or partner with.  By comprehending the needs of potential acquirers, acquisition targets, and partners, you will develop a value framework that identifies high value opportunities.

Connect – Which relationships will increase business the most? Whether your company is B2B or B2C, strong relationships with other companies can help it grow faster. That said, many CEOs have been burned by partnerships that failed due to poor planning, unrealistic expectations, and unmonitored execution.

The solution? Design self-fueling partnerships that continually reinforce each partner’s objectives. Partnering with potential acquirers and industry leaders will drive new revenue by providing access to new markets, extended geographies, enhanced product and service offerings, better branding, and staff augmentation.

By following this three-step process, breaking out of flat growth may be easier than you think.

Breakout Strategies

The best time to evaluate the direction of your business is while it is thriving. I’m currently rethinking 20/20 Outlook’s strategic positioning, and it’s focused on creating breakout strategies.

What are breakout strategies?

The work “breakout” implies constraints. Most companies fail early, a precious few like Amazon, Google, and Facebook rise meteorically, and the remainder become “established” businesses. These established companies often hit a plateau in their growth, resulting in flattened revenue and profit. At that point, it’s common to find a CEO frustrated by a period of constrained growth and experiencing the “CEO dilemma.”

Breaking out of a growth plateau implies change. Most CEOs are visionary, so it’s their business vision that defines targeted outcomes for the company. The CEO’s vision may point the company toward an inspiring destination, yet without clear strategies, employees may be clueless about how to get there, or even worse, may waste resources by taking conflicting routes.

Maybe the CEO’s vision is unrealistic given a changing market environment that he/she fails to recognize. Maybe good strategies are hampered by bad or non-existent external communication. Maybe the company hasn’t learned to properly leverage relationships with other companies in order to expand their offerings, open new markets, or gain access to a broader prospect base.

In every instance, breakout thinking is needed to create breakout strategies that:

  • provide a deep understanding of the market situation,
  • develop a clear picture of the competitive landscape, and
  • provide credible data on which to base plans
  • give a clear rationale for action from which detailed department plans will flow,
  • lead the company to an optimal return on investment of its finite resources
  • last but not least, create energy and enthusiasm.

Truly visionary CEOs sense when an outside catalyst can challenge the status quo and illuminate new possibilities, then they act decisively to introduce change that leads to breakout strategies.

Too Broad, Too Narrow, or Just Right

Driving down a major boulevard in a city where we lived at the time, my wife spied a new restaurant in a place where many others had failed. In the window, it advertised food from multiple ethnicities, including both Mexican and Chinese! I’d be surprised if “Bueno Wok” lasted long.

There’s a truism about how a lack of focus can kill an enterprise. Being “a mile wide and a quarter inch deep” is widely recognized as a cause of failure.  Typically, a desire to increase revenue leads to pursuit of business that doesn’t leverage the company’s strengths and results in lower margins and muddled branding. But, are there instances where too narrow a focus can be just as harmful?

The diagram below categorizes organizations according to two attributes, focus and potential. The Focus axis ranges from single domain to multiple domains through all domains, while Potential ranges from restrictive to growing through saturated. Companies focused on several verticals are distinguished from those whose offerings are truly horizontal (i.e. domain-independent). Of course, each axis represents a continuum so that an infinite set of combinations is possible, allowing for the unique positioning of any specific company.

Back to the original question: is it possible to be too focused? Consider the example of a company providing a niche offering to several vertical markets. In the diagram it would be classified as “saturated domain-specific.”

Suppose you’re advising a new CEO hired to grow this “plateauing” company, Your first inclination may be to assess each of the company’s currently targeted vertical markets in hopes of focusing on the one with greatest growth potential. However, if the frequency of opportunities within each vertical domain is found to be sporadic and sensitive to changing business cycles, it may make more sense to remain diversified. Finding additional verticals that the company can target may represent a more fruitful direction.

So a key factor in opting to narrow or broaden our focus ia available market opportunities. Other factors include strength of brand, plus the company’s ability to execute (e.g. capitalization), integrate, partner, and acquire. These affect companies in each of the diagram’s nine categories in different ways. (NOTE: future posts will consider how, so if one of the nine categories is of particular interest, let me know when you sign up on this page to be notified by email when the next post is available.)

Translating the CEO’s vision for growth into breakout strategies requires careful thought to determine the best way to target and deploy finite corporate resources. Too often a new direction is based on an unrealistic view of the company’s position and capabilities. While it takes an optimist to run a company, it takes a realist to lead one toward its highest value.

 

TexasCEO and Vistage

“Symphony…is the ability to put together the pieces. It is the capacity to synthesize rather than to analyze; to see relationships between seemingly unrelated fields; to detect broad patterns rather than to deliver specific answers; and to invent something new by combining elements nobody else thought to pair.”

— Dan Pink in A Whole New Mind

Vistage CEO Rafael Pastor spoke this morning at a breakfast organized by TexasCEO magazine. He covered a range of topics near and dear to my heart (e.g., “what makes America great? its restlessness”), then reviewed the results of the most recent Vistage member survey, a reliable leading indicator of GDP and hiring trends (good news: CEO confidence is heading back toward the 2004 level).

Finally, he shared four traits of a good leader that combine to produce character:

  1. Confidence – uplifting and inspiring all constituencies to higher performance
  2. Curiosity – looking around and asking questions to learn new ways of thinking
  3. Courage – having determination to risk and innovate
  4. Collaboration – creating and learning from external relationships

How does an organization exhibit these traits? Consider TexasCEO as an example:

  1. Confidence – Driving the creation of the magazine was a desire to distribute information that helps CEOs grow their enterprises. TexasCEO founders were confident they could draw contributing authors from multiple industries to deliver value through lessons that cross domains.
  2. Curiosity – By continually meeting with CEOs and advisors from multiple industries to understand their expertise, publisher Pat Niekamp and staff provide a continual stream of challenging articles on business development, people matters, marketing, sales, leadership, finance, governance, professional development, and other topics that CEOs must track.
  3. Courage – Does it take courage in a down economy to start a combined print and online magazine? Of course, but that courage was based on a clear analysis: no statewide business publication existed in a business-friendly state.
  4. CollaborationTexasCEO continues to build relationships with groups and individuals that share their passion for helping CEOs achieve their dreams. Like Vistage, they appreciate the power of collaboration to broaden our vision. Rafael Pastor said it best when he quoted Marshall Goldsmith: “What got you here won’t get you there.” Often we can learn what works from our peers.

Joel Trammell recently told me about becoming a CEO. “Many people think that the CEO job is just the next progression after being a senior executive in a business… the CEO job is actually a unique role that doesn’t really have much in common with the other executive roles in a business.” He then related how he quickly learned to reach out to other business leaders when he became a CEO.

Vistage and TexasCEO were founded on the common goal of sharing CEO knowledge and expertise to improve business performance. With that common focus, maybe a new partnership was born this morning.

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