 |
||
|
Vol. 4 — No. 5 Escape
Velocity: Defying Business Gravity Requires Deciding Which Opportunities to
Pursue Escape Velocity:
The minimum velocity an object must
have in order to escape the gravitational field of the earth Business Gravity:
The factors that hold your business
back from accelerated growth Discovery: The active review of information regarding
your environment and its potential impact on your organization. Introduction:
In our first newsletter of the series, we defined the forces of business
gravity that hold you back and provided an overview of the steps you need to
take to propel you to “escape velocity” growth. In our next two newsletters,
we examined the first few steps in the discovery stage in more
depth--conducting diagnostics on your business and your market and determining
options for growth. Today we address the last step in the discovery stage: Deciding! One of the challenges we all face
is deciding where to put our limited time and energy. Without a plan for how
you want to grow your business, every possibility becomes an option and
sometimes a distraction. Achieving “escape velocity” growth (or accelerated
growth) requires a plan that provides focus so that you can make a
concentrated effort on accomplishing it. If you want to move ahead, it seems
obvious that you have to know what direction you want to move. But many of us
just aren’t sure which direction to choose among our many options, and so we
go nowhere. You simply don’t have the time or resources to do it all, so how
do you decide? Now let’s be clear about what
level of decision-making we are talking about. At this point, we are NOT
trying to determine what the specific initiatives are that you will pursue,
rather we are honing in on the direction you will go. An example may help.
Although in today’s market, many of us may not be in the market for a car,
you probably have been or will be again. There are hundreds of choices. What
do you choose? The first decision is about what type of vehicle you want. Are
you finally in a position to buy the luxury car of your dreams? Do you need a
working vehicle that can haul loads or people? Once you make the choice of
what general type of category you are in, you can begin to do some meaningful
research on which brand and model you like best. But that comes later. Our work now is similar to
picking a car category. It is narrowing the options to those are right for our company in these times given our specific
strengths. The reason we do this at this juncture in the process is so
that we set the table for the next stage—which is developing our strategic
direction. A strategy is a choice, and we are narrowing our choices for the
next level of scrutiny and definition. So, let’s move forward with decisions
that will provide focus for our business. First, examine your
options: In
the last issue, we talked about how to identify your options for growth. Put
simply, we suggest an “outside-in” approach where you examine market changes
and trends, assess where the opportunities of the future will be and consider
them in context with what you do well. Those opportunities that occupy the
intersection of future market growth and your strengths are the areas in
which you are most likely to establish competitive advantage and be
successful.
Be willing to make
a decision: This may seem obvious, but choosing is hard.
Often, because some economic benefit is associated with every option and many
companies (particularly in growth mode) want to do as many of them as they
can, they try to take on too many new initiatives simultaneously and take
nothing off the table. What happens is that a small effort is made in many
areas, and companies fail to establish traction in any area due to lack of
time and resource. As a result, the company doesn’t become known for any
particular area of expertise, product or service. They are just a face in the
crowd battling it out for new customers, often resorting to price to gain
attention. Decisions aren’t easy to make, but they help you create the focus
you need to accomplish your growth goals. And remember, at this point, we are
just narrowing options from “everything that is going on in our market place”
to “what makes sense for us to consider”. Involve different
perspectives: Sometimes, especially if our teams have been
together awhile, we tend to think similarly about the world. We see things
the same way. It might be a good idea at this stage to conduct discussion
sessions with people who might have a different world view. That might
include high-potential junior employees, or perhaps a group of valued customers.
Their perspective on what might work best or be of most future value to the
company could be different from yours and get you to expand your thinking or
re-order the possibilities. Establish
decision-making criteria: When
we do make decisions, all too often
we tend to make decisions on experience and emotion. He who talks loudest,
fastest or last decides. And as you already know, that rarely works. In order
to benefit from the diagnostics you have already completed and keep the
decisions focused on real market data and company facts, develop a list of
criteria against which every decision will be evaluated. You will likely establish
criteria in at least three areas: Financial, Strategic, and Cultural. One
important financial criteria is the size of the
opportunities you are looking for. What is the minimum contribution in
revenue an initiative must generate to be worthy of a company-wide focus? The
answer depends on how much growth you are looking for. Let’s say you want to
grow at a rate of 10% per year for the next five years and you are currently
generating $50 million in revenue. Think about how many major initiatives you
can reasonably take on, relative to the size of the increase desired. In year
one, you are targeting growth of approximately $5 million. Do you want 10
smaller initiatives or 5 larger ones? We recommend that fewer, bigger
initiatives are to your advantage as they often require fewer total
initiatives, make a bigger market splash and if you are committed, give you
the greater focus, increasing odds of success. So in this case, the decision
rule becomes “every initiative sponsored must be able to generate a minimum
of $1 million in revenue.” You might also consider profitability criteria,
debt or cash flow guidelines. The next category, strategic, has
to do with leveraging the overall direction you want to move in. Consider
things like channel of trade, customer mix, product excellence, or other
aspects of competitive advantage when defining your criteria. Does it help
you leverage what you do well, or correct a shortcoming? Finally, cultural
criteria have to do with aligning decisions to values. What are the must-haves
in every initiative to make it right for your company? Are you a green
company? Are you a God-centered company? Working against your culture and
value system rarely works, so acknowledge it in your criteria. Create an
evaluation tool: Once you have
established your decision criteria, list all of your options and then
evaluate each against each criteria, assigning a H=high,
M=medium, L=low. At this point you are most likely using the diagnostic
information already collected as well as some experience and intuition to get
to the ranking, but hopefully it is giving a good base of logic to your
discussion. Have your team talk about why they ranked each as they did. Be
willing to re-rank when you hear new or persuasive points of view that are
based on good analysis of the market situation. The goal is not to choose the
final path but to narrow the list. Once the list is narrowed to the top
ideas, your team can begin to see the type of opportunities that form the
shape of your strategic direction. In our next issue, we will launch
our discussion of Stage Two in achieving “escape velocity” growth, which is
the development of the strategic framework. Reynolds
Consulting, LLC has several tools they use with clients to help determine
decision criteria and guide the evaluation process. Let us know if we can
assist you in this process. You can reach |
|
We all recognize that growth is an important goal for our
businesses, and while it is never easy to achieve, that is especially so in
challenging economic times. However, by recognizing the factors that restrain us and the
opportunities that are available to us, we can beat the odds and see our
businesses grow to surpass the industry average. This newsletter continues a series of articles on what it
takes to grow—from understanding what is currently holding you back, to
identifying the opportunities inherent in your market, to constructing a comprehensive
and winning plan, to, finally, implementing the plan you have crafted. This newsletter series will run through the rest of the year. Don’t miss an issue! This is Issue No. 4 in
a series of eight. If you missed a previous issue, please let us know and we
will be happy to send it to you. No. 1—Escape Velocity
|
|
Reynolds Consulting values your privacy. |
||
