Your key implementation plan framework to get you started
Dr Greg Fisher is a professor in the Management and Entrepreneurship Department at the Kelley School of Business at Indiana University and a visiting lecturer at the Gordon Institute of Business Science (GIBS) in South Africa.
Over the past three years, GDP growth in South Africa has been small. Economists expect 2018 to see GDP growth at 1% or less. And yet the growth strategies of businesses are aiming much, much higher. How do you target 15% to 20% growth under such tight economic conditions?
According to Dr Greg Fisher, a professor in the Management and Entrepreneurship Department at the Kelley School of Business at Indiana University and a visiting lecturer at the Gordon Institute of Business Science (GIBS) in South Africa, you can’t just ride the momentum of the economy. You need to do something more to fill that gap. And therein lies the challenge, because there’s no silver bullet that can drive double digit growth.
“Ultimately, you need to be able to critically think through and formulate multiple ways to fill that gap,” explained Greg during his keynote strategy workshop at the 2017 ThinkSales Sales Leadership Convention. “Success in anything — sports, raising children, learning and business — is driven by fundamental principles that need to be applied with balance and moderation.
“A conceptual understanding of what to do isn’t enough. You need to take action — your ability to drive double digit growth lies in developing a strategy based on five key principles, and then executing it.”
Here are the five key principles you must unpack in order to formulate and execute a growth-driven strategy.
1. You need a good plan
Every successful business shift begins with a good theory. It doesn’t need to be sexy. It does need to be insightful, and give you a map of what to do next, what not to do next, and what value needs to be created through which channels going forward.
Leverage foresight, insight and hindsight to formulate a mental model and hypothesise (or develop a theory) that relates to your market.
Take Steve Jobs as an example. He hypothesised that people would pay a premium price for ease of use and an elegant design in computing. This would form the foundation that other digital products could be added to.
2. Strategy is about making choices and trade-offs
Strategists are constantly faced with choices and trade-offs that need to be made if you’re going to stick to the plan. Remember, true value is created when you make a choice, and don’t try to dabble in multiple things at once. You need a clear and manageable goal. Choices require decisions, often relating to where you will be channelling your resources. A trade-off is not doing something. What will you do and not do? This must align with what you’ve already theorised. It doesn’t serve you or the business to follow too many paths and options.
Which markets will you pursue vigorously and which will you leave alone? Which customers will you target, and which won’t you? Which products will you produce to enact your theory? Which activities will you engage in inside your organisation, what will you outsource and what won’t you do at all? Who will you hire? Who won’t you hire? And which assets will you choose to own?
Everything is a choice and a trade-off. Take Ikea, a retail brand that’s enjoyed 70 years of successful growth. Why? Because of fundamental and particular choices relating to product designs and style. Ikea isn’t everything to everyone — it has a very specific value proposition and delivers on it relentlessly.
This is fundamental. Even if you’re the low-cost provider in your space, you still need to be doing something different to drive those costs down; you still need to be differentiating yourself and the way you operate. The world is more competitive than it’s ever been, and buyers have more access to information and options than they’ve ever had. To be competitive, you need to really interrogate your differentiators.
The strategy conversation tends to happen early, the profit conversation happens late. You need to bring them together. When you’re having a strategy conversation, you need to understand how it will drive bottom line growth. The role of strategy is to bridge what customers are willing to pay for a product or service, and what it will cost you to deliver it. The strategies you adopt are determined by theories, choices, differentiation and costs.
The formula is the following:
Profit = the number of products you sell x price of product — expenses.
How does your strategy impact this equation? Which lever will your strategy pull? You ultimately want to drive profit, and to achieve that, your strategy must point to one or more of these three elements.
In other words, either you need to sell more products, or you need to increase the price you can charge, or you need to decrease the expenses you will incur to get that product to market (or a combination of all three).
The key question is therefore: What can you influence to drive the outcome you want? What strategy will drive profit?
The variants on the profit equation that you need to consider include:
- Industry average competitors
- Uniquely differentiated competitors
- Low-cost competitors
- Competitors with a digital advantage.
On the other side:
- Customer willingness to pay
- The cost to produce and deliver your goods.
Profit lies in the middle. Focusing on two or even all three of the levers is challenging, but it will result in the greatest results if executed properly.
But remember: The management of the profit equation is ongoing. You need to manipulate it in action and create a strategy that can be adjusted when and where necessary, always tying it back to the bottom line.
Ideally, you want to spend less while delivering more, resulting in higher profits. Before you can do that though, you must identify your profit levers. Finally, does your profit equation tie back to your points of differentiation, trade-offs and choices and ultimately business theory?
5. Activity integration
Your fifth, final and most important point is activity integration. You need to make your strategy happen. The previous four steps are meaningless unless you can do something with them.
Activity implementation is the result of the business performing a certain set of discreet activities. These include the sales force, managing customers and managing returns. This is your core and critical to business. Think of each business unit as a part to a mechanical watch.
The challenge becomes: How do they all work together in the service of the four points above? Your goal is to ultimately create something that is beautiful and precise. Independently, these departments are meaningless. Success lies in multiple activities, all working together to drive your strategy.
Start by driving your strategy and ensuring integration
To get started, consider which activities are necessary to drive your strategy and ensure integration. How these activities work together reinforces everything you’re doing. Activities amplify each other, until 1 + 1 = 3.
The problem is that multiple activities working together is difficult to replicate. There is no single activity (or silver bullet) that will drive success. You need to optimise all of your activities — you need ten primary activities, and you need to do them all very well. That’s activity integration.
The problem is that it’s not easy, which is why so many organisations fail at this stage.
If you can get this right though, the results will speak for themselves. 1x1x1… to 10 = 100%. 0.9×0.9×0.9… to 10 = 35%. That’s the power of activity integration. It also means that doing each activity at 90% will bring the entire organisation down to 35%.
Walt Disney conceptualised the entire Disney business according to activity integration. Each element worked into the next, starting with movies at the centre. Get that right, and all the other activities — Disneyland, merchandising and so on — work. Negate the movie piece and the rest disintegrates.
Bringing it all together
- What’s your theory?
- Do you have a clear, consistent and concise theory on how to succeed?
- How does that theory translate into your choices and trade-offs?
- What definitive things are you choosing to do and not to do?
- How do these choices drive differentiation? You need a core differentiation that customers can appreciate, value and buy into.
- How does your differentiation ultimately drive profits? Can you articulate it, and what levers are you pulling?
- What activities do you need to implement your strategy, and how do they ultimately integrate with each other?
Your Business workplan
Your key business plan to discover and implement the five core elements of a business strategy
Briefly describe the THEORY underpinning your organisation’s strategy.
A theory is a mental model about how your organisation does (or could) create value. It reveals hypotheses about how an organisation can create significant value. It usually entails:
- Foresight about the evolution of the industry in which you operate
- Insight into how your organisation can create value in the industry as it evolves
- Hindsight about how you might build past competencies, relationships and assets.
We theorise that
Key questions about yourself
- What are the assumptions embedded in your theory? Are they valid? Could they be tested?
- Would the other leaders in your organisation describe a similar theory underpinning your strategy? Do you have a consistent view of opportunities and mechanisms for value creation across the organisation’s leaders?
2. Choices & trade-offs
Identify the CHOICES & TRADE-OFFS that you have made, and need to make, to act on your theory.
A choice is a clear decision to do something specific and meaningful. A trade-off is a clear choice not to do something that is somewhat tempting or attractive to pursue.
- We have chosen to Identify 3 to 5 important strategic choices you have made
- We still need to make choices with respect to Identify 3 to 5 important strategic choices you still need to make
- We have chosen NOT to Identify 3 to 5 important trade-offs that you have made
- We still need to decide NOT to Identify 3 to 5 important trade-offs that you still need to make.
Key questions to ask yourself
- Do your choices and trade-offs clearly reflect your theory?
- What’s preventing you from making the choices and trade-offs that you still need to make? What would it take to definitively make these choices?
Identify the points of DIFFERENTIATION that are embedded in what you do (i.e. in your theory, choices and trade-offs).
Differentiation is something that clearly distinguishes an organisation from others in the industry. It is something that other organisations targeting the same customers are not doing and which those customers ultimately find valuable.
- We are different (or strive to be different) with respect to
Key questions to ask yourself
- Do your customers see and experience these points of differentiation? Would they agree you are different in this regard?
- Would the employees in your organisation describe similar elements of differentiation? Do you have a consistent view of your organisation’s differentiators across the organisation?
- How easy is it for your competitors to emulate your points of differentiation? Could they easily copy your points of differentiation? If not, why not?
Identify how your points of differentiation drive PROFITS.
- A useful way to examine the connection between strategy and profits is to examine a simple version of the profit equation as follows: Profit = (Number of products sold x Price of products) – Expenses. Identify how the organisation’s differentiation elements drive profits as follows:
- Identify those elements of the profit equation that apply for your strategy and complete the statement where applicable
- We are able to sell more products than rivals (YES/NO) because
- We are able to charge higher prices for our products than rivals (YES/NO) because
- We are able to reduce our expenses relative to rivals (YES/NO)because
Check those that are appropriate and complete the statement
- We sell more products because
- We charge higher prices for products because
- We reduce expenses because
Key questions to ask yourself
- What more could you be doing to increase volumes, charge higher prices and/or reduce expenses?
- Does your profit equation tie back to your theory, choices and trade-offs, and to your points of differentiation?
- Is the profit equation consistently understood across the organisation?
5. Activity integration
Identify the ACTIVITIES needed to deliver on your points of differentiation, and assess whether these activities are adequately INTEGRATED with one another (i.e. reinforce one another).
- STEP 1. Write up a brief description of each activity required to deliver on your organisation’s elements of differentiation.
An activity is something that a organisation does repeatedly in the process of developing, marketing and delivering products and services to clients.
- STEP 2. Draw links between the activities that currently reinforce each other.
Reinforcement between activities comes about when two activities support each other such that when they operate together, they are more effective than if they operated independently i.e. doing one activity well enhances the other activity.
Key questions to ask yourself
- Do we consistently view our organisation as an integrated system of activities that reinforce one another, or do we tend to deal with each activity independently?
- Are our activities arranged in a way that consistently and effectively delivers on our key points of differentiation? If not, how could they be rearranged to more effectively deliver on key points of differentiation?
Proven Strategies To Grow Your Start-up On A Scale Following These Guidelines
The following strategies can help you make the start-up scalable and grow it to accommodate a larger demand.
Scalability and flexibility are important properties of any business. Let’s say you’ve managed to build a successful start-up. It’s profitable and promising, but you want it to become better. The scalability of a business involves its ability to adapt for bigger workloads without losing revenue.
Even if your business is currently small and doesn’t generate huge profits, scalability can help it turn into a large enterprise. The wrong approach to developing a start-up can deprive it of an opportunity to become better.
The following strategies can help you make the start-up scalable and grow it to accommodate a larger demand.
Scaling Vs Growth
Many companies make a mistake of thinking that scaling and growing a company is the same thing. In fact, growth involves increasing revenue or the size of the company (the number of employees, offices, clients).
Constant growth requires numerous resources and may not always lead to a proportional revenue increase. In many cases, the growing number of services or products needed to boost revenue involves high costs related to the growing number of employees and equipment.
On the other hand, scaling allows you to increase the revenue without the costs involved in growth. You can handle the extra load and boost your profits while keeping the costs to a minimum.
At some point, a successful start-up needs to make a choice between growing at a constant rate and switching to the scaling business model.
Even though a single clear method for scaling your business doesn’t exist, there are some guidelines you can follow.
1. Get Ready To Be Patient
Scaling is not a quick process so you have to be patient. The overnight success story is not about you. In fact, scaling too fast usually results in unfortunate failure.
Allow yourself to spend the time to understand who your ideal customers are and how you can solve their problems in a better manner. Make sure you understand how to be confident about the new volume of your work.
Do research to find out how you can find the right resources to achieve scaling rather than growth.
2. Choose The Right Software
The lack of time and team members is a common problem for a startup looking for scaling methods. That’s why they need to try and automate as many processes as possible. This can be done with the assistance of the right software.
- Trello – to simplify in-office and remote teamwork
- MailChimp – to improve marketing campaigns
- Brand24 – to get insights about your business
- Survicate – to collect customers’ feedback
- Voiptime – to increase connectivity.
3. Take Advantage of Outsourcing
Since you are hoping to limit the expenses while growing the revenue, you have to find ways to spend the revenue in the right manner. The biggest mistake made by business owners who think they are choosing scaling is hiring a big team. By doing so, they turn scaling into growing.
Your best bet to avoid hiring a large team and paying large salaries while achieving your plans is to outsource. Using your resources wisely involves finding freelancers and remote employees who are willing to work for a lower pay on a one-time (or several) contract bases.
For example, you don’t need a lawyer or a computer specialist sitting in the office all day long. Why should you pay them a monthly salary?
4. Don’t Do It Alone
Even though certain team minimisation is necessary to improve your scaling efforts, don’t try to handle everything on your own. It’s important to have at least one person you can rely on to manage the business-related problems.
Scaling your start-up is possible as soon as you understand what scaling is in detail. You need to be careful not to start growing your business instead of scaling it in the process. Once you have all the fundamentals figured, resources managed, and the right people in place, you are ready to start.
Selling The Cape Town Lifestyle In China
GSB alumnus Grant Horsfield has built a rapidly expanding business in China that aims to provide a better lived environment – both at work and at play – and deliver a more balanced, sustainable and enjoyable lifestyle.
When Grant Horsfield moved to Shanghai, shortly after completing his MBA at the GSB in 2004, he wanted to find a product to sell to China, when the rest of the world was focused on buying from China. “I had a clear purpose,” he says, “I wanted to import something from Africa and bring it to China – I just didn’t know what it was.”
Horsfield had completed the Doing Business in China elective on the MBA programme, taught by Professor Kobus Van der Wath, which led to him accepting a job in China with Van der Wath’s consulting firm – The Beijing Axis. He also completed an exchange programme at Jiao Tong University in Shanghai. During this time, although he found China to be exciting and full of opportunity, Horsfield missed the Capetonian lifestyle – particularly the outdoor life and the interaction with nature.
He says, “that was when I realised that the product China needed was the lifestyle that we have in South Africa. I was sure that if the Chinese knew what they didn’t know, they would be living a more balanced life and be able to appreciate and relax in nature – so that was what I really wanted to import to China, the Cape Town lifestyle.
“At that point there was no concept of a weekend getaway spent relaxing in nature that we are so used to in South Africa,” Horsfield explains. This realisation kickstarted his vision for Naked – a chain of boutique eco-resorts set in natural landscapes across China.
The naked Group, which Horsfield founded in 2007, has built and now operates four luxury resorts with a further six under development. The first boutique resort, naked Home opened in Zhejiang Province in 2007, followed by naked Stables – an award-winning resort in Moganshan which offers horse riding to guests. Naked Stables is an industry pioneer in that it was the first resort in China to receive the prestigious Leadership in Energy and Environmental Design (LEED) Platinum certification – an American certification system encouraging the design of energy and resource-efficient buildings that are healthy to live in. Horsfield extended the concept of a luxurious retreat with the addition of naked Castle, a 95-room castle with two restaurants and a spa surrounded by lush forest, and naked Sail which offers a unique travel experience on a 70-foot catamaran in the Andaman Sea.
In 2015, the naked Group expanded into the co-working office space industry through naked Hub. Horsfield sees the move into office space as a natural extension of the naked brand.
“Essentially we had been inviting people to have a better lifestyle outside of work and we realised that we could do that in the work experience too,” he says. “When you build a resort, you build a space that allows people to experience a certain level of comfort and enjoy themselves, so why not do that in an office?” The naked team’s skillset in designing and building sustainable comfy resorts was easily transferred to building office spaces that people enjoy working in.
Naked Hub has seen rapid expansion, opening 50 hubs across China, Vietnam, Australia and the UK in just two and a half years. Initially based on smaller start-ups or freelancers in the gig economy, Naked Hub now caters to larger firms. “The idea of co-working space was born out of trying to make a more efficient smarter space for smaller companies but today more that 50% of our companies are multinationals,” says Horsfield.
The principles of a more balanced lifestyle and a cleaner more sustainable environment are present in all naked projects. For Horsfield, it’s all about trying to make the world a better place.
“No matter what kind of entrepreneur you are, you have to have some values that are important to you. For me, trying to change things for the better has been paramount in everything we’ve designed, and we probably have more sustainability experts on our payroll than most companies. What we do is not just about building, it’s about people, communities and how people interact in their environment.”
Commenting on what it takes to start a successful business in China, and then follow through with rapid global expansion, Horsfield says perseverance, a belief in what you want to achieve, and above all – courage – all play a role.
“You’ve got to have courage to do what looks very scary. If you don’t have a sound belief that it will work, then you just can’t do it.” He adds, laughing, “or as my mom says – I’m just too stupid to see the potential problems! But seriously, courage is what separates businesspeople from entrepreneurs – and that’s something that can’t be taught.”
Horsfield also believes strongly in what he terms AQ, or adversity quotient. “This is the mentality that allows me to overcome obstacles, the ability to hit a wall 20 times but pick myself up and keep on trying.”
Looking back on his experience of the MBA, he believes the programme’s value lies in promoting self-knowledge and reflection. He says, “each project I did allowed me to examine what I had done before and to consider how I could have done things differently. Examining my strengths and weaknesses was a huge benefit. Today I don’t hire people who have low self-awareness.”
“The other wonderful thing about the MBA was the diversity of students. We had a mixed group internationally, with people from many different cultural and work backgrounds, that was really enlightening. It also gave me a strong network of likeminded people.”
Horsfield believes his South African upbringing and his education at the GSB certainly helped him on his entrepreneurial path. He says, “wanting to do some good in the world, wanting to change things for the better, is a uniquely South African strength.”
What Are You Prepared To Lose?
While business growth tends to be a major goal for most business owners, with growth comes pain. Here’s how you navigate those challenges.
Many, perhaps most entrepreneurs would like their businesses to grow — whether from ambition to create an empire or just to reduce the risks inherent in being a little business. To do so the entrepreneur has to change roles. They must move from where they can control everything, and change from working as they always have. Being human, we fear moving away from familiar routines, we find it hard to give up authority and we lie awake at night worrying if we can afford all those extra people.
When you run a small business you make all the decisions, you monitor performance of your employees, have direct contact with customers and have a small nest egg so you can still pay your people in bad months. A bigger business means higher overheads, more debtors, and additional inventory, all of which will put a strain on cash flow. You are likely to need more working capital to finance growth and may have to take a loan, which only adds to the risk.
You are also likely to have less day-to-day control over operations and will worry about whether your managers are about to commit an appalling blunder. A more insidious risk is the growing distance between you and customers as the business adds layers of sales managers, sales people, project managers, and branches.
Finding the opportunities
It’s difficult enough just to stand still in tough times, let alone grow strongly. The more difficult the competitive and economic situation becomes, the more we want to control every aspect of the business. We hesitate to fill vacancies, clamp down on expenses, get enraged when people make mistakes and push the sales team until they get nervous.
We develop a hang-in-there mentality and hope for better times. Paradoxically, tough times offer great growth opportunities. While others cut down on training and marketing, you have the opportunity to lure customers away from them with aggressive marketing and pricing. You can build a work environment that will attract the best people by offering strong customer support and good development opportunities. If you are bold, you have the opportunity to lock in the best suppliers by paying on time and signing long-term contracts while others delay payments and seek cheaper suppliers. It takes courage to do this, and you will feel the loss of security and comfort zones.
In this rapidly changing world, it may be easier to grow a business now than it has ever been. Businesses that embrace change and look for opportunities in uncertainty can scale rapidly. Disruptive technologies have changed the rules and allowed new businesses to grow to international giants. Waste — especially packaging waste — green energy, medical technology and urbanisation have all presented global opportunities for smart entrepreneurs.
Change is difficult to manage; we prefer our comfort zones, but treating change as a friend rather than a fear could give your business the growth spurt you desire.
Letting go to move forward
One of the hardest things to do as a business grows is to discard products, people and processes that have built your business to where it is today, but will be a hindrance to you as you grow. You may have a favourite product that was the essence of your start-up, but is now out of date and uncompetitive. Kill it.
There is pain in dealing with staff and suppliers who will not be able to keep up with your growth, especially those who stood by you when you needed them. I am all for loyalty, but if loyalty becomes a hindrance you must act. Be kind to them, give them their dignity rather than carrying them as a charitable favour. Change their roles, or find alternate work for them. Getting rid of encumbrances, products, people, suppliers, customers and processes is all part of what you need to do to take your business into a growth phase.
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