[The 4-phase approach]
1. Finding the best strategy for your business
To answer those questions and more, Entrepreneur interviewed Michael Canic, business consultant and author of Ruthless Consistency: Aligning Your Organization to Win…or Else!
Entrepreneur One of a leader’s many responsibilities is to have a ‘strategic plan’ for their company.
Does a strategic plan produce sustained focus for
the leader, their management team and the company’s employees?
MC Actually, a strategic plan doesn’t produce sustained focus for anyone. What typically happens is that well-intentioned leaders go off-site for the annual ‘strategic planning’ retreat. They plaster the walls with flip chart notes and discuss at length big-picture issues such as mission and vision. When it’s over, everyone breathes a sigh of relief and gets back to the ‘real work’ that’s stacking up back at the office. The strategic plan is documented and distributed, and then it sits on a shelf and collects dust.
Entrepreneur So why don’t strategic plans become strategic reality?
MC Because strategic planning is all about creating ‘the plan’. Plans don’t implement themselves. Strategy, right through implementation, needs to be approached as a process. That’s why we created the four-phase strategic management process — to focus on turning strategy into reality.
Entrepreneur The idea of strategic management sounds good because it puts the strategic plan into action. What are the four phases of your plan and why are they important?
MC The four phases are assessment, positioning, planning and implementation. The reason they’re so important is because ignoring any single phase can lead to disaster. Failing to conduct a thorough assessment can mean making decisions based on faulty assumptions. Failing to establish the positioning of a company can result in plans that focus on the wrong things. Failing to plan leaves you with a destination but not a roadmap. And failing to implement means your efforts at everything else are wasted.
1. The assessment phase
The key here is that leaders have to be willing to attack their assumptions — to overcome their egos, to come to grips with reality, warts and all. So you start with a question the company needs to comprehensively answer: What is our current situation?
There are three things to look at here. One is the organisation itself, from an operational, financial, structural and people perspective. Two is market data — current and potential markets and current and potential customers. You want to look at your performance feedback and value drivers. Third, and this is the one that’s most often neglected, is what I call the ’STEEP’ factors: the sociocultural, technological, economic, environmental and political factors that can greatly impact a business.
Consider a fast-growing software company. Suppose their growth rate over the past three years has averaged 44%. Customers are happy. Investors are happy. It might be tempting to feel a little self-satisfied, perhaps become a bit complacent. But what’s happening to the industry? For example, if the trend is for ‘on demand’ rather than ‘on premises’ software, failing to recognise this and adapt could put you out of business.
2. The positioning phase
The question to ask here is: what do you want to accomplish as a business? Forget the manicured mission and vision statements. Most of these are too vague, too long and not remembered. Boil it down: come up with one, simply worded sentence that captures what you do as a business so that a stranger who heard this sentence could gain a basic understanding of what you do.
Then develop another simply worded sentence to capture what ‘winning’ would look like. Think of the early days of Apple when the overarching goal was to create the most user-friendly operating system for personal computers. Or recall that more than 30 years ago, Nike had a single, laser focus: ‘Crush Adidas’.
3. The planning phase
The general question to ask here is: how do you get
there? This is the phase that has to be information-driven.
How much capital is required to support the infrastructure for growth? How rapidly do you have to grow to survive a consolidating market? Which distribution channels do you need to dominate?
Think of how many promising start-ups have died because they underestimated both the time to establish a significant market presence and the capital required to achieve it.
4. The implementation phase
Here you must answer the question: how do you ensure it happens? This is the most important phase and the phase where strategic plans fail.
A critical and underestimated part of any implementation is alignment — ensuring that the factors that impact people (from skills, authority, resources and incentives to processes and structure) are all aligned with the overarching goal. It’s alignment through the eyes of the people, not just leaders, that counts.
A second critical aspect of implementation is commitment building. Here we like to structure leaders’ regular communications and engagement with employees. Our underlying belief is that information, input and involvement together help to build commitment.
The last part of this phase involves execution management. Every month, the leadership team should meet for a few hours to track and manage the implementation of the plan. I strongly believe that every 90 days, the leadership team should also meet to recalibrate the plan. Reality changes, and the plan or elements of the plan can become irrelevant. Every 90 days, it’s critical to question the assumptions upon which the plan was built and make adjustments as necessary. Have you lost a key customer? Has a new competitor come into the market? Has a promising investor bailed out on you? What has changed to the reliability of your supply chain?
Unsurprisingly, when a company vigorously adopts a disciplined strategic management process, they’re much more likely to achieve their ambitions — the right ambitions.
2. Five structural elements of strategy
Strategies fail over and over again for the same reason: businesses ignore the five key structural elements of strategy. Miss one and your strategy is doomed to fail.
By Nilofer Merchant
How many times have you experienced this situation: you, your partners and your managers develop a plan, hold meetings, and achieve alignment. Yet during the execution phase, the strategy falls apart. During the inevitable review process, the causes are all too familiar: no defined key players. No consideration of the decision-making process. Too many ideas generated, too few killed. A laborious process or no process at all. The wrong people engaged or poor team collaboration. There’s a reason that the causes of failure are repeated. It’s because strategy has a unique structure, and if you overlook one of the five key elements of that structure, you’ll fail. Add elements that don’t support that structure and you’ll fail. And the failure will look familiar every time.
1. Power distribution
Power distribution dictates who’s involved, how much information each individual can access, and the decision-making process.
It’s crucial to know who you’re working with from their track record on complex strategy projects to basic strengths and weaknesses. Talk to other people in the organisation who have worked with them to gain more information. Vet people to avoid surprises and to understand the best ways to support and motivate team members.
How much of your strategy is confidential? What can — or should — be shared with other groups? Set the boundaries and share them so that everyone agrees and has the same expectations. Make sure that the inner working of the group matches the culture and values of the parent organisation. If your company is as free-flowing as Google, don’t bind people with conservative rules that eliminate communal sharing of ideas or the development of innovative solutions.
The way that decisions are made in organisations determines how ideas are generated and which ideas are considered. The way decisions are made influences how these ideas are carried out later.
Does decision-making in your organisation flow top-down or bottom-up? Who are the holders of the power to decide which ideas advance and which are eliminated? If ideas are valued in your culture, there’s a strong likelihood that it might not matter who generates the ideas.
3. Idea generation
How ideas are generated affects the quantity and quality of these ideas, which directly affects the number of viable strategy options.
A company that has an annual strategy meeting with a brainstorming component that encompasses input from many directions within the company uses one type of idea generation. The Google model involves having employees use 20% of their time for innovation. They test and grow projects. Some projects are nurtured and provide the company with revenue. Others are killed off. It’s even possible that original projects may mutate into something different.
Process is the way that ideas are handled and consumed within organisations. Process defines the way that agreements and commitments are made and managed, and how well people understand what is happening and what to do. The process-driven organisation avoids wasting employee time and energy. People in this type of company reach agreement that an action is valuable, develop a process around it, and set it in motion.
Process may be communicated to a team in writing, by word of mouth or in other ways. Agreement is critical to the understanding of process within an organisation.
In an organisation of any size, people bring their domain knowledge, talents, and perspectives to strategy creation. Often people are viewed as the first point of strategy failure, but they are actually the last point of failure in a long series of cascading interactions.
Put another way, very bright, creative, motivated people can fail if they are embedded in a strategy creation structure process where power, decision-making, idea generation, or process are broken.
Each of the five elements is critical to the strength, balance, and practicality of the proposed strategy. Tighten up around these five and watch your team’s next strategy
succeed beyond your plans.
3. Plotting your path to business growth
Growth strategies are not cast in stone. You need to be flexible to maximise opportunities as they present themselves.
By David Meier
ost entrepreneurs, from time to time, have more than one way to grow their businesses available to them. The process of deciding on a growth strategy is ongoing, and the decisions that result can be critical to the future success of any business.
The search for real business growth, by creating permanent increases in profit as a direct result of measurable and sustained increases in sales volume, may not only be a reaction to opportunities in the marketplace, but also a requirement in order for your business to maintain market share. The right decisions can conceivably have a major positive impact on your business’s bottom line, thereby creating real growth. However, if you choose unwisely, or decide to do nothing when action is clearly warranted, the results can lead to a loss of growth potential, or even a period of negative growth (decreased sales and profitability).
Invest in growth
As with so many issues in business, your growth decisions should be based on objective financial data, consisting of relevant estimates and projections. Not every growth strategy can be expected to impact your business in the same manner, and over the same time period. Your ability to compare growth options is the best way to make informed decisions.
Think of your decisions in the context of ROI analysis. Each growth opportunity has an investment component, money that you would be required to spend as a part of the process of implementing a specific growth strategy. The corresponding return that you can expect from your investment in business growth can be represented as the increased profit your business is projected to incur, directly as a result of the sales increases created by your business’s growth strategy. For example: a retail business is considering growing by adding a new product line. The required investment to add the line is R1,2 million. This addition is expected to add R800 000 in annual sales, and as a direct result, a corresponding R200 000 increase in annual net profit. Therefore, the anticipated ROI from this additional (product) line is in excess of 16% (R200 000/R1,2 million).
Evaluate growth plans
If the business is currently enjoying an overall 25% ROI, the question the owner must answer is, ‘Should I invest R1,2 million in the addition of the new product line to earn an ROI that is nearly 9% less than my business is currently earning (25% – 16% = 9%)?’ The correct answer may appear to be an obvious ‘no’, but there may be other business reasons that would cause the owner to decide to add this product line, such as the presence of a strong market demand for the new items.
In any event, once each growth strategy is converted into an ROI percentage, you can compare dissimilar growth options, and ROI can be used as a critical financial component in any business growth decision. Furthermore, just as ROI analysis can be used to evaluate these additional growth strategies, it also can be used to evaluate business ideas, such as those of entirely new businesses. And fortunately, ROI analysis can be applied to these new business ideas well before an owner ever decides to invest in that new business.
How You Can Achieve Growth Through Access To Markets
If your goal is to scale your business, you need to increase your sales and access to markets. We found the best way to do that was through key strategic partners whose existing clients were our target market.
Many sales-led organisations have come to the same conclusion at some stage in their business growth life-cycle: In order to build a sales-led business for scale, you need to adopt a multi-channel sales distribution strategy. In our world, this means a combination of direct sales (boots on the ground), digital marketing and strategic partnerships.
After five years we had grown Merchant Capital as far as we could organically. We needed a much larger sales distribution channel. Understanding the need for a multi-channel sales distribution strategy is one thing, execution is something else entirely. After paying significant school fees, our strategic partnership distribution strategy was crystallised, and off we went to bring our chosen partners on board.
1. Finding strategic partners
Re-calibrating our sales strategy led us to the conclusion that we needed a strategic partner who could bring us ‘one-to-many’. In other words, we needed to identify potential partners (‘one’) who have ‘many’ sweet spot clients who are also our target clients, and whom they are already servicing with other products daily.
The end result of this three-year process has been strategic partnerships with Standard Bank and Discovery Insure. In the case of Standard Bank, every business that utilises a Standard Bank point of sale (POS) system can apply for a cash advance from Merchant Capital. Thanks to the partnership, Standard Bank POS merchants can access a cash advance within less than 24 hours of application.
It sounds incredibly simple and straightforward, but the process of identifying the right partner, creating the value proposition and then building a relationship that can result in such a partnership is anything but.
The most crucial element in this process was identifying partners who could benefit as much from a relationship with us as we could from them — in other words, ensuring a strong mutual value proposition.
When you have a business need, it’s easy to convince yourself that your prospect or potential partner needs you as much as you need them. Unless you are absolutely sure that this is the case however, there’s a strong possibility that you end up having a life-changing initial meeting and then never hear from them again.
This can happen for one of two reasons: Either you haven’t found the right partner who will also benefit from a partnership with you, or you haven’t been able to adequately distil that value. If this happens, very often you’ve missed your opportunity and won’t get a second chance.
We therefore had to be extremely disciplined in identifying which partners we wanted to approach. We focused on removing any subjectivity from the process by building an objective ‘partner scorecard’ that allowed us to weight certain attributes of the partner (such as a large client base, deep client relationship and mutual value proposition) with what we could offer them. This empowered us to make educated decisions.
2. Making first connections
Identifying the right partners is only the first step — now you need to make contact. By design, the partners we had identified were behemoth corporates with much larger priorities than meeting us, and convincing them on the upside of a strategic partnership needed to be robust and well-articulated.
Step one is getting your foot in the door. We began the process by identifying ‘champions’ within the partner organisation. This process takes time. We were able to secure meetings and found that running pilots was a good way to provide demonstrable evidence of the proposed ‘win-win’ proposition.
Early on in a business life-cycle (before any traction and brand equity exist), we found that leveraging off our network of shareholders and mentors to make introductions to the appropriate decision-makers within the organisation was of great assistance.
When we signed our previous investment deals, this was actually a key consideration for us. For obvious reasons, growth funding holds value, but the network and mentorship that the right board and shareholders bring to the table can be much more valuable.
Until you’re able to build brand equity and gain traction with a partner (or client), the right networks, introductions and referrals help you secure the meetings you need to prove yourself. And then you need to start small. Don’t expect a meeting with the CEO. Start with someone who could be your champion within the organisation.
3. Finding your champion
Finding a business sponsor to champion the partnership within the corporate partner is fundamental to your overall success. They will understand the internal friction and potential hurdles in navigating the naysayers within the organisation.
There will always be people, and rightly so, who challenge the partnership and ask why they can’t just do it themselves. If you don’t have an internal champion who is engaged and passionately buys into the partnership, then the initiative will most likely fall over and die.
Being the first mover in a partnership with an innovative start-up has many advantages if the product takes off. Often, these people want to be involved on the ground floor.
That said, big corporations are still taking a chance teaming up with young companies (brand risk and financial losses, to name a few). The upside of having already landed a smaller partner where significant traction can be demonstrated goes a long way in softening the initial concerns and risks from the large corporate’s perspective.
4. Nothing worth having can be rushed
The one word that comes to mind when thinking about this journey and the past three years is grit. In our experience, landing great partnerships takes many years of relationship-building and demonstrating solid business metrics and track record.
As I’ve already mentioned, our discussions with Standard Bank began three years before doing the deal. What we found useful in the early days of the partner discussions was communicating that in the next quarter we were going to achieve certain results and then coming back the following quarter and presenting the fact that we had hit our milestones, or hopefully exceeded them.
Just as you would do with an investor, this built a track record and credibility. The rhythm of checking in every few months and reporting back on progress is a great way to build the relationship over time without being too pushy as well.
Pulling it all together
There are two types of growth: Organic growth and scale. We’re an organisation that wants to scale. We’re aiming for exponential growth. This wouldn’t be possible without exponentially increasing our access to market.
We identified that the best way to do this was through the right strategic partner, but there are many channels that business owners can consider.
The important thing is not to just do what you’ve always done, unless you’re comfortable with organic growth. Evaluate your current model, and critically examine what you need to do to increase your sales, distribution and access to market. There is no one right way to do this. It took us time, and we needed to learn a few tough lessons before we were confident in the direction we wanted to take.
Related: My Business Is Growing… What Now?
5 Lessons On Scaling Up Your Company From An EOY Winner
It takes a combination of grit, hard work and the right strategies to navigate the challenges of the scale up journey. What do some entrepreneurs do differently to make it to the top?
Building a successful company is really hard. Even when you have made it through the start-up phase – product development, market fit, building a team, earning first traction – the process of scaling up remains a challenging road.
Louw Barnardt CA(SA), recently named the Emerging Entrepreneur of the Year at the Sanlam/Business Partners Entrepreneur of the Year® Awards, shared his five top lessons learnt from fast-growing clients and from their own journey of scaling up Outsourced CFO to twenty five full time professionals.
“There are many stumbling blocks that hinder exponential growth at the scale up phase. Successful start-up founders do not always have the right skill set and experience to build a business from five to fifty people or from twenty to two hundred.”
Louw and his team have taken the concept of an ‘Outsourced CFO’ – a go-to finance person for emerging companies – and built a very exciting business from it. “There are hundreds of lessons one learns on the journey of building a scale-up company. These five stand out among all of the biggest lessons learnt.
1. Invest in People
Doing business is all about people. In start-up phase, founders are able to manage almost everything. From the social media post to the invoicing to the recruitment – it all falls on you. One founder can manage this for a short while and a founder team for a bit longer, but somewhere between five and twenty people this changes. The founders can no longer make every call, have every meeting, answer every client query.
It’s critical to build a solid leadership team and then to equip them with enough autonomy and authority to run with the various portfolio’s within the company. Put a head of HR, head of sales, head of client engagements, head of operation and head of finance in place as soon as you can and keep investing in them – it’s the only way to scale out of start-up mode.
2. Manage Cash Flow
The finance function sits at the heart of every business. If the numbers don’t add up, everything comes to nothing quite fast. Founders need to make sure that they have a firm eye fixed on financials. New cloud systems enable entrepreneurs to have access to every detail of revenue, profitability, debtors and cash flow in real time.
That’s right – exact live financial information at your fingertips for decision-making. Foreseeing cash crunches ahead of time and actively being able to navigate to avoid them makes all the difference in the scale-up process. Growth eats cash, so be sure to manage yours on the way up.
3. Streamline and Automate
A start-up can afford to do what needs to be done in the moment. Scale-ups cannot. Automation of company processes is key to enable scale in various company functions.
Automate your sales process with a tool like Sales Force or HubSpot. Automate your marketing with a tool like Hootsuite. Automate your finance with a tool like Xero. Automate your company culture input with a tool like Hi5. Putting a good system in place and investing in the understanding and utilisation of all of its functions is a prerequisite for high growth.
4. Prioritise Strategy
As execution becomes a bigger and bigger part of your company, the strategy that directs that execution plays an ever-increasing role. The most successful management teams set and stick to good habits around strategy: Annual breakaways to direct long term strategy. Quarterly strategy days to cement key strategic priorities for the next 90 days and the likes.
It may seem counterintuitive to have your full management team out of action for so many full days of work, but putting the right strategy in place to execute is the real deep work required to scale.
5. Brand and Awareness is key
The value of owning a top brand and of being top of mind with all your stakeholders cannot be overstated. A stronger brand lifts the market’s perceived value of your offering. Continuously starting conversations and finding ways of reminding your networks and target market of who you are and what amazing things you are doing opens up ever-bigger opportunities that play a huge part in creating scale for our top entrepreneurs.
“Building a company is hard work. But if you do it smartly, the juice is worth the squeeze many times over. Make these five lessons your own to hack the scale up journey as you build the business of your dreams.”
Use Growth To Help You Live Like A Hero
Often strengths become weaknesses as we progress through our business journey. If you want to remain the hero, you need to focus on growth.
“Do our heroes fall from grace? Sometimes.
However, what makes them a hero is that they fight and crawl their way back to the top. You aren’t a hero because you were once great. You are a hero because you continually strive to be great.”
I am a big Batman fan. The 2008 film, The Dark Knight, gave us an iconic line. In it Harvey Dent, who later becomes Two Face, says, “You either die a hero, or you live long enough to see yourself become the villain.”
It’s a cutting view of a fall from grace: How our heroes often become vilified through their actions or our perceptions of them.
But I would like to suggest a different context for this quote. As an entrepreneur, you must develop certain qualities and characteristics to become successful. The problem is that those same qualities and characteristics, once the tools that pushed you to success, can at a later stage become the stumbling blocks that prevent you from progress.
Growth beyond abilities
Here’s a quick example. You wake up one morning with a great idea. Soon after, your idea has been translated into action and your business is up and running. You find yourself jumping between different roles. Sales. Marketing. Accounting. Operations. All your time and energy gets funnelled into the business. You work late at night. Sure, it impacts your social life but at least you don’t have a family to worry about.
Then, growth. Things change. And your superpowers become weaknesses. You need to hire a team to help with the increasing demand on the business. But you struggle to let go. You want to hang on to your ability to control every aspect of the business. It’s how you have always done it. It’s what led you to success. However, the business requires you to change with it. To learn a new skill; finding the right team and trusting them with your dream.
You might then find yourself in a serious relationship or married. Perhaps even a kid. And the amount of time that you can dedicate to the business is impacted. You must find ways of staying productive at work while making time for your family and close relationships. Your previous ability to pull all-nighters becomes futile in the face of new expectations as you need to divide your time in a meaningful way.
What once was a strength now becomes a weakness, and this happens much faster than you might think. So, how do you prevent your superhero abilities from withering?
Truth in reflection
Everything we do starts from knowing. You would be surprised to know how much of your behaviour is driven by subconscious programming that you grew over the years.
Since this behaviour becomes a part of your identity it becomes almost impossible to see how it affects the way you interact with the world and those around you.
So, the only way to really create a new set of behaviours is to pause the auto-play function. And for this to happen you need self-awareness and reflection. You do this by creating time for meditation, journaling, and spending time with a coach or mentor.
In my experience, entrepreneurs are pretty good at learning new things. Especially in the early days. So, as your business grows, you need to grow with it. Unfortunately, many entrepreneurs get left behind. It’s much more ideal if your growth drives business growth than the other way around.
I am not going to harp on about this because I think there are more than enough resources that can help you to evolve your thinking, and they aren’t hard to find, in fact you are holding such a resource in your hands right now.
People Are Mirrors Too
The people around you are pretty good at holding a mirror up to you. They aren’t always aware that they are doing so. They hold up the mirror by reacting to you in a certain way and by speaking to and about you in a certain way.
If you are paying attention, then you will pick up on the clues that they leave behind. You will be able to read between the lines and hear their cries for support, encouragement, and trust. But of course, what you are seeing is not a reflection of them but rather a reflection of you.
What part of your identity is robbing people of support? What have you done that created a culture of mistrust?
It all comes back to you and the way you have been conditioned and how you are, in turn, conditioning those around you.
You can stay the hero
That’s why you can’t give up. Heroes don’t give up. — Kiera Cass
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