Stage 2 companies must already have a clear and compelling value proposition if they’re successful enough to have grown out of start-up, right?
Well, yes and no. They do have enough traction in the marketplace to show that they have a value proposition that works. But it’s actually unlikely that the company has a systematic way to communicate the value proposition. And if that is the case, it will find that revenue growth is harder and harder to achieve – and in a competitive market, the company may start to lose ground to other companies who are communicating their message better.
What should a value proposition look like? When I started out in marketing, I worked with an excellent marketing agency, who explained that the “brand positioning statement” should follow a classic formula of, “For [market segment], Our Brand is the [product category] that [customer benefits] by [points of differentiation].”
So, for a clear and compelling value proposition, you need:
– A clearly defined target market segment or customer profile – is it marketing directors who work with global brands, or owners small businesses in cities, or…
– A definition of the product category – the marketing agency I worked with explained that orange juice could be defined as a breakfast drink or as a health drink, so picking the product category has a big impact on how the product itself is perceived
– A description of the customer benefits – what are the pains you alleviate (lost revenue, production downtime, etc.) and gains you enable (new revenue sources, talent retention, etc.)
– The points of differentiation – choosing from all the ways that your product works or the ways you deliver your service, what are the ways that set it apart from the competition?
Once you have your value proposition, make sure you reinforce it with everyone in your company, and you use it to focus your marketing and sales messages.
Not all strategic decisions need the same amount of analysis. This is something that many founders understand intuitively. But it’s also something that becomes more complicated as a company grows.
Why? Because the decisions get bigger and more complicated, what worked for a Big Decision in the past often doesn’t work for the Big Decisions of a bigger company. In addition, the “decision environment” gets more complicated, with more potential participants and more dynamics among them. Who do you include? When? How? Who provides input and who participates in the decision? How is the decision actually made?
What qualifies as a Big Decision? Something where the payoffs are extraordinary – say, it could have an impact of 20% or more of a company’s revenue, or it could impact more than a third of the employees – and/or where the risks are extraordinary – say, it could take 20% or more of a company’s discretionary resources to implement.
Decisions fall on a continuum – as the stakes rise, so does the need to treat the decision more seriously.
And how do you do that? As the decision gets bigger, you should add more information, more structure and process, and more focus and energy on the decision before its made. If you don’t, you can be pretty sure you’ll be spending more time than you’d like or expect after the decision.
Many of you reading this post are 10%ers. And there’s something in the back of your mind eating away at your conscience. You know there’s something not quite right about it, but you tell yourself that 10% has always served you well.
And you might be right. You’ve probably gotten along well enough with your 10%. Then again, you may feel like it no longer has the same effect that it used to. So let’s take a look at your 10% and see if it’s still serving you.
I’m inspired to write about 10% because I met with a guy last week who said, “It’s just what I’ve always done. I don’t really have a reason for it, and sometimes I wonder if it’s what I should be doing. But I’ve never known how else to do it.”
Later on, after our discussion, he said, “Yes, that’s what I want – that would help me, and it would help my team. They’ve always been a bit confused and defensive about the 10%.”
What am I talking about? Let me use his words, “We did a strategic plan back in 2008, but we’ve never updated it. It was helpful and we did some things because of it. But for the last 5 years, I’ve just said that we should grow by 10% next year. And that’s what I say at the start of each year. I kind of know that I could or should have more to my goal, but we’ve been OK just trying for that 10%.”
It’s something I’ve heard many times before. So, let’s look at the good, the bad, and the ugly of the “Let’s grow 10% next year” approach to strategic planning.
The good is that it’s an easy way to communicate that you want to grow, but not too much. It says, “Let’s get better at what we’re doing.” It’s also quick – most leaders who use 10% as a goal (I just can’t bring myself to call it a strategy!) need about 1 second to access their intuition and come up with that number. And it’s also good that most leaders who use 10% don’t enforce it – some years they’ll decline 1%, and others they’ll grow 20%, and both are received equally.
The bad is that 10% doesn’t tell anyone how to achieve 10% growth, and, since the person who used it likes a planning process that only takes 1 second, they usually won’t commit the time to strategy and planning to figure out how to get the 10%. And so, they just react to whatever the marketplace offers. That’s not good, but often times 10%ers are bailed out by a strong market, and so reacting is bad but OK.
Which brings us to the ugly, which arrives when a 10%er is managing a business in a market that is seeing substantial change. If that’s the situation, 10% is of no use, and in fact may be counter-productive. Because at the heart of 10% is “let’s change, but not more than we’re comfortable with.” And that can breed complacency that appears to be fine…until it’s too late for any small adjustments to work. And if the only goal you’ve ever had is 10% growth, you and your team are not going to be prepared when you need to lead your company outside your comfort zone.
So, if you’re a 10%er, you have a choice – to be passive or active. Either keep enjoying that comfortable feeling until you’re forced to do more…or lead your team to have a new set of discussions that develop your company’s ability to identify opportunities a little outside your comfort zone, go after them in smart ways, and stay ahead of the market.
I have 2 clients who are focused on “accountability” this year, and it’s proving a hard row to hoe for both of them. Why?
Well, first of all, accountability is a somewhat scary term. If someone is saying we need it, then that must mean that we are not being accountable, and that sounds like someone’s not happy with people’s performance.
Worse, if there’s not a way to gauge performance, the people are likely to take a need for accountability as a judgment on their dedication. They’ll confuse accountability with work ethic.
It’s unfortunate that accountability gets this reaction. In Stage 2 companies, accountability is more about making things that used to be managed intuitively into things that are managed objectively. It does make a judgment about how people are working, but not in the way they think – accountability focuses on working on the right things, not the level of effort.
In fact, most of the time I work on accountability, people have a clearer sense of direction and less stress in their jobs.
I can spend lots of time talking about how to make your organization more accountable, but for now, let me finish by answering the question, “How do you overcome the initial resistance to accountability?”
I recommend 3 steps. First, before you bring up accountability, praise the team’s work ethic (assuming it deserves praise…if it doesn’t, that’s a deeper problem…), so that they know that you know they are dedicated. Second, give them an example of people spending more time in an area than they should. (Serving the bottom 20% of your customer base is a fairly typical area.) Finally, ask the team, “Do you have a way of quickly seeing whether the other people on the Leadership Team are succeeding?” If you don’t, then you’re probably spending more time than you should simply understanding how you’re doing, instead of diving into the issues that will make your business better.
I spent the last 2 days in a workshop learning about performance and accountability from Shane Yount of Process-Based Leadership. His model is a terrific match for the strategy work I do – once you know where you want to go, then you need to activate the organization in a consistent, engaging, disciplined-but-flexible process.
I often talk with my clients about “strategic management,” which is the on-going ability of the organization to identify the right things to work on, and then to actually work on them – as opposed to getting consumed by day-to-day work that puts things off-track.
What powers Shane’s performance system is a “culture of accountability.” What does that look like?
– There are clear priorities for each team – and the company as a whole – to focus on
– There is a sense of urgency in each team – Shane is a strong proponent of a weekly cycle
– There are “non-negotiable rules” that people hold themselves, others, and the organization to – things like showing up for meetings on time, coming to meetings prepared, and taking responsibility for “re-negotiating” commitments if they are not met
– The dialogue is about what people do, not how they feel
How do you know if you need it?
– The performance of your company or team is driven by the force of the leader’s personality (and if that wasn’t there, who knows what would happen…)
– The company or team focuses on whatever is in front of it at the moment
– There is selective engagement – people are able to set their own level of effort and contribution
Many companies don’t need or want a complete structured performance system like what Shane offers. But whether you’re talking about my “strategic management,” or Shane’s “process-based leadership,” every company needs its own “management toolbox” to drive performance.
Is your company’s performance saying you have the right tools?
Many of my clients are proud of the “family feel” of their companies. They care about their people, see the whole person, and create a bond of trust that moves them well beyond an “employer-employee” relationship.
The last few years have been hard for the leaders of these companies, because they haven’t been able to protect their employees from the tumultuous market environment that their companies are operating in. Bonuses have been cancelled, raises postponed, training missed, and some of the “family” have even been let go.
In a discussion this week with a leadership team that was debating how to balance the benefits of a family feel with the realities of operating a company within the rules of business, I pointed out that it is profitability that provides the flexibility to treat employees well.
Look at a company that treats its employees well, and you’ll also be looking at a company that has a profitable business model.
At a Board meeting with one of my family business clients a few weeks ago – a company that has been passed down through several generations – they said it another way: “Always protect the money tree first.”
After yesterday’s meeting, I thought, “If profitability is the foundation of an empathetic company, what is the foundation of profitability?”
The answer has many parts, of course – strategy, productivity, discipline, teamwork, culture, accountability, etc. But I’d say the thing that comes first, before making the profitability happen, is…empathy. The ability to empathize with your customers, so that you understand what they need and how to make their lives better, in a way that they value.
If you want to empathize with your employees – if you want to create that great family feel – empathize with your customers.
There are many values that a company can live by. If you haven’t considered having Empathy as one of your company’s core values, it’s worth a look. And if you haven’t defined any of your core values…we should talk.
A friend of yours runs a successful Stage 2 business – but is also frustrated
that things aren’t going as well as he’d like. It’s your job to set him
on a new path.
How do you create that inflection point – that clarity of understanding and
focus that sets a new path and provides the basis for success?
Let’s look at how it works for Ebenezer Scrooge, because if ever there was a
tough customer for a strategy consultant to work with (cheap! close-minded!
domineering!), he is one. But Scrooge’s consultant (the ghost of his
former business partner) designs a great process that holds lessons for any
He starts with a look at the past (fond memories of Scrooge’s childhood).
What core principles show up then that Scrooge needs to reconnect with
today? What lessons does the past hold for Scrooge?
He then looks at today, from different perspectives than Scrooge usually sees
(a joy-filled market, a family feast, a miner’s cottage). What can
Scrooge learn from those people? What is happening outside of his normal
view that he can use? What does Scrooge have to offer those people?
And finally, he looks at the future to see where Scrooge will go if he
continues on his current path (a neglected grave!). What are the results
Scrooge will get from his present efforts? What results does Scrooge
want? Do the likely results line up with the desired ones – and if not,
what needs to change?
With a process like that, it’s no surprise that Scrooge emerged a new
man. Full of energy. Renewed with purpose.
The Wikipedia entry
about Scrooge’s transformation sums it up well, capturing both the immediate
impact and the long-term sustainability of Scrooge’s new thinking:
“Scrooge has become a different man overnight, and now treats his fellow men
with kindness, generosity, and compassion, gaining a reputation as a man who
embodies the spirit of Christmas. The story closes with the narrator confirming
the validity, completeness, and permanence of Scrooge’s transformation.”
So, as you do your annual planning, use the wisdom of Scrooge’s planning
process in your Stage 2 business, by tapping into the Ghosts of your
The Ghost of Business Past. What was at the heart of your success
in Stage 1? What was fun about the business? What made you
special? As you look to the future, you need to reconnect with that –
especially as your company has to change.
The Ghost of Business Present. Life in Stage 2 is more complex
because you are connected to so many more people and organizations, and because
you need to deal with broader markets rather than just isolated
customers. To come up with an effective plan, you need to take a more
holistic view. What are your customers thinking? Your
suppliers? Your competitors? Your employees? What is
important to them? What trends are happening in the market? You
need to see the world from other eyes, and use that perspective to come up with
The Ghost of Business Future. Stage 2 companies have reached a
point of sustainability, so now their leaders have to turn their attention to what
they are sustaining. What impact do you want your business to have on
the world? What results are you looking for from your business?
What does your business stand for? And what gaps and problems can you
identify today so that you can deal with them before they are urgent,
expensive, and entangled?
Successful Stage 2 leaders understand that it is not easy to design an effective
planning process, and so they put the time and effort into “planning the
When they do, the result is a business that is transformed overnight – with the
power to sustain that change over time.
What do you see when you go on a tour with your ghosts?
Enjoy the holidays, and best wishes for a good new year.
Want to succeed as a Second Stage company? Become a master of systems thinking.
Systems thinking is at the heart of my work. A Stage 2 company is moving from a Simple System (few parts, simple cause-effect, straightforward thinking) to a Complex System (many interdependencies, complex cause and effect, deeper analysis). Simple System thinking won’t work anymore…and Complex System thinking needs to be used in doses that start small and get bigger as the company grows.
One of my favorite books for introducing Complex Systems is Once Upon a Complex Time, by Richard Brynteson. He has assembled a range of 2-page stories that show how things are more complicated than they look at first glance.
A good example is how he starts his introduction…
“I could never figure it out. If my parents really cared about me, they would quit smoking. They knew that it irritated us kids. They should just stop doing it. Just like that! Now that I have worked with systems thinking, I realize that they couldn’t stop, just like that. There is the smoking system – the process of lighting up, inhaling, exhaling, and flicking the ashes (and, maybe, coughing). But other systems also surrounded smoking: social systems, body addiction systems, emotional systems, thought systems, memory systems, drinking systems…and social systems.”
If you’re running a Stage 2 company, you could probably go out to any person in your company right now, and read that quote, and that person would be able to replace “smoking” with some bad management practice that is holding them, and your company, back.
Everyone in the company may even know what it is.
So, why haven’t you changed it? Because you’re probably trying to solve a Complex System problem with a Simple System approach.
Brynteson goes on to explain that systems thinking…
- Uses a wide-angle lens, not a telephoto
- Sees connections between parts, not just the parts themselves
- Sees the patterns and structures underneath events, not just the events themselves
- Examines time and distance between cause and effect
- Is circular, not linear, thinking
At Phimation, our consulting, coaching, and training takes a Complex System approach, and teaches your team how to, so that you can make the major shifts that you need for solid growth and sustainable success.
I named the business Phimation because that’s the force that enables Simple Systems throughout nature to transform and thrive as Complex Systems. And Stage 2 companies are a key leverage point for phimation – they are living the transition from Simple to Complex System every day.
If you’d like to learn more about how to apply Systems Thinking to your Second Stage company, register for our monthly Stage 2 Secrets call.
Imagine having a crystal ball that could show you the future.
Wouldn’t it help you make better decisions for your business?
Well, we don’t have a crystal ball. And we can’t promise to show you the future. Not exactly. However, we can show you the next best thing: the trends that will impact your second-stage company in the upcoming year.
As we work with small businesses to help them assess and understand what shapes their future—from the inside and out—we see these trends and understand their impact.
And second stage companies, who might be lulled into a false sense of security for getting past that awkward start-up phase, may need to watch these trends more closely than anyone. Failure to look at your operating environment might lead to missed opportunities … or prevent you from adapting when it’s most necessary.
Here’s are a few of the trends we think everyone should know about:
The New Agraria – Get ready for an environment more like 1800s farming than the industrial economy you’ve come to know. This means you can expect “seasons” and different “weather patterns” in your markets, and you’ll need to take one plot at a time as innovation continues to shift your market. However, one key difference is that today’s small businesses will work in communities defined by interest, instead of geography.
MAD World (Massive Adaptation Daily) – With economic and technological change, companies will need to be highly nimble for daily survival. The leading companies will engage employees to evolve in significant ways that create new opportunities and efficiencies.
The Almighty Network – There will continue to be a powerful shift between physical and virtual worlds. The Internet will keep equipping small businesses with essential availability, intelligence, capability, and capacity to serve their customers. But it’s not just a one-way relationship. The Network is demanding more from small businesses.
Our trend report, which we assemble every year, highlights the most influential small business trends. We think it’s essential reading for small businesses looking for trends to capitalize on.
We’ll send you the full report – with trend descriptions, strategy recommendations, and important trends from other sources – when you enter your email address below. If you just want to see the trends, check them out on the SlideShare presentation below.
Conflict in a team can be so frustrating for a Second Stage company. You want to focus on the work at hand, but you and your team can’t get started – or keep getting sidetracked – because you’re not working together.
There can be several reasons for team conflict. Often people look at the personalities involved, or the level of emotional intelligence, or “teamwork” – and it makes sense to look at all of those. An area many people don’t explore, though, is strategy.
Often times conflict arises from a poor or unclear strategy.
Conflict happens “when you don’t live up to my expectations.” And that happens much more often when (1) the strategy isn’t clear, because then there are no common expectations and everyone just uses their own, or (2) the strategy isn’t good, because that puts more pressure on everyone, and pressure makes it hard for everyone to work outside of their comfort zone.
Team-building exercises have their place. But if there is conflict in your team, you may have deeper work to do than just team-building. If you think that’s the case, schedule a strategic planning session, hire a strategy consultant, or lead your team through the strategic assessment workshop we offer in our Stage 2 Insight program.