If there’s one thing in Stage 2 companies that does not take a lot of thinking, it’s identifying who your “High Potential” staff are. They come to mind immediately whenever I ask leaders who they are.
But, as much as it’s a no-brainer to get the most out of the people who offer the most, Stage 2 companies do a consistently horrible job of actively developing their High Potentials. Why? Because the Well-Oiled-and-Balanced Wheel is easy to ignore (and besides, it has a lot of weight to carry and can’t afford much “down time”.)
The first step I’d recommend in developing your High Potentials is to come up with a model that you can use to identify your High Potentials. Since it’s always obvious who they are, why would you need a model? Two reasons.
First, you need a program to develop your High Potentials, both to get the benefit of the full value that they can give you, and to keep them engaged and hopeful about their future at your company. And in order to have a program, you need to explain to people who is part of the program and who is not.
Second, you also have people who are Good Potentials. Most of them will never make the jump to High Potential – but some of them will. And to do that, they need a model of what they’re aiming for – what a High Potential is.
I have a 1-page model for talking about High Potentials. It’s a graphic that you can put in front of High Potentials to talk about why you value them so much and how you want to continue to develop them. And you can show it to Everyone Else to explain in simple terms what it takes to be (and be treated like) a High Potential.
If you want to see my model and learn some tips for using it, sign up for my upcoming August Strategy Hour webinar (even if you can’t make it you’ll get a copy), or go to the Contact Us page and reach out to me to request it.
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.
Sometimes I’m asked to help companies find the right path for their next 3-5 years – which qualifies as “long-term” strategy for a Stage 2 company. Other times, my strategy work focuses on short-term performance. In either case, it’s useful to have some way to measure progress and check to make sure we’re on the right track – to have a dashboard or scoreboard.
In designing a dashboard, there are 2 main factors: (1) what you will measure, and (2) how you will measure it. I would rather have a precise description of the business driver and an imprecise metric than an imprecise description of the business driver and a precise metric. In other words, it’s more important to understand what to measure than to have a top-quality measure itself – it’s not much help to have an accurate measure of something that doesn’t matter. Or, said even another way, you should not pick your metrics by what is easy to measure – you should focus on what will drive your business, and then do the best you can to approximate a metric if there isn’t one easily available.
As for the business drivers, when you’re measuring short-term performance, the first job is to decide what’s important to track – what’s going to move the needle. In general, the items to track to improve short-term performance are going to be either revenue or costs/productivity. However, I recommend you come up with more specific metrics that zero in on exactly how you’re going to drive those areas. Examples would be:
- Revenues from our top 20 customers
- Revenues from new customers
- Revenues from a particular product line or market sector
- Costs or productivity of non-customer-related activities
- Costs or productivity in the areas of your largest expense areas
For a situation where the short-term performance is OK and the focus needs to be on medium- and long-term initiatives, there are a broader range of areas that are usually represented in a dashboard. Examples of long-term programs include:
- Development of new products
- Diversification into new markets
- Building a new way to acquire customers
- Changing the sales process
- Training and developing your people in general, or the skills in a particular part of the business
- Developing partnerships
So, what do you do if you don’t have a precise metric available? I’ve found that Green/Yellow/Red works fine as long as (a) there is a clear owner of the area that is being tracked, and (b) there is discussion about the status. The benefit of having an actual metric is that good data leaves little open to interpretation. (“Data ends discussions.”) If you’re not working with good data, but instead using something like a color scheme, then you’ll have to make sure you spend time understanding and interpreting what’s going on.
I’ll have some more specific recommendations for designing dashboards during my upcoming Monthly Strategy Hour – register to hear more and ask any questions you have.
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.
How could I not take up the challenge of finding the link between the 50 Shades juggernaut and my beloved Stage 2 small business clients!?!
Putting aside the more mundane topics of what Christian Grey’s DISC profile is, the importance of proper inventory processes, and the merits of NDAs, I’m struck by the similarity between Christian’s dominant role and how Shane Yount, owner of the Process-Based Leadership system, describes some companies:
“(Managing by position, proximity, or persuasion) creates dependency. Employees become dependent on their leaders to make the decisions, to solve the problems, to show them what to do and when to do it. Certainly managing by position, proximity and persuasion gets short-term results. But dependency is dysfunctional.”
It may seem extreme to draw a parallel between 50 Shades’ dominant/submissive relationship and how many small business leaders operate, but there’s probably more truth to it than many owners would like to admit.
Recently I talked with a group of Stage 2 company CEOs, and one of their big a-ha moments was when they realized how dependent their organizations are on the leader’s opinion, intuition, and judgment.
If you realize that your leadership is out of balance, or if your employees start to refer to you as Mr/Ms Grey…what can you do?
The first step is creating a dialogue with your managers. You want a process to be guiding the company, not a person, and to do that, you need to start a process that involves your leaders in key decisions – and then you need to stay committed to it. And, if you’ve been doing a lot of the talking, start listening more. Don’t totally hand over the reins, but start to share them.
What should you talk about? To start, I like to focus on today – what is working, what isn’t working? Once you have things working OK, then you can start looking out farther on the horizon – to the next few months, and then to the next year, and then to the next 2-3 years.
Let’s be honest about something Christian Grey knows – it’s fun and exciting to be in charge, to be The One Who Makes the Calls. But it’s also not sustainable, and if you’re looking for your business to prosper for the long-run, you need to mature as a leader and expand how you relate to your business.
“We have to stop talking about what we want, and start doing what the market is telling us to do,” said a COO in a recent meeting I was leading to talk about changing the way the company serves customers.
10 years ago, the company served its customers start-to-finish, and the profits that it made enabled it to take good care of those customer if anything went wrong in the project.
Now, more customers than ever are contacting them to buy their service, but fewer want the start-to-finish service. This was creating tension within the business, as frontline employees tried to force these new customers into the old model – a model that the new customers don’t want and don’t want to pay for.
We’d started the meeting describing the new way that we’d be working with customers, but the ideas were meeting resistance as people tried to fit the new model into their old mindset.
Until, after growing frustration, the COO stopped the discussion with his emphatic reminder that the answers to strategic questions start with what the market wants.
With that clear, we then set off identifying the questions and issues that would need to be addressed to meet customers on their terms. It involves a lot of new thinking, and it is a 2-3 year project, but the team is well aware of the tensions and problems that it has trying to stay with the old model. So, we’ve targeted a few short-term changes we can make in the short-term so we can create momentum, and we’ve also highlighted some complicated issues that will take prolonged effort.
The lesson for you leaders: when you’re starting in on a strategy, or a strategic discussion, start with what your customers and your markets are telling you they need. And if you haven’t talked with your team about what that is in the past year, include that in your next strategy meeting.
In case you were thinking that some people haven’t had to rethink their business model to the “New Normal,” Taylor Swift provided a reminder that, well, that’s true!
While the rest of the world is gravitating toward streaming music services – which apparently don’t pay what purchased downloads do, let alone what good old fashioned CD sales used to – Taylor Swift pulled her new album from Spotify. If Spotify’s users want to listen to Shake It Off or any other song from her, they’ll have to buy it. (I’m a Spotify subscriber who ponies up the $10/month for the premium service, for the very reason that I want artists to be paid for their work.)
Her leverage in this case is unusual, which gives her the flexibility to take the risk to pull her product from a major distribution channel. Wouldn’t you like to have that leverage in your market?
So, what has Taylor Swift done to put herself in this position:
– Worked hard for a decade to develop her skills, brand, awareness, and business
– Put out a quality product that the market wants
– Was authentic in her product and brand
The various promotional strategies her team has used for each album and tour certainly made a difference – for example, I don’t think it was a fluke that she gave Spotify users access to Shake It Off for a short time, so that they could get hooked on the song. But the core elements of hard work, wanted-product, and authenticity were the start of her success.
What can you do to increase your market leverage by improving these core pieces?
– Do the hard work and tackle the hard issues
– Ask your customers what they want, or look at which of your offerings sell the most and do more of that
– Describe your company’s personality and culture and make sure those come out in your marketing (not just in what you say, but also in what you do)
Congratulations, Ms. Swift. I haven’t decided yet whether I’ll be buying your songs or just waiting for them to come back to Spotify (I expect they will come back), but I respect you for forcing me to make that decision.
Loch McCabe of Shepherd Advisors uses an interesting frame for thinking about your company’s health and growth. What would it take to double your revenues – and then double them again? Loch recently spent an hour with me describing his process for creating Exponential Growth, as he calls it.
Those kind of results aren’t easy to achieve, but there’s definitely a formula that works, and Loch is good at describing that formula. (And he’ll be sharing it during his upcoming workshops 10/22 in Ann Arbor and 10/24 in Saginaw.)
What stands out for me in Loch’s process is the focus on customers and markets. At the heart of Exponential Growth is customer-based strategy – using insights about your customers to identify the “leverage points” that will give you outsized returns for the investments you make.
From there, he goes beyond your current customers to look at emerging market trends. An important part of exponential success is being able to ride the right market waves, and Loch’s process highlights which ones to jump on.
Loch has asked me to talk about the organizational-development aspects of Exponential Growth during the workshops. So, when you get the strategy part right, what does it take from a leadership, teamwork, organization, and culture perspective to manage and execute that growth.
Let me give you a sneak peek of my thoughts here…
Organic Growth is more accommodating of cracks and stresses in your organization. Don’t have the right VP of Ops? Haven’t solidified your sales process? Don’t have a solid pipeline of talent? With Organic Growth, those issues are OK – they’ll need to be addressed, and will be over time, but they won’t create any serious risk.
Exponential Growth, on the other hand, forces and enables you to get your house in order. It magnifies the strengths and weaknesses of the organization. It offers a carrot and a stick for dealing with your issues – solve them and you see big results; avoid them and you’ll feel the pain.
Honestly, Exponential Growth is not for most people. It requires strong leadership, solid teamwork, effective operations, and a dynamic culture. Of course, that’s what most companies are aiming for – and struggling with. And that, I think, is the opportunity that an Exponential Growth vision offers. It’s like saying we’ll put a man on the moon – it’s a rallying vision to get people to break out of the patterns they have and address the issues that can linger and smolder for years and years if the goal is just Organic Growth.
What could a game plan for Exponential Growth do for your company? If you find it intriguing to think about, you should talk with Loch or attend one of the workshops to find out more – see the links above, or let me know you’re interested and I’ll connect you.
I like SWOT assessments (you know – strengths, weaknesses, opportunities, and threats) for getting people’s thinking out of the day-to-day and into a creative, strategic “space.” Unfortunately, I often see SWOT assessments that are just marginally useful.
Here are some tips on how to get more value out of your SWOTs.
If you can take a bullet and put it on someone else’s SWOT without changing it, then you’re not specific enough. One of the favorites to put under Strengths is “Our People”…which is also a good example of a bullet that is not specific enough to be useful in the planning process. What is it about your people? Their experience? Their deep knowledge? Their ability to be generalists? Once I know what’s special about your people, then I can create some possibilities about how to leverage that into a better advantage.
Work hard to look at the future. We live our lives in the day-to-day, so it’s hard to look ahead several years. And that’s why it’s an advantage to do – because most people don’t.
Put “the hard stuff” on the list. Every business has issues that it doesn’t like to talk about. The problem customer. The problem owner. The problem staffer. Without knowing the details, I can tell you that those issues consume a large amount of resources. So they need to be on your SWOT – though it will probably take some diplomatic phrasing. (For example: “Some customers are easier to work with than others,” “Owners are not always aligned on decisions,” and “Spotty follow-through.”)
Make sure you have bullets that cover the whole breadth of the areas you’re involved in. Often, leadership teams focus more on certain areas, and that bias comes through on the SWOT. But the non-focus areas are often the places where there is the most opportunity, especially for companies that are developing from the lean-and-mean start-up to a more complete and sustainable enterprise.
So, here’s the question to ask about your SWOT to see if you’re getting the value out of it: “Does it give us insight into where we should commit significant resources over the next 3 years to improve our chances of success?” If it gives you that, then you’re getting the value you should. If it doesn’t, then you should take steps to upgrade it – which I’ll cover in my next post.