4 Key Decisions to Scale a Mid-Market Company
“How can I really grow my company without losing control of my life?”
Here is a summary that I have adapted from Growth Institutes research of the highlights and biggest insights from the survey. With thanks to Daniel Marcos for sharing this.
3 Qualities Of Leadership To Scale
Did you know there are 11,000 new companies starting up every hour around the globe? The fact is, many companies start up but too few scale up.
The most important foundation on which to scale a company is having the right leadership. Here are three important qualities business leaders need to have to lead their company into growth.
1. Passion
As always I look to global thought leaders to assist me. Marcus Buckingham, in his book “Go Put Your Strengths To Work” redefines strengths. Many people define their strengths as what they’re good at, and because they’re good at many things, it becomes difficult for them to let go or delegate. This keeps them stuck because there’s no way any company can scale without other people.
Marcus takes a different approach. He defines strengths as something that gives you energy while you’re doing it and even after you’ve done it. While a weakness is something that wears you out, even if you’re good at it.
The key is to delegate things that deplete you to someone who enjoys that task; to someone whose strength is in that area. Steve Jobs is a great example. Even though he was the CEO, he chaired the marketing functions because he was really passionate about the design aspect of Apple.
How can you implement this in your company? Here are three steps to guide you in putting your strengths to work:
- For the next few weeks, keep track of all the activities you do on a daily and weekly basis.
- From this list, start eliminating activities that nobody needs to do and identifying activities which can be automated.
- From the remaining tasks, identify the ones that make you tired and then delegate them to someone whose strengths lie in that area.
This process encapsulates one of the main ideas Marcus pushes forward in his book: Good leaders play checkers, great leaders play chess.
When hiring people and building your team, it’s important you’re not just duplicating yourself like a checkers board where every piece is the same. As a great leader, you want to develop a chess board where unique pieces have different strengths that are able to balance each other and work together as you scale.
2. Purpose
Purpose gives you a bigger reason to scale your company than just the money. Aubrey Daniels, says that if you can touch people’s hearts, you can boost the discretionary effort of your team by up to 40%. This gives you a huge competitive advantage, and a huge reason why purpose is so critical for mid-market companies to scale.
An example of a company that exhibits this is Starbucks. They understand that their purpose is bigger than just selling coffee. Rather, their purpose is to be a sanctuary for people between their office and their homes.
3. Persistence
Apple started in 1976, and while they had early success it was only after about 25 years that they really took off. Starbucks only had 100 stores on their 20th anniversary, and their real scale up occurred after their 25th anniversary. Of the top 10 paintings critics consider to be Picasso’s best works, six of them were painted after he was 50 years old.
We are absolutely innovative in our 20s, but we are twice that in our 50s and beyond, when a lot of us are just hitting our stride. So persistence is a key ingredient in scaling and becoming our best.
From Starting Up To Scaling Up
Here’s one of the most important things to understand about scaling up a business:
“What got you here, won’t get you there.”
The gap between “startup” and “scale up” is the chasm that Geoffrey Moore, an American organisational theorist, management consultant and author, describes in his work, “Crossing the Chasm”. To cross this chasm, you need to change your strategy — what got you here, won’t get you there.
In the early days of running a company, you had to say “yes” to everything. Now, you have to start saying “no”. It’s all about tightening up your strategy. Those who have strategy will say “no” more times than they say “yes”. Those who don’t have a strategy will say “yes” to everything.
If you don’t nail strategy, your gross margin dollars will not grow as fast as you would like them to and your execution is not going to be as effective at driving profit and valuation.
The number one job of our strategy is to make things easy for our customers and their customers. Here are a few examples of companies who do this right:
- Amazon looks at how to make it easier to buy products from their site. They even look at how to make their packaging easier to open and better for the environment.
- BajaBound.com makes it easy for their customers to get the auto insurance they need to drive from the U.S. into Mexico. They dominate their niche and have more market share than any of their competitors combined with just seven employees.
- Ikea acquired TaskRabbit to make it easier for the elderly to get furniture and assemble it.
Another aspect is making things easier for your employees, and this is the true essence of the Scaling Up methodology. It makes things easier for you and your employees, so you can scale up without the drama normally associated with growing businesses.
Let’s take a look into the different tools available in the Scaling Up methodology that will make things easier not just for your customers, but also for you and your employees so you can scale up.
Vision Summary
The vision summary is what you want to share with the bulk of your employees, and maybe even your customers and marketplace. The vision summary has three components:
- The four decisions:
– Core values
– Purpose
– Brand Values
– BHAG - The strategic priorities:
– 3-5 years
– 1 year
– Quarter - Contribution
– KPIs
– Goals
– Quarterly priorities
To do this, there are four decisions that you have to nail, and that’s what I’m going to dive deep into now.
The Four Decisions
The four decisions lie in four areas critical for business growth:
Most of you are aware that managing these four areas in business is like juggling four balls. If you want to scale them, which is to get them higher, then you have to do it one ball at a time. The first thing you want to do with your team is figure out which of these four areas you need to focus on first, to make things easier for everyone.
Now, let’s look into scaling up each area of growth.
Scaling Up People
A lot of mid-market companies could easily double their revenues with their current headcount without having to attract more talent.
A lot of us are so focused on wanting a great sales team, a great marketing team, a great HR team, a great IT team, etc. that we tend to forget that the real work occurs across those functions in a series of four to nine processes. To do that, you’ve got to be clear who is accountable for what, and you’ve got to know whether they’re running it well.
Scaling Up has designed a few tools to help you scale up the “people” area of your business. The Function Accountability Chart gives you a framework to determine if you have the right people, doing the right things, and getting the right results. While the Process Accountability Chart helps you identify the 4-9 processes that drive your business and identify KPI’s for them (better, faster, cheaper).
Scaling Up Strategy
If you can’t state your strategy simply, you probably can’t execute it easily.
“We deliver pizza in 30 minutes or less, or it’s free” is the perfect example of a great strategy that is stated simply.
To come up with a great strategy you can state simply, you can turn to the first two steps in the seven strata tool which Scaling Up designed to help you crush the competition and dominate your market.
For now, we’re going look a little more into the first two steps of this tool since it can help you with stating your strategy simply. They are:
- Own a word or two — What is a word or phrase you can own in a marketplace to make you stand out in your niche?
- Declare brand — What are your three brand promises?
Scaling Up Execution
Do you have relentless repeatability to scale up your execution?
For this, Verne Harnish designed the Rockefeller Habits Checklist, which consists of ten routines or rituals for scaling up.
As we like to say it, routine sets you free. These ten habits encompass:
- Healthy Team
- Alignment to #1 Thing
- Meeting Rhythms
- Clear Accountabilities
- Employee Feedback
- Customer Feedback
- Values & Purpose Alive
- Articulate the Strategy
- Know a Great Day/Week
- Plans & Performance Visible
What these habits essentially come down to is focus and discipline, to implement a tight execution that allows you to rapidly scale.
Scaling Up Cash
Now, we’re going to wrap up with the fourth area, which is cash.
Do you know your cash conversion cycle? In the Scaling Up methodology, we have created a cash tool called Cash Acceleration Strategies or CASh. It’s a worksheet that can take you through improving your cash.