Bedtime Profitable Growth Lessons

When I read bedtime stories to my daughter, there are tales of witches flying on broomsticks, young children wandering into the forest alone dark at night and absentminded Fathers getting soaked trying to repair the garden hose. At certain points she might say “I am scared”. When I ask what she is scared of, she responds, “I am scared of what is going to happen to “X” on the next page”.

Likewise we accept challenges in profitably growing businesses, knowing that there are circumstances under our control (the quality of our management, employees and the level of uncertainty within the business) and there are others that are not (competitive threats). What we know is that if we are to develop we must increase our learning. We learn by applying our past (expertise and experience) to transform our clients’ future. Our future is a function of our resilience to events outside our control and continuing to be of value to our clients (reinvest the lessons learned in new, faster, more impressive approaches).

Lesson #1: The art of management is the ability to balance the demands of key constituents for short and long-term profitable growth.

Lesson #2: Not all constituents (shareholders, board, employees, business partners and so on) are equal. Not all demands are equal (EBITDA growth, higher pay, happier clients). Behind every demand is an emotional imperative (improved image, enhanced peer recognition, a promotion) and a logical objective (lower acquisition overheads, optimum size of business, attracting word class talent). Dig for both, orient your management approach around both.

Lesson #3: “Speed” (climbing to the next level) is as important as “quality” (existing revenue generation).

Lesson #4: Success arises in the implementation of a strategy (arriving at the desired future state), not the formulation. Credit may be given to the latter but the glory goes to those, who accomplish the former. Lee Kwan Y

Lesson #5: You start by determining what your vision is and what is “mission probable”. There are a great many visions that are possible in the conceptual world but missions that are improbable (capital, people, innovation, implementation) in the real world. There are a small number of visions that are possible in the conceptual world and mission that are probable in the real world. Don’t kid yourself because you can point to one exception, who got lucky!

Lesson #6: If you are not failing, you are not trying hard enough. It is always odds against (less than 50%) predicting the future. The best management teams are probably successful no better than 1:3 with new product innovations or international expansions. What you must believe is that when you have success, the rewards are sufficiently large to cover the losses plus the ongoing costs of profitably growing the business (payroll, pension, capex, new hires etc.).

Litmus Test: Is there someone I can point to (highly similar sector and recent scenario) who has visibly travelled the same profitable growth journey as I am seeking to pursue? Are there lessons I can apply to accelerate the speed towards our immediate profitable growth (reducing labour intensity)? Are these lessons I can apply to enhance the quality of our profitable growth (repeat business, unsolicited referrals) such that moving to the next and the levels beyond that is sustainable?

If you cannot point to a real world example, it may well be for a very good reason. The path you have chosen is improbable or the timing has never made sense previously.

Of course, there are environmental changes (technology, access to capital, demographic, social) that make the previously improbable, probable. That is where the “unicorns” (AirB&B, Xiaomi, Moneysupermarket.com) emerge from but they are the exception, not the rule.

© James Berkeley 2015. All Rights Reserved.

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