Every founder should apply the strategic box. A long time ago, me and Brian O’Kane invented this strategic box when we wrote “Growing your own business, a workbook”. It is a quick frame and filter to determine your strategy, using six statements: vision, mission, passion, values, positioning, and resourcing. Not only does it works to align management teams, but it works with recruitment, storytelling and ultimately, it is all about culture and dreaming. If you don’t have a dream, then it can’t come true.
Codify from the start
We use the strategic box with startups as well to make sure the founders are clear about their aspirations and expectations, but also as a way to set the foundations for the culture of the business in the future. Codifying culture, if you will. Creating principles.
The Founder’s Mentality: How to Overcome the Predictable Crises of Growth
I came across “The Founder’s Mentality: How to Overcome the Predictable Crises of Growth”. The book concludes that growth or decline is almost an internal story. It’s the story of building the business, expanding and retaining a quality workforce, strengthening the culture, upgrading the systems, learning from experience, adapting the business model, holding down costs, and mobilising the people to carry it all out perfectly, again and again.
It is on the inside
Well over half of all businesses today face at least one form of significant outside disruption to a part of their business model. The authors find that more than four in five problems on the outside of a business trace to problems on the inside. Problems that inhibited its ability to adapt, to decide and act quickly, to embrace new ideas, to keep costs down, or to scale its ability to serve customers.
Small company advantage
Small companies possess one great competitive advantage over incumbents. At every level of the business, the employees of small companies make their decisions and pursue their objectives motivated by an owner’s mindset. They’re so invested in the company, that is, that they feel and act like owners. Employees who feel engaged and empowered, who possess an owner’s mindset, in other words—will volunteer solutions to problems and come up with innovative ideas 3.5 times as often as those who don’t.
Three predictable crisis
Many companies lose the competitive edge of the owner’s mindset as they grow. As companies scale, they go through 3 predictable crises of growth:
- Stall-out, or a sudden slowdown
- Freefall. Freefall is an existential problem that demands an immediate and dramatic response.
Scaling usually causes a loss of the impulse to innovate, serve customers uniquely, and fully value the employees on the front line. The focus is on efficiency, bureaucracy, complexity, politics and structure. Ninety-four per cent of large-company executives cite internal dysfunction as their key barrier to continued profitable growth.
The problems with scaling
- You can’t just do the same things you’ve always done, only ten times more often. You have to build new systems to handle escalating complexity, and you have to adapt your business to the marketplace.
- Once, you yourself could be everywhere to model behaviours. Now, you simply can’t. Once you knew your key customers by their first names. Now you know them as averages on PowerPoint slides.
- Once, everyone in your company knew what made your mission special. Now you have trouble conveying that sense to the outer reaches of the organisation.
- As companies scale, their leaders tend to undermanage or take the elements of the founder’s mentality for granted.
- It feels horrible: you’re growing successfully and are working harder than ever, but with each passing day, you feel more and more overwhelmed.
- The voices from the front line are getting lost.
- Accountability is eroding
- Your revenues are growing faster than talent, and you are sacrificing employee quality for quantity.
- You are drowning in-process and PowerPoint presentations. We have the resources and no shortage of opportunities, but somehow we’ve lost the ability or the will to make the most of them.
- Running the business, once such a personal, high-energy ride, now feels like flying a huge, sluggish airliner.
What appears to be critical to managing these crises in all cases is the need for a deeply ingrained founders mentality. When private equity firms restored the owner’s mindset at these companies, this consistently increased speed, reduced bureaucracy, caused a more critical evaluation of non-core businesses, and improved the management of costs.
The founder mentality
- A common set of motivating attitudes and behaviours that can usually be traced back to a bold, ambitious founder who got it right the first time around.
- An owner mindset
- Bias to action
- Keeping things simple
- A clear sense of mission, ideals, and focus that everyone in the company can understand and relate to
- A cohesive brand personality
- They abhor complexity, bureaucracy, and anything that gets in the way of the clean execution of strategy.
- An obsession with the front line.
The founder’s mentality is the key to achieving sustainable growth
It starts with history. Every great business founder has an origin story to tell. In many of the really sustainable businesses, it ultimately takes hold at every level and can far outlast the founder. That story is simple and focused. That is important, especially in the turbulent and distracting environment in which we now compete.
You are what you measure
Companies assess their health on the outside with lots of outcome measures (profit, revenues, customer counts, market share, average prices, and so on), but they don’t take good stock of the health of the core with non-financial, root-cause measures. You need to change that. Create a soft balance sheet. Measure your intrapreneurship level.
- Does everyone understand the company’s insurgent mission?
- Are we focused on empowering/supporting the front line?
- Do we think and act like owners?
- Can we learn from competitors, especially newly emerging insurgents, who embody the founder’s mentality better?
- Is the company as much of a meritocracy as it was in its younger days?
- How do answers to these questions change our business priorities?
Purpose and mission
Three bad things happen when an organisation’s ambition becomes diffuse and vague. It loses the ability to inspire; short-term financial targets and crises begin to dominate the agenda because there is no concept of what is being built in the long term. The key principles on which decisions are made become blurred.
Too often, mission statements leave employees with no clear idea of what their company strategy is or what makes it special. Create a Compass, which consists of a new purpose for the company, a high-level goal, and twelve nonnegotiable principles designed to create more cohesion and reduce complexity.
Stay true to that mission in everything you do, no matter what your size, and you’re more likely to succeed. Lose touch with it, and you’re more likely to fail. The executives interviewed about maintaining the founder’s mentality as their companies grow cite one factor more than any other: a tight, intense focus on principles and purpose.
I write about clock speed on a regular basis. Leaders should make speed a competitive advantage in everything they do. Speed has been a factor in almost every section of this book. Speed to decide. Speed to deliver. Speed to market. Speed to restock inventory. Speed to solve customer problems. Speed to get to the root cause. Speed to adapt. Speed to acquire and integrate. Speed to see crises coming. Speed to prepare. Speed to act. Speed to grow.
- An obsession with the front line is fundamental to the founder’s mentality. It shows up in three ways—as an obsession with front-line employees, with individual customers at all levels of the company, and with the details of the business. A deep curiosity about how the business is working in its details at the front line.
- Treat both expenses and investments as though they are your own money.
- Starting with the front-line employees and our onboard customer
- Translate strategy into front-line understanding.
- Make complexity reduction a way of life. The best way to attack complexity is from the top down. First, you have to shed non-core assets and businesses in a portfolio. Then you have to develop a simpler strategy for the remaining businesses. Then you have to attack the complexity of the organisation and the core processes. And finally, you have to go after complexity in product offerings, suppliers, and product design.
- Celebrate and reward front-line heroes.
- Empower front line staff to solve tactical problems on the spot.
- Establish explicit rules to define the “guard rails” of things like brand management and then let the business operators make the next-level decisions.
- Make constant improvement a focus.
- Codify best practices. Codify how people ought to treat each other in the company and what your culture should be.
- Keep staff focused on core principles and customer needs.
- Initiate open house meetings. Make yourself available for employees.
- Set aside enough time to ensure that everyone understands and feels connected to the purpose of the company, including involving them directly in shaping it.
- Make management meetings open to any employees who want to sit in on them.
- Do a weekly call where any employee can phone in.
- Commit to Monday meetings. Leaders of the company meet once a week with a promise: at this meeting, no matter how long it takes, they will work to unblock any obstacle preventing key players from doing their jobs.
- Create a council of franchise players. Every company can identify some employees, not necessarily department heads or people with big titles, who have a disproportionate impact on the performance of the company and its delivery to customers.
- Look at the degree to which power has shifted from the franchise players and the front line to corporate staff and functional departments.
- Benchmark cost and speed against your most successful insurgent competitors.
- Spend as much as one-third of the top executive time on selecting, coaching, and developing people.
- Regularly examining every process and every key activity with a fresh eye and asking these questions: Would we still invest here if we could start over? Have a zero-base mentality for everything, from yearly budgets to the future of the business model itself.
- Embrace the principles of meritocracy
- Set big but simple targets for the units of value creation in the company, and empower the leaders to act like entrepreneurs.
- Create your own entrepreneurs by fostering new businesses and “mini-founder” experiences.
- Rediscover lost practices of the past
- Kill at least one nonessential layer, process, or reporting requirement every month for a year.
- Routinely ask your people if they would recommend that a friend work at your company.
- Populate the leadership team with people who want to rebuild the future, not defend the past.
- Hire insurgents with a rebellious spirit—people one executive described to us as “black sheep from blue chips”—rather than employees who are used to the trappings and stability of large companies.
- Make sure you have access to voices from the front line.
- Have as a designated person at key meetings to represent the customer’s voice
- Strategic change doesn’t just start at the top. It starts with your calendar. Look at how you spend your time (with customers, in front-line facilities, with high-potential young leaders).
- Go back and look at the agendas of your last five management meetings and the last two strategy off-site meetings. Ask when was the last time you really talked about the differentiation that propels your business model and how you will keep it fresh, what your front-line employees are really saying and feeling, and how quickly you decide and act relative to outside benchmarks.
- No matter how large your company is, go back and look at how you get direct input from employees in the field, with customers, and at production facilities. Are you getting as much as you can from them? Are you using what they tell you? Would they agree with you?
- Spend the first six weeks at the front lines of the business
- Say no to things. Start the decision-making process by saying no to everything through zero-based budgeting.
- Kill projects or products at the same rate that you add them.
- Pursue the “hidden” root cause. Use five whys, in which they drill down with a series of “why” questions until they arrive at the real root cause of the problem.
- Invest massively in next-generation leaders
- Companies build systems around the averages, not the exceptions; sometimes, large formal systems need to be overruled.
- Eliminate all situations where a committee made decisions, creating single decision-makers in each unit.
- Ask yourselves what capabilities you need to build or acquire to become fully competitive again.
- Create a second version of your company where employees can focus on innovation without the burdens of your own bureaucracy.
Before you take on the 43 lessons, start with the strategic box. If you want to find out more about the strategic box, have a look here. Start the 6 statements with your management team (you will guaranteed see a non-alignment) and work your way down the company. If you want to talk, give me a shout.