Saturday, April 24, 2010

FOCUS - A Key Fundamental Business Tenant

Situation: The Vice President of Sales for a young snack food company runs into the Founder’s office and says “I just had lunch with an importer who has done a ton of business in Asia. We were talking about how well our main product would do there and he said the only thing we would have to do is translate the label! What is really great is that he said he would be willing to buy a container so we would not be on the hook if it didn’t sell. If we sold a container of product, that would really make up for our being behind plan in our main US business this quarter.”

The Founder contemplates this idea. “I don’t know…. I am concerned about throwing a package change at Jim in marketing who is already overloaded with our new local marketing campaign. That campaign is focused on our core midwest consumers so that we can stop the high level of discounting we are doing to move product in that region. I agree our product would kill it in the international markets, our largest shareholder mentions it every time I see him. A full container would be the largest single order in company history and boy we could use that volume.”

What should they do?


One of the biggest challenges for most companies, particularly small to medium size ones, is managing the myriad of opportunities for growth that arise. Unfortunately, more often than not companies launch that new product, open that new region, hire that new executive, close that acquisition in the euphoric spirit of growth but sacrifice essential focus on the core competencies of the company or team, or the benefits its key products provide to its core consumers / clients. Maintaining focus is difficult for companies of all sizes, but small to medium size companies tend to lose focus due to abundance of opportunity and passion where larger companies often lose focus as they strive to bring growth back into the business. (I will focus on smaller companies in this post.)

One of the main reasons small to medium size companies have difficulty maintaining focus is that they are constantly bombarded with new ways to grow: new products, new markets, new territories, new customers, new technologies, new market trends, etc. Typically these companies have unique or innovative products and services that attract opportunity. They gain increased awareness in the industry, the media begins to notice them, vendors or customers pass along new ideas, friends and family enthusiastically forward ways to help out and the phone starts to ring. Additionally, one of the strengths of a smaller organization (ie. that decisions can be made quickly and the company can be nimble when attacking opportunities) can be a weakness in that new directions can get set without thorough analysis. Combine all of that with the intense passion and spirit that are required to make a young company successful, and the temptation to follow and act on every lead, market and product idea is great.

While this passion, hunt for opportunity and desire to find new ways to fill society’s needs are the essential engine of progress and innovation, the manager of a young company needs to balance that with a steely eyed focus on the mission of the company, the core market and consumers, and the key product benefits. Without that focus the direction of the company can shift frequently, the team can get demotivated, the organization can become highly inefficient, the customer can get confused and leave, and the cash balance can dwindle quickly. Here is just a sample of the repercussions:

- You will dilute your already scarce resources – money, people, time.
- The company will launch new products or enter new markets without sufficient research into the full implications to the business model, financials, organization, brand and long term strategy.
- Customers will become confused as to what the company truly stands for and what its products / services truly deliver. They will migrate away from you. This is death for a “brand”.
- The team will feel like the company direction shifts constantly, the place will feel unstable, even passionate employees will lose their desire to go the extra mile (because the work they did last month is not helping this month’s strategy.) The best people will leave.
- Corporate culture will be virtually impossible to build and maintain.
- Revenue growth and profitability will suffer as money spent on prior initiatives is lost as new initiatives become priority.

How do you not lose sight of organizational focus?
- Know the company’s core mission and soul. Why does it exist in the first place?
- Understand exactly the core customer need you are filling. Get granular with this. You may think your product or service has a dozen uses. That may be, but you need to focus your energies on the key one that sits at the core customer need.
- Know your customer and market cold. This is related to the prior bullet, but in addition to understanding the need, you need to understand the key customer and market you serve intimately and you need to target them with unwavering focus.
-Understand your true competitive differentiation - why your product / service fills the customer need better than the other alternatives in the market.
- Concentrate on doing these core things really really well in one market first. If you do this, you will get well known in your key market, build a core customer group of fanatics, and have a solid base upon which to expand. This means you don’t launch in Asia if you have not yet “owned” your key customers and markets.
- Communicate the core competencies and strategy with abandon. Communicate to everyone all the time. To your staff, your investors, your customers, your clients, the media. Do it all the time, in staff meetings, company meetings, sales calls, on company fliers, on the walls in the office, in marketing material. Be consistent. This defines you and helps you build a brand rather than just sell a service or product.

When considering new avenues of growth (products, markets, etc.) stay focused and be an incredibly good listener. Trust your team and let unfiltered debate take place. If you and the team are focused on your core competencies, then the company will make the right decisions about new growth opportunities and all members of the team will know that their tireless efforts are a part of a grand and well defined strategy.

Tuesday, April 13, 2010

TRUST - A Key Fundamental Business Tenant

Situation: Sitting with a group of people (a meeting, a cocktail party, a casual conversation, whatever) and one of the people in the group feels really strongly about the topic, seems to know more than the others, or has significant power over the fortunes of the others. You have something important to contribute that might contradict the prevailing wind of discussion, might add a relevant overlooked fact, or might just force the group to consider the merits of an alternative course of action. What determines whether or not you speak your mind?


In all organizations, young / old, small / large, public / private, interpersonal dynamics determine whether a group maximizes the knowledge and skill of its members. If each team member trusts that his/her opinion will be respected and honestly considered and that everyone will be held accountable to “do what they say they will do”, then the group will benefit from open dialogue and will likely arrive at the best course of action. Without that trust, team members will play politics and only reinforce the view point of the strongest willed member or will only shallowly bring up opinions counter to the conversational trend.

You say, "Yea, I know this – it is pretty basic Group Think stuff…" Might be basic, but it is everywhere and personal insecurities make sure it is unfortunately the norm.

Trust in the Team: The foundation of a healthy and successful organization is building and maintaining a cohesive leadership team whose interaction is based on trust. It is the goal of the effective leader to snuff out the tendency of any group to orbit dominant personalities – particularly that of the leader. Trust is not created by saying “I will not fire you if you disagree with me”, or “my door is always open”, true trust is built over time through many interactions reinforcing the following:

- Respect: Team members know they won’t get their head "bitten off" if they speak their mind.  (See the picture above.)
- Debate: The team engages in energetic unfiltered debate around important topics (and doesn’t waste energy on trivial issues.)
- Logic: Debate centers around logic and fact, not emotion and personalities.
- Business, not personal: Each team member knows that everyone has the best interests of the team / organization at heart - all discussion is about the business, it is not personal.
- Clear action plan: The team and individuals commit to specific plans of action.
- Accountability: The team follows up on progress and holds one another accountable.

While seemingly obvious, in practice most organizations / teams fail in at least one of the above areas. The last two (Clear action plan and Accountability) are often surprisingly difficult. You can have unfettered debate, respect for your team members and focus on logic not emotion, but if you do not set clear action plans and hold the team members accountable daily and weekly, politics will prevail. People will realize that success is not necessarily based upon performance and will focus on the fact that some people are not equally pulling their oars. All members of the team must feel comfortable calling out missed deadlines - not meeting action plans impacts the success of entire team, not just the individual.

Diagnosing Trust in an Organization: How do you know if you have a “Trusting Team”? (Excerpted from Patrick Lencioni’s The Five Dysfunctions of a Team – Jossey-Bass 2002)

Members of a Trusting Team:
- Admit weaknesses and mistakes
- Ask for help and constructive feedback about their areas of responsibility
- Take risks in offering others feedback and assistance
- Appreciate and tap into one another’s skills and experiences
- Focus time and energy on important issues, not politics
- Openly address viewpoints of other’s performance in the group (no backstabbing)
- Have leaders that are good listeners and encourage a free flow of dialogue
- Look forward to meetings and other opportunities to work as a group

Members of a Team in the absence of Trust:
- Conceal their weaknesses and mistakes from one another
- Hesitate to ask for help or provide constructive feedback
- Say negative things about members of the team behind their backs & hold grudges
- Fail to recognize and tap into one another’s skills and experiences
- Are afraid to hold others accountable for lack of performance
- Have “table pounding” emotional or insecure leaders that dictate discussions
- Dread meetings and find reasons to avoid spending time as a group

The next time you are in a group setting, I encourage you to assess what type of group dynamics are going on. Does the conversation flow freely with people highly engaged, readily accepting constructive criticism and you don’t feel time passing? Or is the discussion dominated by one or two individuals with the others seeming like spectators until the topic gets to their area of expertise and you look at your watch every 10 minutes thinking you need another cup of coffee?

If you are in the latter group, there may be some very drastic things you will have to do to change the dynamics and culture of that organization. But that is for a future post…


Friday, April 9, 2010

First Posting to The Young Business Blog (TYBB)

I am starting The YBB because of what I see as a general lack of relevant and actionable content written by people that have actually lived through starting, growing, funding, and transitioning a business.  Most content is written by consultants or vendors (bankers, lawyers, accountants, etc.) who have only seen it from a distance or been advisors for a short period of time.  While I have been a banker helping others fund their business plans, I have also lived the dream (nightmare to some) of actually implementing growth strategies for a start-up as well as a public company.  I intend to keep these postings generally short and manageable (not massive B-school essays) that touch on the main points of an issue.  I may deepen a discussion if I get sufficient feedback requesting more detail.  I am also one that doesn't take myself too seriously, and as such I hope this to be entertaining - if not, no one will read it.

The following outlines some of the topics I intend to cover:

Key Fundamental Business Tenants regardless of business size.

Considerations for the really young business:
• Turning an idea into reality - what an idea needs to have any chance at all.
• The business plan - what do I really need to do?
• Raising money - dos and don't, banker or no? other considerations.
• The financial plan - how do I do this and what does this have to be to raise the money?
• Hiring your first staff, hiring people over the coming years, firing people.
• Strategy - what is it really and why does it matter?
• The biggest ways things go wrong.
• The most important things to get right.

Considerations for business adolesence:
• "Yippee we closed that huge account...Oh no, what is it going to do to our business?"
• Funding the growth - how much capital? what kind of capital? where do we get it? what do we give up / how much will it cost?
• Growing the team, managing the team, culling the team, incenting the team, keeping the team motivated and bought in.
• Roles of the Founders vs. other senior staff.
• Building the systems you need to scale from 3 guys and a fax machine to a real business.
• Staying Focused - avoid a huge fatal mistake.
• The Business Model - Do we have a sustainable business?
• COGS & Operations.
• Selling & Marketing.
• General & Admin costs.
• Partnering & Alliances.
• Where is it all going? Planning for the end-game.
• The biggest ways things can go wrong.
• The most important things to get right.

Considerations for managing the business in its adulthood.
• Corporate strategy & retaining competitive differentiation.
• Maintaining corporate culture and maximizing team effectiveness.
• Refining the business model to maintain high growth while improving profitability
• Considerations related to capital structure - debt vs. equity and the different permutations.
• "Should I Stay or Should I Go" - considerations around executive staff and corporate evolution.
• Executing on the end-game.  Sale to a strategic buyer, a financial buyer, an IPO, other options, etc.

My goal is to post once a week.  I expect generally to follow the above, but there may be weeks when I write about something that I feel is particularly relevant at that time that doesn't completely fit in the outline above. 

I welcome broad feedback and questions.  Feel free to email me at