Thursday, December 26, 2013

Too Much Growth?

Over the years while driving strategy, planning and development for a variety of companies and in many different industries I have seen a fatal flaw in the thinking about growth.  

While there maybe growth or aggressive plans for growth I always ask two questions: 1. Are you ready to grow? 2. What does growth mean to your business? The challenges of execution and delivery maybe different in a product company vs. a service business, so for this conversation I want to focus on the idea of service company growth. Whether technical services, or engineering, or construction, or facility services the same issues can impact not just the bottom line but the long term health and viability of the business.

Let me tee up the thinking. So you have a sales force, or regional offices, or managers that execute the work and they also sell. You need to grow, need to add business, need to add projects. You assume everyone understands what you do to make money as a company and you tell them to go get more of the same. You might even put in place a reward and incentive program to motivate the whole company to go get “work!” Then it starts to happen, growth – at first it’s exciting and it’s great. Numbers grow, new clients, new projects with old clients. Within a short while though cracks in the success start to show. The margins drop, the customer satisfaction erodes, the field teams start to moan about the quality of the projects or the bids. The next thing you know, the leadership team is pushing back on the idea of growth and see it as a bad thing.

One simple tool I have used, to help refine the focus of growth is an “opportunity lens” to get everyone thinking about growth the same way. Having read Good to Great, Built to Last, How The Might Fail by Jim Collins along with Blue Ocean Strategy by W. Chan Kim, Attracting Perfect Customers by Stacy Hall and other books the goal was to take all this great thinking and make it a tool that anyone on the team could use to help make better decisions in growth and opportunity. The key was getting a wide enough cross section of leadership in one room to talk and think it all through. What would success look like and how to judge is a potential really in the sweet spot of potential? This can be a challenging effort but I have found it is a great way to gain alignment across operations, finance, business development, the president’s office and more.

Out of this dialogue I end up crafting a simple lens to look at these growth opportunities. Every business is different, so I am not saying one size fits all. Instead the idea of looking at potential all the same is important to sustainable growth. Attached is a template example. It takes a few areas to look at when sizing up a potential new client or a new project and put into a one page lens to view all opportunities through (and share with the decision and support team).
  1. Does the client and the opportunity fit within your ability to execute the work successfully or is it out side your scope of experience and capability? It is good to take on some new stretch projects and clients but too many and not enough of the mainline stream of needed revenue can stretch resource as well.
  2. Size of the opportunities? Too big? Too many small? Too far away from the support staff? The revenue potential? One time or gate way to a five year relationship program?  What is the profit potential, what are the risks of failure?
  3. Does this opportunity support and strengthen your brand, your reach into a market? Is it not aligned with your brand promise?

You can have as many of these decision points to look at an opportunity, while I would strongly recommend keeping it under 10 elements at most. I also like to weight the decision points – how important to the mix are they and in the end you can see where the opportunity falls. Now I am not saying that if something isn’t 100% you shouldn’t look at the project or client, instead it is key to have your eyes open and be thinking about every choice and how it fits into the mix.

Example Template Opportunity Lens (just a starting point - yours will need to be special to your business, industry, skills, margin models...) 

Taking strategy, making vision and decision making easy and real world are needed to grow successfully. Do not assume that everyone is on the same page nor do they all understand what you mean about growth. Ask four people in your company, alone and to the side “what do you think we need to grow business wise?” and I can almost guarantee each will say something different.

In the world of construction and technical services it seems that there is a chronic desire to say yes to everything. “Have you ever done a micro tunnel under an air strip?” – YES! “Have you every built a bridge across a plasma stream?” – YES! Later only realizing that they never have, nor was it smart to say yes – realizing you can lose profit taking on the wrong work. Then you try and end a new opportunity after you have started or done one project only coming to damage the brand and the market’s view of who you are. Nothing worse than going to a brand new client and saying you need to end the contract because it is not working out.

It is important to look at the mix of the work, the past experience of the team, the practical reality of costs, time and possible risk. Too many yes decisions on new work and/or clients could turn a bad situation.

Next tool was how to say a positive no to opportunity that doesn’t make sense. I will share more in the next post on this.

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