What does it say about entrepreneurs who need growth financing but turn away from honest, direct, successful entrepreneurs (who want to invest in a few enterprises other than their own) to look for money from secretive, game playing sharks?
That may all be true. But my observation recently is that lots of entrepreneurs don’t recognize that their business could benefit from an infusion of capital until it is almost too late. They keep trying to prove they can do it themselves. At the same time they may not recognize that obtaining some outside guidance does not diminish them as leaders. Ironically, the most valuable element of involving angels, private investors or venture capitalists in a business is the advice that comes with the money.
When the question about “could our business benefit from capital infusion” comes into an entrepreneur’s mind, I often recommend that they look for nice non-celebrity wealthy people. They can talk and get to know one another. The entrepreneur can lower his/her guard. And if a pleasant person who has recently had a “nice liquidity event” from his/her business, hear them out. Maybe you both can enjoy the journey of taking your business to the next level. After all, he/she just did that for his/her business.
Important subjects like growth financing do not always have to start as a fight or contest!
Serving on the board as a minority shareholder of another business provides unique learning opportunities for CEOs. It’s a particularly good idea for CEOs of privately held companies that are approaching the $50Mil/yr mark because that is such an important inflection point on the journey to $1 Bil. (see David Thomson’s 2006 book BLUEPRINT TO A BILLION.)
As a minority shareholder, you can witness another CEO being defensive as you and other board members ask important questions about the readiness of executive team members to take the company to the next level. You can see what happens if/when the performance metrics that serve smaller businesses haven’t been replaced by more relevant ratios. As a board member, you can see how indecision on the part of the CEO stalls growth more often than market dynamics or the availability of money. You can learn that nothing invites the exodus of top talent faster than previously successful executives who have become risk adverse. And you can witness the damage done when leadership refuses to address a chronic recurring problem.
No matter what industry you are in, advances in technology influence what your growth strategies should be.
Maybe you don’t view your company as directly related to technology. Perhaps you sell things like paper products, over the counter medications, or canned or bottled foods. The reality is, each year’s flu season drives increased sales for Kleenex tissues, Charmin’ toilet paper, Chap Stick lip balm, TheraFlu, Halls cough drops, Vicks Vapo Rub, Canada Dry ginger ale, Joy Mangano’s cotton and bamboo blend blankets, Hallmark get well cards, and Campbells chicken noodle soup. The flu even impacts which items are purchased from the Home Shopping Network.
If your company is involved with these and similar products, you may not be happy to learn about progress being made by Dr. Rider and his team at MIT, but you do need to know about it. An article by Scott Tarone in the September 2013 issue of TECHLIFESCINEWS shares information about DRACO, which is a double stranded RNA activated caspase oligomerizer that has been successful against 15 different viral infections including the H1N1 flu virus!
If customers tend to purchase and use your products when they are feeling well, you need to know about DRACO too. You might decide to establish higher market penetration goals.
If you don’t think that something like DRACO is relevant, maybe a better question is whether someone from your team should attend the annual CES event. Their advertisement in the Sept 2013 issue of WIRED magazine accurately describes the event as “It’s a Lab. A Social Phenomenon. A Marketplace and a Look into the Future.” This global stage for innovation will be in Las Vegas, Nevada from January 7-10 in 2014.
What your team members read is also important. If your business is influenced by techno gadgets, maybe someone in your company should be reading Liszewski’s Gizmodo blog.
Think about it. The formulation of growth strategy includes rethinking: your company’s positioning, products/services, customers & market, competition, and business model. We all need to be informed about technological advances before making these big decisions. Who is leading and coordinating the research effort for your organization?
The cover of the 09-09-13 issue of BLOOMBERG BUSINESSWEEK proclaimed HOLY SHIP … for good reason. Drake Bennett’s article shares that Maersk Corp. has recently ordered 10 of the new Triple-E cargo ships that can haul 18,000 TEU (standard shipping containers). That is huge! It wasn’t very long ago when carrying 6,000 TEU was remarkable. One Triple-E ship is as long as the Empire State Building is high and can carry 182 million IPADs or 111 million pairs of shoes from Shanghai to Rotterdam. That 25 day trip involves 530,000 gallons of fuel. When you visit Shanghai Harbor, you cannot help but notice the three Triple-E hulls on DSME’s floating docks. At this point, a new Triple-E is entering service every 6-7 weeks.
Although a portion of the readers of my weekly blogs are in ship building, import/export, and/or transportation, I realize that not all of you are. So why should you care that Maersk ordered 10 Triple-E cargo ships?
Maersk is the world’s biggest shipper in part because its leaders apparently know how to read the rise and fall of the economy and spot windows of opportunity. The shipping industry is very cyclical. They started planning to GO HUGE 4 years ago. The 500+ page contract to order 10 Triple-Es (with an option to buy 10 more) was signed in February 2011. It takes a year to build, test, and deliver one Triple-E, so the ships are now launching during the 3rd and 4th quarters of 2013. If competitors try to copy Maersk, their timing would be way off.
This is yet another example of true wealth that can be traced back to actions taken during recessions and periods of uncertainty. 2008-2010 were some of the most stressful years for most companies. Maersk was busy getting ready to buy/fill/launch 10 HUGE Triple-Es. By the way, Maersk did not exercise its option to buy 10 more, but isn’t it impressive that they created the opportunity for themselves?
Although we are not anywhere near the scale of Maersk, we do benefit from the fact that 3 of our 5 related businesses grow more rapidly during periods of uncertainty and/or recessions. That didn’t just happen. The concept of establishing a suite of related businesses (and 2 unrelated companies) was the result of deliberate research, analysis, and negotiations. Fortunately, none of our contracts were/are 500+ pages, like Maersk’s.
What is your executive team doing to read the cycles of the global (macro) economy? your industry’s economy? your company’s micro-economy?
What risk will you be taking to turn the waves of the economic ocean into success?
How many times have you convened with other leaders to do strategic planning and the session starts with the traditional SWOT analysis (strengths, weaknesses, opportunities, threats)? OK, the approach helps board members and executives hear one another, get caught up, and slowly start to think about something other than day to day implementation. But if your organization has been approaching strategic planning this way every year, it’s time for a change! Kill it. Smash it like an ugly bug.
The SWOT approach exercises the parts of our brains that consider incremental change and linear progression. If your last strategic plan includes several “improvement goals” you know exactly what I mean.
Strategy # 1: Let’s improve customer satisfaction or customer retention or net promoter scores by 5%
Strategy # 2: Let’s improve capacity utilization, productivity or efficiency by 3%
Folks, those aren’t even strategies. They are execution targets for sure but we could substitute “do more with less” on everyone’s strategic plan and skip SWOT analysis and the retreat all together. WHY and HOW should you improve these things? What is the strategic logic behind the goals?
Do you remember a few years ago when the Cadillac division of General Motors came up with the CATERA and the cute advertisements said “LEASE A CATERA” “WHO’S LISA CATERA?” What a fiasco that was. In my opinion, that was a blatant example of inside out, incremental, linear thinking. They wanted to save money. They wanted to have a smaller Cadillac. They had access to cheap OPALs. The result was a charade. An OPAL is still an OPAL even if you call it a Cadillac.
Strategy is more about “outside in” thinking than “from what we already know.” Strategy starts with insights about the outside and is about what you don’t already know.
Research about societal trends, buying patterns, new technologies, generational differences, power and influence, etc. is a more powerful way to get into strategic planning than SWOT.
That kind of research can be unsettling for folks who focus on implementation most of the time, but frankly…that’s the difference between executives and managers. This probably reminds you of Peter Drucker’s famous view of leaders doing right things and mangers doing things right.
And stop calling it a planning session. It’s enough to get important people together to do some strategic thinking. How about strategic working (or thinking) session?
Instead of SWOT, could your strategy session with a review of high level trend research. Where is the market headed? What are the challenges/problems people and organizations in the market experience? What do they want (even if it doesn’t exist today) better, faster, and cheaper? Which of today’s problems and complaints could/would/should be resolved in that time? What will their world look like 5 years from now? Take some time envisioning the future…your customer’s desired future.
That step of becoming fully immersed in the improved lives of who you serve raises the bar on your own thinking and helps you temporarily stop thinking only in terms of what your organization is capable of doing today. What role should your organization play in the improved lives of people in your market(s)? What would you be providing to have earned loyalty and rave reviews?
This process leads many organizations to let go of “forecasting” … accepting incremental improvement of what is done today. Back casting from the vision of a better future outside typically leads executives to embrace much more aggressive changes inside. How else would you see that you might need to actually improve efficiency 12%?