“Work on Your Business, Not In It”
This popular, and somewhat cliched refrain, has for many years been suggested as a managerial and entrepreneurial best practice, and as "the dream" of business owners everywhere.
Because if only...
...We could extract ourselves from all of “the stuff” that takes up our business day: customers, prospects, employees, contractors, regulators, meetings, emails, texts, social media, and more...
...and we were good enough at delegation, at process improvement, at separating the truly important from the chaff and the noise then...
...We would be left with the time and the clear and reflective energy to:
A business hero of mine that does all this and more is Richard Branson. Branson is rightfully admired for having built from scratch one of the most iconic and successful brands and family of companies in business history, and having a ton of fun while doing it.
When studying a business legend like him, I look for "lever points" - small areas of emulation that when mindsets and behaviors are modified (sometimes just slightly) to match, big productivity gains result.
Here are three great Richard Branson “work more on your business” lever points to emulate:
#3. Write. Wherever he goes, Branson famously carries with him a journal. He says there is “strategic magic” in writing, greatly because most of us learned to think in academic environments at impressionable ages with pen and paper in hand.
Because of this early-age imprinting and because writing is inherently a "quiet" activity, business work done this way is naturally more reflective and strategic.
#2. The Day’s First Hour: Sharpen the Saw. In Richard Branson’s “Why I Wake Early” post, he notes:
No matter where I am in the world, I try to routinely wake up at around 5am. By rising early, I’m able to do some exercise and spend time with my family, which puts me in a great mind frame before getting down to business.
Investing in ourselves, from the day's get go - with exercise, meditation, spiritual reading, etc. - counteracts the entropy that can downgrade our business day into just a frenetic "one task to the next" squabble.
#1. The Proactive Comes First. Good executives react well to business stimuli - they return calls, they answer emails, when a co-worker says hello, they smile and say hello back, etc.
Great executives proactively create their business reality. They define and prioritize the most important projects. They cultivate the right relationships. They invest in their physical, mental, and spiritual well-being and in their capacity for creative work. They are the masters of their domains, of their fates.
And from this confident, unhurried, centered place, easily completed are more of their mission critical “on the business” projects, tasks, and to dos.
What is more fun in business than that?
The fundamental challenge of modern business is finding that right balance between tactics and strategy, between execution and innovation, between management and entrepreneurship.
Typically, as companies grow and age, they naturally become more tactical, more execution - focused.
In contrast, the “tabula rasa” of startups has traditionally been the best milieu for out-of-the-box strategy and innovation to thrive.
Now in the old days, businesses could do ok by being very good at just one of these.
Big businesses could sustain profitable franchises for years by leveraging their resource advantages to keep smaller competitors out and margins high.
As for startups, it was easy to stay in the “idea bubble.”
Investors were more patient and it often just wasn’t that obvious if your team and technology had the right stuff. You had time on your side.
But no longer - businesses must now be either good at both or they perish.
This is extremely stressful for most entrepreneurs and business owners, and especially for investors working to determine which of them to back.
Luckily, there is an easy shorthand to separate the superstar company wheat from the chaff.
It is the simple idea that super business PEOPLE must be all of these things too.
And superstar companies are really just ones where lots and lots of superstar people work.
So, find the superstar people, and the money will follow.
In his excellent book “The Global Achievement Gap,” author Tony Wagner flags seven crucial “superstar” skills to look for:
1. Critical thinking and problem solving
2. Collaboration across networks and leading by influence
3. Agility and adaptability
4. Initiative and entrepreneurship
5. Effective oral and written communication
6. Accessing and analyzing information
7. Curiosity and imagination
To this, let me add one more: Ambition.
Now I am not talking about the garden variety get good grades, go to a nice college, start a small business, complain about taxes and regulation and how hard it all is type ambition.
In this multi-billion person, highly educated, hard-working world of ours, that just doesn’t cut it.
No, the ambition I am talking about is one that burns so deep and hot that it is deeply dysfunctional.
An ambition that usually translates for sure into an insane, other-worldly work ethic, but one that goes beyond that.
It is an ambition that is channeled daily into ongoing personal and professional improvement and learning.
An ambition that leads to goals beyond the realistically possible.
Like Steve Jobs leading Apple into the music business, or Richard Branson Virgin into airlines, or Tony Hsieh with Zappos putting his life and considerable fortune on the line, for of all things, to sell shoes online.
This kind of ambition is the unifying force. It demands that everything be done right – strategy, tactics, innovation, execution, entrepreneurship, management.
Find this kind of ambition – channeled to ethical, capitalistic ends – and back it.
And you and the world will be better for it.
Why do the vast majority of businesses get “stuck” - doing well enough to "stay alive" but not even close to being either a) a source of significant cash flow for their owners or b) an attractive acquisition candidate for a strategic or financial buyer?
Stuck companies face a daunting array of vexing challenges, almost all of which fall into one of these four "M" buckets - Money, Management, Model, and Marketplace.
Money. Most smaller and mid-sized businesses fight an ongoing, Sisyphean battle with money - pushing the cash flow boulder up the hill month after month, only to see payrolls, rents, materials, insurance and marketing & sales expenses drag bank balances down again and again.
However, losing at the money game is almost always a symptom of deeper problems than a cause in itself.
So when money problems arise, usually the best thing is to not focus on them but rather to confront their root causes, which almost always can be found in one of the remaining 3 “M’s” below.
Management. As described in my The Living Company post, in the end, a business is simply a “Collection of Humans” temporarily united toward a common cause.
As such, the “productive vitality” of the relationships between these humans is the most important indicator of its ultimate success, and can be well measured by answers to the questions below:
1. Would / do the people in the company recommend it as a great place to work?
2. Would / do true leaders view it as a place where they can build their careers / make their mark?
3. Does a productive camaraderie exist in the organization such that that those within it do more and better work than without?
If the answer to any of these questions is no, then a hard and sober look at the company's management and leadership is required (And, in all likelihood, the problem starts and ends right at the top).
Model (Business). I had the great fortune a few years ago to lead a change management assignment for a large, urban hospital here in Los Angeles where Mr. Charlie Munger - Warren Buffet's famed partner at Berkshire Hathaway - was Executive Chairman.
Mr. Munger's philosophy and credos were well steeped in the organization, of them my favorite was that for Mr. Munger all businesses – no matter the size, industry, or focus – could be evaluated as to their answer to one question, namely:
"Does the business consistently deliver high quality at low cost no matter the field of endeavor?"
Honestly measuring how one’s company ranks on this cost / quality spectrum relative to competition is a great predictor as to its long term success.
Marketplace. Following on Mr. Munger's wisdoms, try on one of Warren Buffet's most famous quotes:
“When an industry with a reputation for difficult economics meets a manager with a reputation for excellence, it is usually the industry that keeps its reputation intact."
Now, when it comes to industry and market analysis, most small and medium-sized companies undertake it anecdotally, if at all.
An investment of time and resources which almost universally yields a high ROI is to have an outside research firm undertake for the business a formal industry, competitive, market, and customer analysis.
It is almost impossible to pay too much for such work, as helping managers gain stronger focus as to what their right market positioning is (and what it is not!) is worth its weight in something far more precious than gold, opportunity cost.
Money. Management. Model. Marketplace.
Successful businesses get the last three right and the first naturally follows.
And, as they do, companies get “unstuck” and recapture the promise and excitement of the business' earliest days, but now with the cash flows and equity value that makes all of the hard work worthwhile.
Risk is good. Not properly managing your risk is a dangerous leap.
- Evel Knievel
"The Strategy Paradox," Michael Raynor's classic book, should be required reading for executives interested in understanding the connection between risk and return in strategic planning and decision-making.
Raynor’s basic premise is that almost everyone, because of how human beings are fundamentally wired, over-rate the consequences of “things going bad” and consequently too often default to seemingly safe strategies.
Raynor goes on to make the point that while this may be fine from a personal health and safety perspective, it is quite sub-optimal when it comes to strategic decision-making.
The reasons, he cites, are both subtle and obvious.
The obvious reasons revolve around classic “agency” challenges - namely that there are a different set of incentives in place for owners versus operators of businesses.
The owners - i.e. the shareholders - main goal is investment return. As such, they usually evaluate strategic decisions through the dispassionate prism of expected value.
The operators of businesses, in contrast, usually act as who they are - emotional, empathetic, and personal-safety focused human beings.
And while, as professionally trained managers, they are of course aware and focused on expected value and shareholder return, their analysis of those rational probabilities often get overshadowed by more "human" concerns.
Like friendship. Like the stable, comfortable routine of a job. Of co-workers. Of a daily, comfortable work rhythm.
And the result of this natural human bias toward "the comfortable" is executive decision-making that defaults too often to the seemingly (that word again) conservative option.
Now as for why this conservatism is a strategic problem, Raynor delves into the concept of survivor bias and how it pertains to traditional studies of what factors separate successful companies from the unsuccessful ones.
Survivor bias can be best illustrated by all of those statistics that too many of us unfortunately know by heart regarding the abysmally low percentage of companies that make it through their 1st year of business, those that make it to 5 years, to 10 years, etc.
Now most of us naturally interpret these statistics as to mean that the leaders of these failed businesses were too aggressive, that they took too many risks, made too many big bets that didn’t pan out.
But Raynor's research actually demonstrates the opposite.
As opposed to Jim Collins’ famous (and famously flawed) Good to Great analysis, Raynor found that when the full universe of companies were surveyed – not just those that survived – that there was a direct negative correlation between those that didn't make it and the relative conservatism of their leaders and their pursued business strategies.
Or from the other perspective, the successful businesses were led and managed far more so by leaders who could be described in those "seemingly"pejorative terms - "aggressive," "risk taker," "bet the house" types.
So what does this all mean for the executive / entrepreneur interested in making quality higher risk / higher return strategic decisions?
Well, to quote the title of a famous self-help book: "Feel the Fear…but Do It Anyway."
Accept that as human beings, we are wired to be afraid.
BUT to prosper in modern business we must push through this and trust that the riskier choice far more often than not is...
...the strategically correct one.
Over the past few weeks, I have talked about the demonstrable, high ROI of strategic planning for companies of all types and sizes, along with suggested processes and tactics to complete that plan on time and under budget.
As important as the creation of the plan is its ongoing review and updating. Both in comparison to actual results and then the corresponding “Gap Analysis” to evaluate what went right and should be done more, and what went wrong and needs adjustment, discontinuation, etc.
One of the best ways to recalibrate like this is through the establishment and regular meeting of a Board of Strategic Advisors.
For smaller, entrepreneurial companies, a strategic advisory board can perform many of the functions that a fiduciary board does, but for far less cost, headache, and without the emotionally and financially complex decision around loss of owner control.
For companies like this, here are a few ideas on how to set up and earn ROI right away on a strategic advisory board:
Accept the Truism that Often It is Better to Receive than to Give: While advisory board members, unlike with formal boards, do not have liability nor fiduciary responsibility, their time and energy requirements to participate are significant.
And for most smaller companies, the financial incentives it can offer advisory board members are relatively little compared to the value of board members’ time.
A good if imperfect analogy is that for many senior executives their involvement with a smaller company advisory board is almost a philanthropic endeavor, where they give of themselves without expectation of direct reward, financial or otherwise.
Correspondingly, the owners and managers of the small company must approach the sage advice and good energy offered by their advisory board fully in “receiving” mode.
For businesspeople of the mindset of always trading value for value and reciprocal obligation, this is hard. But only by clearing this space can an advisory board’s counsel be best received.
And somewhat counter-intuitively, often only by management fully accepting the “gifts” of its advisors will the board member’s experience be richest.
Begin with the End in Mind: For companies beyond the startup phase, its operating executives are naturally pulled to the shorter-term challenges and realities: this quarter’s revenue and profits, this month’s sales, the challenges and angst of a difficult employee decision, etc.
An advisory board discussion, however, by both its nature and by the kinds of folks attracted to serve on them, naturally pulls to the longer view - to the big "why" and "which" questions that all businesses should be regularly asking themselves always but rarely do.
The why questions are hopefully embodied in the Company’s mission and its values, and need the regular attention of strategic planning sessions like advisory board meetings to keep them from existing only in “hot air.”
The “which” questions are in many ways the harder ones that an advisory board dynamic can specifically help address.
This is because ambitious entrepreneurs and executives, especially after they have a little success, are naturally drawn to expanding their sense of their market opportunity, and correspondingly their list of product and service offerings.
This naturally leads to a diffusion of focus, of trying to be all things to all people. A thoughtful advisory board will challenge management to clearly define where they are aiming to be 1 year, 3 years hence and beyond, and from this vision where resources and attention should be focused today.
Speak Little, Listen Much: Managers and owners of emerging companies are often also the lead salespeople, the lead “evangelists” for their companies.
As a result, their default mode is to always be selling, always be pied-pipering their incredibly bright futures.
This is natural and good, but when strategic planning in board settings it is of equal importance that the challenges, the obstacles, the concerning risk factors be discussed and grappled with long and hard.
Even if, especially if, so doing is buzz-killing and / or depressing.
Why? Because it is often only in the “low negative” energy state that a certain kind of reflective creativity can flourish, and completely new approaches to solving vexing problems can be discovered.
Brevity is Next to Godliness: Strategic planning sessions in a modern business context should be tightly scheduled to last not more than 3 hours. After this length of time, diminishing returns starts setting in fast.
A tight frame also requires all participants to come to the meeting prepared. And, in turn, that the meeting organizers select the right meeting homework and then plan and moderate the agenda with the proper balance of structure and free-flowing dialogue.
Doing all of the above requires work – a good guide is that for every hour of strategic meeting time there should be 5 hours of planning time by the meeting organizer and at least 2 hours of preparation time by each participant.
Given that the only way to increase the value of a business is to either a) increase its bottom line financials and/or b) to improve its strategic positioning and growth probability, a structured approach involving first the development of a formal plan and then...
...staying committed to its ongoing “review and resetting” as is done in a well-moderated advisory board setting should be a FIRST priority of any responsible manager of a company with ambition.
These are classic “non-urgent, extremely important” business building activities to be ignored at one's peril, and benefited from in ways well beyond reasonable expectation.
The past is never dead. It's not even past.
- by William Faulkner
A vexing challenge in attaining a business breakthrough of any type - sales, profitability, business model, company culture - is the inexorable "backward" pull of a business' historical results and accomplishments (or lack thereof).
For sure, as effective executives, we know to focus on opportunities not problems and that past performance, good or bad, is neither indicative nor predictive of future results, yet...
...whether we like it or not we are reminded always of what has gone before, with the “unsaid” being that no matter how hard we try, the future of our business will be more or less like its past, with the best we can realistically hope for is just a few percentage points of growth here and there.
This frustrating reality is caused, to a very large degree, by the day-to-day operational “inertia” of most businesses, big and small.
It is the inertia that develops when the same people interact with each other in the same way - managing meetings, running projects, and assigning to-dos in that default and “comfortable” way.
Over time, individual executives start bringing to these repetitive business interactions increasingly hardened perspectives.
And then this inertia turns to a creeping lethargy that stops a business in its tracks, especially when opportunities that require proactive action to pursue present themselves.
Now I hope that just by describing the problem sheds light on how to solve it: Consciously and constantly injecting into a business new, different, and extraordinary stimuli.
The stimuli of Organizational Change - bringing new people in and encouraging under performers to depart.
The stimuli of Branding Change - ditching the old logo, tagline and website and starting over new and fresh.
The stimuli of Financial Change - seeking and securing investment capital to grow faster and more strategically.
Heck, just contemplating new stimuli like these can be a breath of badly needed fresh air - forcing executives to visualize and imagine what their desired business of the future should and can be...
...and then working back to the present time to define what needs to be done to get it there.
Yes, when it comes to breaking the shackles of the past, the default strategic stance should be that new and different is always better until and unless proven otherwise.
I wouldn't worry too much about whether this approach will lead to poorly considered risk-taking.
Because whether we like it or not, our businesses’ pasts are always with us.
But by taking conscious, definitive, and different action - repeatedly and determinedly - we can easily break free of it.
I recently moderated a strategic planning session for a Texas-based developer and distributor of specialty software for the financial services industry.
For them, on the one hand it was truly the best of times: an 8 - figure revenue base and possessing of a recurring revenue business model with long term clients including some of the biggest banks and brokerage firms in the world.
But...and like many companies now in our technology fast forwarded world, serious storm clouds threatened: minimal revenue growth and more disturbingly pricing (and margins) driven down by aggressive overseas competition.
As concerning, the Company’s Founder - rightly revered for his work ethic and charismatic leadership - was uncharacteristically indecisive, waxing on a bit too nostalgically on how “easy” business was in the “old days” versus addressing today’s challenges.
So we got “stuck,” so that even in the areas where there was agreement as to the strategic and tactical changes needing to be made, the executive team just couldn’t make them (and then have those decisions stay made!).
Now, as I have found from my 15+ years of leading strategic sessions like this, at some point as often as not they turn into Interventions, defined by Webster as “becoming involved intentionally in a difficult situation in order to change it or improve it, or prevent it from getting worse.”
And, in the context of a company refining its strategic plan, the intervention (at a top level) normally involves leading the executive team through a series of “Why,” “What,” “Who” questions.
First, there are the “why” questions to re-ground us in the business’ “reason for being” and the fundamental values it brings to its stakeholders - shareholders, customers, employees, etc.
Questions like “Why do customers choose us?” and more poignantly for the team “Why do we work here?" and "Why is it important to us as individuals that this company be successful?”
As these “whys” are grappled with, strategic clarity usually emerges and the questions turn to “Whats” - to tactics, projects, deadlines, and to-dos.
As this point, everyone (finally!) starts “getting real” with each other, to who is responsible for what and more to the point is there really an accountability-based culture in place to promote and sustain high performance and positive change?
As these exercises proceed, what normally re-awakens is the understanding that the leadership team’s responsibility is to the organization as a whole, and not to any one particular individual, division, or practice area.
In this company’s case, from these exercises the hard decision was made to transition a pair of executives, as they embodied a legacy mindset and approach unsuited for the “business of the future” needed to be built.
And, as is more often the case than not, these transition conversations were more difficult in their anticipation than actuality, and as they were completed a new forward looking-energy and initiative was unleashed in the team members that remained.
I would encourage any business that feels “stuck” in any important aspect - revenue growth, cash flow, client satisfaction, culturally - to prompt a business intervention like this.
Yes, the outcomes will sometimes be difficult for specific individuals, but almost always beneficial for the organization as a whole.
The fox knows many things, but a hedgehog knows one big thing.
- Ancient Greek Aphorism
Isaiah Berlin, in 1953, famously referenced this as a jumping off point for an essay on the relative importance of two kinds of knowledge, on the one hand that of principles and ideas, and on the other hand that of "ways of the world," street smarts, and technique.
I was reminded of it recently by an old and wise colleague, as we were evaluating an investment opportunity, and the relative importance of the executive team’s operating experience versus their big picture strategy and growth model for the business.
His point was that while those executives were certainly “foxes” - great resumes, hard workers, and excellent communicators - they were lacking as “hedgehogs,” pursuing an inefficient and difficult to scale business model.
We passed on the investment.
And it occurred to me how so many of us think and work like them - tens of millions of knowledge workers all over the world that know and do a lot of “little” things - how to code, talk, email, text, post, and tweet, but how too often doing so crowds out the "Deep Work" necessary to arrive at and execute upon business models that scale.
Perhaps the most vexing "focus" challenge of modern business, but for the disciplined executive one surprisingly easy-to-overcome through asking one simple question:
Does a particular bucket of stuff really make me and my company money or does it not?
Because focusing on making money almost always means focusing less on:
And more on:
And when we reflect on it, isn't this not just the stuff that makes us money, but is also the stuff we almost always enjoy and find the most fulfilling?
Isaiah Berlin's full "The Hedgehog and the Fox" essay can be read here.
Timeless, ancient wisdom worth applying to our frenetic, modern day.
Don’t chop water when you should be carrying wood.
- Old Zen Proverb (updated for the 21st Century)
Last week, I wrote about the connection between vision, strategy, and action in a business, and how great organizations find the balance between:
a) Making the right changes at the right time and
b) Having the discipline to “keep on keeping on” and just doing more of what is working.
Note well that b) is particularly hard to maintain when the tasks and activities that ARE working become repetitive and lack in excitement and drama.
So how does do executives find this balance - between being creative and just keeping their heads down and plowing forward?
Well, luckily in the past few years a large and impressive business literature has sprung up that codifies best practices of how to find this all-important balance.
It can best be summarized by the phrase “immersion plus spaced repetition” and goes like this:
1. Everything, of course, begins with ideas, with the best ones arising from a series of introspective strategic planning and goal-setting sessions that clarify objectives and the obstacles standing in the way of their accomplishment.
This immersive process - done at least annually but at the best companies quarterly - both defines what needs to be done and inspires all to take on the hard work of getting it done.
The value of inspiration cannot be underestimated – Thomas Edison famously said that “genius was 99% perspiration and 1% inspiration” but that 1% “spark” is uber-critical in propelling an organization through the various thresholds of change.
2. But, as anyone that attended an exciting or invigorating conference or strategic planning session can attest (and as I am sure Mr. Edison reflected on often during long nights at the lab), inspiration fades over time.
Even worse, when the inspiration is not followed through on, cynicism can set in and actually leave an organization worse off than if the planning sessions were never done in the first place!
So how to avoid this distressing fate?
3. Well, by keeping the ideas, goals, and objectives of the planning session alive through their regular review and adjustment.
Think of it this way - if a well-run strategic planning session is the essence of good leadership, then repetitive goals reviews are the essence of good management.
Great managers check in with their teams as often as daily - if only for 5 or 10 minutes - to review the day’s objectives and to keep the shorter term work flow aligned with the longer term planning and mission objectives.
The old adage that the only way to eat an elephant is one bite at a time is never more true than when is comes to these spaced and repetitive management check-ins.
When done right, they measure, acknowledge, and reward incremental progress and prevent the desire for the perfect from getting in the way of the doable and the done.
Then, the organization reconvenes and reviews progress against stated goals, assesses what worked and what didn’t, and then refines and updates the key goals and objectives.
And after this next round of strategic planning, what is done?
Well, the spaced and repetitive management check-ins begin anew.
Wood is chopped, water is carried.
Following this simple but disciplined formula, over time great ideas become great realities, businesses are built, and legacies and fortunes are made.
And for investors, far more than technology these “above the line” leadership, management, and company culture disciplines separate the well-run companies to back from the disorganized ones to avoid.
So what are you waiting for?
Every business needs a vision - a clear definition of what its leadership seeks the business to become.
And every business needs a strategy - a road map of how the business will reach its vision.
Once the vision and strategy are clear (and yes, this is hard), the next step is action planning – the day-by-day mapping of how all of this good but sometimes theoretical “stuff” will actually get done.
This, involves determining which projects will be completed (and as importantly, which ones will NOT be done), by whom and when, and how many resources - work hours, money, and assets - will be required.
Now, this is lovely for the whiteboard but what a company's strategic plan more often than not looks like is this:
Unclear, Unshared Vision. With all the time most management teams spend talking to each other, it's surprising how often they have different pictures of what everyone is supposed to be doing and in what direction they are supposed to be heading.
It's the hard and repetitive job of leadership to repeatedly communicate the plan (i.e. the vision, the strategy, and the day-to-day road map of how to get there) until all are on the same page.
And then rinse and repeat.
Planning Once Per Year, Out Of Routine. So many of us, right around New Year, think about our personal goals for the year ahead.
Similarly, many businesses work on their yearly plan during the same month of every year.
And then they forget about it.
The best businesses, in contrast, create, refine, and live their business plans in real time, every day.
Yes, this is hard, now more than ever because of…
The Tyranny of the Urgent. A HUGE challenge to executives and businesses attaining greatness is how difficult it is, because of technology, to not let those “urgent, but NOT important" activities dominate our days.
More than ever, we must fight for the time and attention to do the great and important work, and block out those insidious distractions everywhere and always around us.
No Process or Methodology For Strategic Planning. A best practice is to focus on vision and strategy in one set of sessions, and then on the day-to-day action planning, accountabilities, and progress measurements in another.
In discussing vision and strategy, we are in creative mode, exploring any and all options and ideas.
In contrast, figuring out action plans and accountabilities are best suited for separate, more “Tough Love” and analytical-type meetings.
With appropriate time set aside for vision, strategy, and action planning, a business can experience the collective joy that comes from knowing exactly what it is striving toward and how it will get there.
Everyone at the business will feel more grounded, balanced, and centered.
Being so all will come to work with greater purpose and passion.
And, at the end of the year, we will all have far more to show for our efforts.