Defining an organization’s culture as a “Family” culture reflects tolerance to subpar performance. Rather focus on those characteristics of a “family” culture that you want.
I have loved skiing ever since I first started 40 years ago. When I first started, I thought the aim was to go straight down the mountain as fast as you could; however, a broken leg soon cured that misconception. Still today, I see many people bragging about how they skied down this challenging run or the other, but having seen them ski, I realize that they are getting down with little style or ability, and gravity is the main contributor. While they have survived, the chance of repeatedly doing this is small. In business as in skiing, the key is to be able to do successful things regularly.
Continuously adjust to changing conditions
Looking at great skiers, they move effortlessly down the mountain. All you see is the fluidity of their movement and their rhythm. What you never notice is the changing slope of the mountain and changing snow. When watching lesser skiers, you can tell when the conditions change – in the moguls, their rhythm abandons them, and on the ice, they flail around. Thus the differentiating factor better an excellent skier and an average skier, in my opinion, is the ability to adjust continuously to the changing conditions below your feet.
In the corporate world, those companies that can maintain the company’s performance through the continuous changing and challenging business and economic conditions are the great ones. They appear to make it effortless in their execution, but it is not. It requires great skill and the ability to anticipate and react to changing conditions. Coca Cola, well known as the largest provider of many soft drinks and beverages, manages to maintain its market leadership in Japan, where there are over 7,000 different soft drinks, and it launches over 1,000 new products every year. Coca Cola maintains that leadership by continuously introducing new products and adjusting to the changing conditions and tastes of its consumers.
The upper body is still, the skier looks ahead, and the legs adjust and absorb.
Watch skiers as they ski the moguls, they are looking 2 to 3 turns ahead (remember where your eyes go your body follows) down the mountain. Their upper bodies are relatively still, while their legs are moving like pistons, absorbing and extending through the moguls as they guide their skies.
To me, the upper body is the strategy of the company, still focused ahead on the goals and plotting the best course ahead to achieve them. The legs are corporate tactics that are required by the environment to realize the strategy. As the business environment, the mountain is never constant; success requires continually adjusting to the changing conditions by changing and adjusting tactics to reach the corporate strategic goals.
When skiing moguls, if you sit back on your skis, you lose the ability to steer the skis and so lose control and will crash. Often the solution, when you do start to sit back, has been described as effectively throwing your body down the mountain so that your center of gravity will pass your feet, and you can regain control of the skis and steer them. Companies often “sit back” and then they are in trouble as the industry changes, and they cannot change direction with it. An example of this, I would describe Apple before Steve Job’s return. The company was sitting back, not controlling its path in the industry. To save it, it had to throw itself ahead and gain control of its direction in the industry.
“If there is no snow on your ski jacket, you are not improving.”
Phil Maher, the great US skier, once told me this, and I have always appreciated it. What is meant by this statement is:
If you don’t have snow on your ski jacket, you haven’t fallen.
If you haven’t fallen you are not pushing yourself outside your comfort zone; and
If you don’t push yourself outside your comfort zone, you are not growing.
The same is true of companies; if you don’t take risks, you cannot succeed. Many writers have covered the thesis that the opposite of success is not a failure, but not succeeding. Strategies that make companies successful are the same strategies that make them losers; it just depends on how the future unfolds (See “The Strategy Paradox” by Michael E. Raynor). The tradeoff is that most strategies are built on specific beliefs about an unpredictable future. Still, the current approach forces leaders to commit to an inflexible strategy regardless of how the future might unfold. Thus success or failure is often up to chance. To be successful, you have to commit to a plan that has risk, but at the same time, be flexible and adaptable. Regardless, there are times when the company will “fall.” If the company cannot fall, it must play it safe so as not to fail; however, nor can it succeed, it just exists in a constant state of mediocrity, leading to a slow demise.
Many companies and management teams play it safe as they will still receive their compensation but not face risk. A recent McKinsey article suggested that companies should innovate more, but behavioral bias is stopping them, and they are too risk-averse (http://bit.ly/oC5XyU). Taking risks implies there may be a failure, but often that growth or failure can move the company in a new, unanticipated direction, leading to greater success. However, failing to take on risk stops the organization and its management from growing. When they stop growing, they lose the ability to adjust to change effectively, and the ability to take risks is weaned out of the company. At a time like that, many companies try to buy their way out of trouble, acquiring new technologies and clients at excessive multiples, which often delays the death spiral. That is because the risk-taking culture and learning through growth have gone, and so while the company adds products and clients, the underlying behavior doesn’t change, so the decline continues.
© 2011 Marc Borrelli All Rights Reserved
Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”
The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.
Many business owners want to sell at the top of the market. However, market timing is tough. Is this the best strategy? Probably not.
Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...
As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.
“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.
You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.
If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.
Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.