How to create organic growth in your company

growing-organization.png

How do you grow your company organically in today’s competitive marketplace?

A McKinsey survey looked at approaches used by companies and found that high-performing firms used a combination of three strategies:

  1. They moved investment and money into high-growth activities.
  2. They created new things to sell and new ways of delivering value.
  3. Tney worked on making how they did things internally better.

It appears from the survey that the best performing approach is one where firms focus on creating new products, services and business models, but also ensure that they allocate resources effectively and work on optimizing their own operations.

That sounds easy enough, so what stops organizations from doing this and setting off on a growth track?

There are three reasons, according to another article from McKinsey:

1. Inflexible structures

Your organization needs to have the right structure to enable growth, with the right teams, leadership and strategy in place to effectively serve its target market.

Simply working within an existing structure can mean that ideas and innovation can get lost in the unending stream of existing priorities and concerns.

2. Unscalable processes

A related problem is when existing processes just cannot keep up with new opportunites and demand.

If you have a bottleneck in your organization – perhaps when it comes to pricing, turning proposals around, evaluating opportunities or in your manufacturing systems, that will become an increasingly large problem as you grow.

3. Unprepared people

A growth strategy can come as something of a surprise to people in organizations used to doing things in a certain way.

This can slow growth down considerably – not because people are being difficult, but just because by being cautious and adding what they feel are reasonable checks to the process, they can end up slowing and even derailing the entire initiative.

So, what does this mean for us?

An organic growth strategy takes time, focus and investment.

Like growing plants, you need to prepare the ground, seed it, provide them with resources and keep away predators.

And then you need to wait.

The Matthew effect – why the rich get richer

the-matthew-effect.png

Have you ever wondered what makes a product or a person successful in today’s interconnected world?

Is it the quality of their work, how hard they work or a big dose of luck?

There are competing theories flying around – but some have been around for longer.

The Matthew effect comes from biblical parables and says “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken even that which he hath.”

In other words, the rich get richer and the poor get poorer.

This effect doesn’t have to do just with money – although that is one way of measuring it in real life.

It turns out that you see this in a number of situations:

  • The bestseller lists for music and books are dominated by a small number of well-known and rich artists.
  • The most eminent researchers get the credit for a discovery, even if it has been done by a team.
  • Children that learn to read early in life pull away from those that don’t.

There are two factors at play here.

The first effect is the principle of cumulative advantage. Small advantages build up to big ones over time.

An example of this is described in Malcolm Gladwell’s book Outliers, where children that start playing a sport who are older than others in their cohort perform better because they are bigger at the start of the year, and so get more opportunities to play and develop their skills.

People who start a job and are slightly better are more likely to be invited onto a team to do more interesting work, and over time get more experience than others.

The second factor is the network effect. The more connections you have, the more connections you tend to make – and the more connections you have, the more opportunities come your way.

People who have large networks or are already wealthy tend to have more people approaching them with ideas or opportunities.

Publishers pay more attention to authors that already have a large social media following or email list.

Venture capitalists take entrepreneurs that have already been successful more seriously.

Artists that have a large following and existing sales find it easier to get their next album out and into the market because people are already looking out for them.

So what does this mean for us?

The main takeaway is that advantage builds up over time. If you want to get rich, the best time to get started is 10 years ago.

The second best time is now.

What do you need to learn to keep your job?

reading-while-running.png

You know that AI is coming for you, right?

A third of current jobs will be done by computers over the next 20 years. If you want to know if your job is at risk, type it in here.

There are a number of changes happening in the world of work – and these are foundational changes – changes in the very nature of society itself, enabled by interconnected technology.

Technology is enabling a move from the traditional industrial approach of cramming everyone in a large space and giving them small tasks as part of an assembly process to networks of smart people working together to create value.

The choice facing us in the future might be as stark as either choosing to learn more and create value that cannot be done by a computer, or learning how to clean and maintain the computers and automated cars that do the jobs that we used to do.

In an article in the McKinsey Quarterly, Amy Edmondson and Bror Saxberg point out that most organizations focus on the money, leaving it to their employees to worry about learning.

This might have been ok in a world where all people had to do was “do”, but not in a world where they have to “think”, “create” or “decide”.

It’s not enough to get a traditional education and then come into the workplace and never open a book again. In modern organisations you have to be ready to learn all the time, and learn while doing your job.

The military is very good at this. As Josh Bersin points out, they only really do two things: fight and train. Most of the time, they train.

They make a big deal of sitting (or probably standing) after an exercise and working through what worked, what didn’t and what they would do differently next time.

Learning doesn’t have to be classroom based and formal any more. For individuals, the amount of information and support out there to learn almost anything is staggering.

Just take Coursera, for example. This site has free courses that you can take that range from programming and management to abstract painting and dinosaur paleobiology.

Organizations have to create the conditions that enable people that work in them to learn. That means giving them time and space to experiment, research, get feedback and think.

The skills needed are not just technical ones, but also social – skills that make it possible to work collaboratively across organizational boundaries.

The challenge is making learning part of the daily routine – you need to learn as you race along doing your job day to day.

Do you have what it takes to be a great executive?

great-executive.png

You could argue that most of the momentum and drive that propels a business along comes from the work of a cadre of executives that are responsible for major parts of the organisation.

The way in which this group of people operate, make decisions and run their businesses has a huge impact on success or failure.

So, if you’re one of those people already, or want to become one of them, what skills do you need and can you learn them?

A 10-year study by Ron Carucci published in the Harvard Business Review set out to answer that.

It found four patterns that set apart great executives from good ones after analysing over 2,700 interviews with leaders.

The patterns are deceptively simple, which is why they are perhaps so hard to actually do.

1. Great executives know their industry

Industries have different economics and drivers and the best executives understand this.

The kind of strategies that apply in a fast-moving consumer goods space cannot be applied directly to a moribund regulated business.

Your industry makes money in a particular way, by meeting demand with supply and competing with others.

If you are curious, able to spot possibilities and test and challenge assumptions then you will be able to focus your attention on doing things that make the most difference.

2. Great executives know their business

Most people arrive at a senior position after spending years in a particular function or business unit.

This means that they often view the whole business through the lens created by their experience – sales leaders think about pricing, operations about supply chains and accounting about finance.

Great leaders think about the system – how all the pieces fit together to create value. They focus on the interaction between parts of the business, remove bottlenecks and improve coordination to make it easier for the business to operate optimally.

3. Great executives know people

A great strategy developed in a locked room is of no use to anyone.

To actually make things happen, you need to interact with other people, show them your plans, take into account their objections and get them to work with you to make things happen.

You can only do this if people trust you and your judgements at all levels of the organisation. If you try and control, manipulate or steer people you’re probably going to be found out.

People aren’t stupid.

If you help other people get what they want and they can trust what you say, you have a good chance of moving in the right direction.

Great executives know how to make good decisions

If you know your industry, know your business and have good relationships, the last part of the puzzle is being able to make good decisions.

How do you take data and information and combine it with your gut instinct to create insight?

The key is having decision making processes that help you arrive at reasoned decisions that are free from bias – yet that incorporate the human element that comes from a deep understanding of your own circumstances.

As the article says, you can learn these skills if you don’t have them already.

It’s a simple enough list really.

But just because it’s simple, don’t make the mistake of assuming it’s easy.

How to get your timing right

timing.png

Why do some people succeed and others fail? Is it because the successful ones were just better? Or were they lucky?

This is a hard thing to take apart. All we have to go on is the evidence of success or failure – we don’t know what would have happened if the situation had been different.

“Luck is what happens when preparation meets opportunity”

This quote has been attributed to Seneca, the Roman philospher, but probably wasn’t said by him. It’s still good, however.

If you get yourself ready, then when you are able to react when the opportunity presents itself, you improve your chances of being lucky.

When it comes to timing investments in markets – this is a good strategy.

In investing – if you decide ahead of time what is good value, and the market comes close to that number – you should buy.

Much too often when prices fall people don’t buy, hoping they can get it cheaper. And when they rise they don’t buy either, hoping they will come down again. That doesn’t work.

Another way of thinking about this is with a surfing analogy. If you’re a surfer, you don’t just go to the beach, scan the waves for a big one and then head out towards it.

Instead, you get in position, and when the big wave comes along it lifts you up and you get going.

It’s all about getting in place before the opportunity starts. If you can see a trend, see the wave, see what is about to happen – then you are probably too late to do anything about it.

This is perhaps why people who take risks, start new ventures, try out new ideas are sometimes regarded with pity, sometimes with scorn by those around them.

Until they succeed. And then it looks like it was inevitable after all and anyone could do it. Except they didn’t.

Can you increase your chances of getting your timing right and being lucky?

A ten-year study by the psyschologist Richard Wiseman suggests there are four things lucky people do more than others:

  1. They create and notice chance opportunities
  2. They use their intuition to make lucky decisions
  3. They have positive expectations
  4. They are resilient – and that sometimes changes bad into good

This study suggests that how lucky you are may be related to how you think and behave.

Perhaps the approach to take is a combination of Oliver Cromwell’s maxim “Trust in God and keep your powder dry”.

In other words – think and act lucky, but also do everything you can to have the capability and tools needed to seize an opportunity when it comes along.

Why body language isn’t enough

body-language.png

If you have ever attended a team building event or communication seminar or similar training programme, the topic of body language probably came up.

93% of communication is non-verbal, they probably said. How you say something is far more important than what you actually say.

The problem is that this is wrong.

Professor Albert Mehrabian’s research in the late 1960s found that when trying to communicate feelings, 7% of the impact came from the words you used, 38% from the tone and 55% from your expression.

In other words, if you said you were happy when looking sad and sniffling, or said you were fine while looking very angry and snarling, people could work out how you really felt most of the time.

It doesn’t follow that when you try and communicate in general, only 7% of what you get across to someone else is the verbal component.

The research has been misinterpreted for decades – until TED.

TED – a conference on Technology, Entertainment and Design – is now probably the world’s best known repository of great ideas. It has videos of short talks where speakers talk billiantly about an area of interest and expertise.

They don’t just saunter up on stage and perform. The words they use are crucial – their words are used to “tell a story, build an idea, explain the complex, make a reasoned case, or provide a compelling call to action”.

TED made what you said important – because the speakers were talking about great ideas and insights and research that mattered and was making a difference.

Why does this matter to the rest of us?

Virtually any important decision you are involved in will require communication and persuasion. Either someone else has to make the case to you, or you need to make the case to someone else. And people have to agree.

In a connected world filled with information noise, we need to get better at making the case for doing something important.

What you say is just as important as how you say it.

What’s the least you can do?

scientist-with-pipette.png

There just isn’t time to do everything.

How do you know what you are doing is having an impact? And then, how do you know when you have done enough.

A model from pharmacology may help.

The concept of an effective dose (ED) is a measure of the smallest amount of a drug to produce a desired response in a patient.

Anything more than the ED does not help – having 3 painkillers when one is enough is probably not going reduce your pain by three times.

Much more than the ED can be harmful – that’s why you aren’t sold massive packets of painkillers in supermarkets.

So, there are three things to figure out when thinking about what needs to be done:

  1. What’s the baseline – the normal level or business as usual?
  2. What’s the least required to produce a required result?
  3. At what point should you stop?

It’s very easy to do a lot and look very busy, but it’s more interesting and useful to be effective.

And being effective means doing just enough – not too much. Doing too much is a waste of resources.

In the startup world, this model is referred to as a Minumum Viable Product (MVP).

The MVP is a product that has the least amount of features that make it viable and usable by a customer.

Once you have that, find a customer, get them to use it and use their feedback to improve and make the product better.

Many companies spend too much time and money building a perfect product, only to run out of both just at the point when they are ready to ship.

Take another example – one that many of us face – how to change a behaviour?

Whether it is exercising more, eating better or doing something more, just how long does it take to create a new habit?

First – its obvious that if you select too punishing an exercise regime or too strict a diet, the chances of you giving up increase. The right behaviour is one that you can sustain over a long enough period.

Then if you do that minimum daily behaviour every day it turns out that it takes between 18 and 254 days to make that a habit.

That’s quite a wide range. If you’re at the top end of that range, the less you have to do and the easier you make it on yourself, the more likely it is that you will be able to stick it out.

Once you start to look around, you can see applications of this approach everywhere.

Do you really need to check your phone 46 times a day to stay informed? How much news do you really need to watch every day to know what is going on? How much time every day do you need to spend checking out markets to be aware of trends?

Paradoxically, by doing less you may find you have the time to do much more.

As Antoine de Saint ExupĂ©ry, the French aviator and author of the Little Prince wrote, “It seems that perfection is attained, not when there is nothing more to add, but when there is nothing more to take away.”

Would you stick your neck out?

stick-your-neck-out.png

What would you do when faced with a situation that poses a risk to you personally or professionally?

Are you risk averse – preferring to deal only with certainties or do you plough ahead and accept whatever happens as a result?

Neither approach is particularly effective.

At a talk at Sheffield University Sir Peter Middleton, a former Chancellor of the University and Group Chairman of Barclays, made the comment that outside of number theory, everything is probabilistic.

And that is something that is quite hard for us to get our heads around – it’s just not the way human brains are wired.

Take the army life, for example. That is a profession where sticking your neck out could quite literally result in a very unpleasant outcome.

If you were a risk averse soldier, would you ever go first around the corner?

The US military, which helpfully publishes a lot of its leadership training material, talks about the concept of prudent risk in its Mission Command Doctrine.

Prudent risk is defined as “deliberate exposure to potential injury or loss when the commander judges the outcome in terms of mission accomplishment as worth the cost”.

It’s not gambling, rushing in hoping to win big without thinking through what might happen to your team if you fail.

Instead, you weigh things up, in essence working out the probabilities involved, and make a prudent decision.

Take another field – investment management.

Risk is defined in rather arcane terms because it sounds better when you try and sell it to clients. Volatility or beta sounds much more knowledgable than saying some days prices go up and other days prices go down and most days there isn’t really a clear reason.

Warren Buffet talks about risk in simpler terms – he defines risk as the potential for loss.

If you buy a particular stock, or do a certain transaction, what are the chances that you will lose money on the deal?

If you only deal with certainties, and keep your money in cash under the bed, you returns will be low.

If you go for exotic and complex deals that you don’t understand but are assured are “no-brainers”, you may strike it rich, but in many cases you will not.

Remember the old saying – when a person with money meets a person with experience, the person with experience ends up with the money, and the person with the money ends up with the experience.

The key to succeeding in investment is taking prudent risk – taking action when the opportunity outweighs the cost and you have a greater probability of success than failure. And then doing that again and again.

When it comes to personal or business success, the same approach applies.

You can’t replace personal initiative, responsibility and cooperation in the workplace with automation. It’s hard to get a robot to do anything outside the limitations of its programming.

Instead, businesses succeed when the people in them assess situations clearly, weigh up the pros and cons and accept that any significant decision is going to involve risk – and take the crucial decisions where the opportunities outweigh the costs.

That does mean sometimes sticking your neck out.

What do you think of when you hear hoofbeats?

horses-or-zebras.png

What could possibly be the cause of a problem you are facing? How would you diagnose it?

Medical students are taught to be careful about making diagnoses of rare illnesses.

It is easy when you see a patient to remember the unusual illnesses you have encountered that caused the same symptoms as now and jump to the conclusion that your patient has the same disease.

It is likely that there is a simpler reason.

Perhaps this is why many doctors ask you to take a couple of painkillers and come back in two weeks. The chances are that whatever you have isn’t actually that serious.

Dr Theodore Woodward came up with the aphorism “When you hear hoofbeats, think of horses, not zebras” to remind his students to beware of making exotic diagnoses.

But you can use this outside medicine too. Take markets, for example.

Markets are places when buyers and sellers come together. Prices are created through the mechanism of supply and demand and the actions and decisions of participants.

If you want to get a good deal, you need to know what it takes to produce and supply the item you need and calculate its value.

In a one-to-one sale, you may be able to negotiate a good deal. In a financial market, you need to be ready to move when the market price is at a level that is low compared to your calculation of value.

Many things move the market price on a daily basis, but usually a few big things impact how prices work over the longer period – and they boil down to supply and demand.

The trouble most people have with markets is that they feel that they should be active rather than putting a strategy in place and letting it run – the simple passive approach seems too easy, but time after time it produces better results.

In any field, operations, human resources, sales, writing, programming, marketing, research – it is likely that the reasons for a problem are down to common causes.

Before you decide that your phone is knackered or that your computer has been infected with a virus and that’s what is making it slow, you should turn it off and turn it back on again and see if that fixes the problem.

If your marketing isn’t working – the chances are that you are not taking to the right people, or not saying the right things to interest them.

If your writing doesn’t flow, it’s likely that there are four or five main reasons that repeat time after time.

This aphorism also applies when you think about larger issues.

Is it possible that climate change is an elaborate scientific hoax, or is more likely that the current U.S administration’s antipathy towards mitigating climate change is because powerful organizations with a vested interest in the status quo are trying to protect themselves?

That said, context matters.

If you are on safari in the Masai Mara and you hear hoofbeats, you are quite likely to see zebras.

In addition, although you should not reach for an exotic reason immediately, you should also not rule it out until you have evidence to the contrary.

We just need to make an effort to think through the problem as clearly as possible.

Why we should spend more time thinking upside down

person-upside-down.png

How you look at a situation usually defines how you analyze it and the kinds of solutions you come up with as a result.

The problem is that quite often it is only after you have spent some time on the analysis that you find out that the way you were looking at the situation in the first place was wrong.

The maxim “Invert, always invert” was a favourite of the German mathematician Jacobi who believed you could solve many hard problems by thinking about them upside down.

Take a famous example from Edward de Bono about the problems of pollution. Factories along a river were taking in water, using it and putting their polluted water back into the river. The last factory received the most polluted water.

The question asked was how to ensure that factories cleaned their water first before putting it into the river. Did it need a legislative solution? A technical one?

de Bono’s simple idea was to invert the input and output and require all factories on the river to have their water intake pipe downstream of their output. This means that they would be the first to suffer from their own pollution and give them a strong incentive to clean up.

Charlie Munger, the Vice-Chairman of Berkshire Hathaway, has talked about the importance of inversion in making investment decisions.

The secret to being smart, he says, is to avoid doing dumb things.

If you avoid doing dumb things for long enough, like taking drugs and racing trains to the crossing, then eventually the decisions you do take will result in good outcomes, and you will look smart as a result.

Inversion, or upside down thinking, can be applied to many situations in life and business.

If you have a goal you want to reach, thinking about the things that will stop you achieving that goal can help you take the right decisions on what to do and what not to do.

If you are facing a business challenge, re-stating the problem may create new approaches that you hadn’t thought of before.

For example, if your car park is too full, you might consider how to increase its capacity – and that leads to solutions like buying more space, expanding and investing more money.

Instead, asking how you can reduce the number of cars in the car park may result in different solutions – encourage car sharing, moving to other locations or encouraging home working, getting to the same point but with less investment.

In investing, after you have come up with all the reasons why you should buy something, it is a good idea to list out the reasons why it is a bad idea to buy it as well.

Looking at things the wrong way round, or upside down, can expand the way in which we think about problems and create a richer set of solutions for us to pick from – increasing our chances of making good decisions time after time.