I’m not going to pretend to say I have the best answer to growing a great business that stands the test of time. That’s what MBA school is for along with the thousands of books that have been written on startups, strategy, and management.
However, I’m not uncomfortable providing my perspective. I also know there’s not that one and only holy grail for business excellence. If it existed, every business founder would be successful.
Five Critical Ingredients to Building a Great Business
I’m stripping away jargon in favor of everyday language we know and understand. Here’s the list and I’ll do a mini dive on each point afterward:
- The big bet and the supporting pillars behind that big bet.
- Unity of individual teams and unity across the entire organization that’s rowing in the same direction at the right pace.
- The coach of all coaches who provides the direction for the organization mentioned above.
- A profitable cash flow model backed by a strong balance sheet and a growing customer base.
- Knowing the pulse of the market in which the business serves along with the favorable or unfavorable trends and shifts in the marketplace.
The Big Bet
Every founder starts out with a big bet. They never go short on their bet, they go long and in doing so, they are willing to risk everything they own. Go back in time and think about the big bets of Henry Ford, Sam Walton, Jeff Bezos, and Steve Jobs. There are many others. They started with a big bet, and that bet is synonymous with strategy or the strategy of all micro strategies in the growing business.
Big bets require support and augmentation. That’s where systems, processes, and structures enter the picture.
You might think that systems, processes, and structures are separate from the company’s overall strategy. I just can’t wrap my mind around that because the two go hand in hand – like blood and oxygen in the human body.
A big bet alone is not enough. It has to be a winning bet. Sometimes that chip has been cashed in for a newer and even bigger winning bet. When you started your business, what was your winning bet? And do you have the support systems adequately built around that big bet?
The consulting industry for culture is huge and possibly immeasurable. I’ve left that word out because the purpose of a great culture should be unity. Without unity, the growth of a business will stumble or grow haphazardly. It can still grow, but not as well as the firm that’s unified in its purpose.
Unity alone is not enough. The Boys in the Boat is one of my favorite non-fiction narratives of the some two thousand books I’ve read. The book is about a handful of flawed athletes who didn’t know how to row and ultimately became the world champions on the greatest sports stage of its day. They rowed in the same direction at the proper pace – speeding up and slowing down as called upon.
Perhaps you’ve spent money to enhance your organization’s culture and employee engagement. Does unity exist?
The boys from Washington won a 1936 gold medal and were coached by a man who was decisive, humble, and knew how to draw up a winning game plan. In short, he was the coach of all coaches on his rowing team.
The coach of all coaches in the organization knows the direction the growing firm needs to go in.
Setting the company’s direction may seem like it’s from the page of common sense. Yet, study after study in academia reveals this is one of the biggest weaknesses facing leaders.
That’s why ‘direction’ setting is critical in becoming a great company.
A Profitable Cash Flow Model
I could write about this topic for weeks, but I’ll stick to brevity.
Every business I model (in software) spells out how, when, and where they generate cash. The model continually reviews liquidity issues or cash surpluses.
In short, one of the keys to growing a great business is ensuring your little ATM is spitting out far more cash than it’s having to consume.
If I have one nitpick in this arena, it’s the leader who grows complacent with a decent amount of profitable cash flow while it’s slowly plateauing. Success can be paralyzing and get in the way of continual innovation. And that leads to my last point.
Knowing the Pulse and Trends of the Marketplace
I love studying business failure. The stories of BlackBerry, Blockbuster Video, Circuit City, and Compaq quickly come to mind.
These businesses crumbled for many reasons: bad leadership, too much debt, and tons of competition.
Yet, in every case, you’ll find that they either a) ignored marketplace trends, b) or failed too badly in trying to keep up with disruption in their marketplaces.
About once a year, I ask every CEO, “Will we be relevant in five years?” When I get the answer, I ask, “Why?”
Of the five requirements to build a great business, this ingredient is the hardest in my opinion.