Going from Good to Great: Small to Medium Business
Matthew Hunt: SiDCOR Client Director
I recently read Good to Great by Jim Collins. It had some really insightful learnings into what his research determined the key factors in taking a business from sustained average results, to sustaining great results.
The study revolved around Fortune 500 companies in the late 20th Century, but I’m certain it has application to SME’s in Australia right now. Here are my top five learnings:
FIRST WHO THEN WHAT
It’s tried and tested, the concept of getting the right people on the bus, the wrong people off it and the right people in the right seats. Once then, and only then, will you decide the exact route your bus goes on
Attracting the right people and giving them input in the direction you wish to go has been an extremely successful formula for many companies.
The lesson for SME’s is two-fold:
1) Ensure engagement of key staff members, securing key staff members and then empowering them to have a say in where your business is to go; and
2) Determining what seat should you be in. Being a business owner doesn’t mean you have to be across every role in your business, decide what your strengths are and what you are passionate about, and then hire people and develop processes to cover your weaknesses.
THE HEDGEHOG CONCEPT
This concept is a three tiered analysis of the space your business should play in:
What are we passion about?
What do we have the ability to be the best in the world at?
What drives our business’ economic engine?
In other words, what do we love doing, what are we best at and what is profitable – once you’ve figured this out, and you are disciplined in how you execute this strategy, the world’s your oyster.
Along the way distractions will come up, a new product line, an expansion opportunity – the lesson is to evaluate these opportunities in line with your hedgehog concept.
Littered through the history are case studies of businesses who expand into different areas either to increase shareholder return or keep up with competitors, only to fail miserably. In hindsight, these companies will realise their only error was overreaching their own hedgehog principle…think Woolworths and the launch of Masters.
LEVEL 5 LEADERSHIP
Every single good to great company had a leader which embodied what Jim Collins termed Level 5 leaders. Characteristics of this type of leader for me are:
- workmanlike disciplined action to allow business to fulfill its potential
- humility, very little ego regarding results, attributed a lot of companies’ success to ‘luck’
- resolution that the business will succeed no matter what
- culture of promoting leaders from within
THE STOCKDALE PARADOX (Don’t think you’ll be out by Christmas)
The Stockdale paradox is simply: “You must retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time…You must confront the most brutal facts of your current reality, whatever they might be”.
Stockdale who, as a POW in the Vietnam war, observed that those who were overly optimistic and expected to be out within a certain amount of time, often suffered and ultimately perished from what he believed to be from a broken heart.
My learning for business owners of SME’s, is that when you face challenges, whether it be from competitors, technology or digital disruption, that as a leader of the business you remain 100% resolute that those challenges will be overcome in due course, whilst simultaneously admitting the brutal facts.
For example, a business in retail may be confronted with falling sales due to increases in online shopping. Utilising this paradox, an owner would be analysing their business model and admitting that on current trends, if they do not increase revenue by 20%, or margin by 10%, their business will not be viable in 12 months’ time. They then need to set about disciplined action to change the model (go online, review supply chain) while all the time believing that the business will meet this challenge head on and come out stronger on the other side.
Apply technology in the context of your hedgehog principle. Make sure the technology accelerates your ability to execute your vision, not just use technology because others are using it.
This point really hit home to me the power of a well run, long standing business and their ability to be steady and meticulous when introducing technology to their businesses. In his book, Jim discusses the American pharmaceutical industry, and the ability for Walgreens to use technology to enhance its value proposition through thinking about and using technology differently to its’ competitors. As a result, they took the conversation from lowest price, to best service & maximum convenience.
For SME’s the challenge is there for you to identify what is your hedgehog concept, and how can technology increase your ability to deliver value for your customers.
If competitors and technology are currently eating away at your revenue, stop complaining and start thinking about your unique value proposition to your customers, and how you can leverage technology to better serve your existing customers.