The Transition Point
As a business grows and matures, it will typically outpace, outrun, (pick a word), the capabilities of the founder(s) and/or family members that established it. I have seen this directly in five businesses to which I have consulted. The mindset of the leadership when they realize the business has need for more capability than they possess (or don't) directly determines the future of the business.
Let's set some context for the conversation. The businesses we are describing are those that are organically grown from an idea or concept, not "startups" that have been funded (angel investors 1st and/or 2nd round) or spun off from an existing parent or other types of venture, investor, etc. backed entities. The businesses we are describing here (which even includes billion-dollar businesses) are those that are created and run by a single minded individual, partnership, or group (family run).
At some point, the business challenges the "founder(s)" to seek outside help to strategize, run, manage, direct, etc. the business. At that moment in time, several psychological, emotional, and practical factors collide. In some cases, in fact, the factors will overwhelm the founder(s) and the business will tank. In some cases, the founder will reluctantly accept some outside influence, but ultimately decide it is too extreme, and the business will tank.
The Transition Requires Strategy
In those cases, where the founders can manage emotions and look to the future, the business will transform and continue to successfully grow. At this point, the founder(s) face a pivotal moment, where they disassociate themselves personally from the business and realize that their true legacy is in the survival of the business beyond them. What they typically carried in their heads, the guiding compass upon which they relied to get them to this point was a "strategy". They inherently knew or amassed an end sight of where they wanted to go. All of these founder(s) would say things like, "we aren't there yet, but we are still moving towards the goal".
When the founder(s) looked in the mirror, they would see that they needed help to forge on. With the current size of the business, they realize that they could no longer manage all of the things in a single day. Therefore, codifying the vision and goals, and the path(s) to success would be their first step in the transition. They would need to first document a living and breathing strategy so that all could understand the focus and the "why" of the business.
Once complete, then the transformation begins.
Transformation - Making Strategy a Reality
The transformation of a strategy into reality is based on people, process, and data.
People
Strategy becomes a reality when people are unified around a goal or vision and not led by the personality of the founder. The culture of the organization now emerges as the mission statement is codified. The mission statement educates and informs those inside and outside the organization of the true culture embodied within. Picture Sam Walton, the founder of Walmart, in his pickup truck talking with shoppers at his Walmart store in Arkansas about the best prices "around these parts", a message held to this day! If the people of the organization don't understand the why of the organization, then it will be quickly doomed.
Process
The processes of an organization start with how the organization deals with its customers. Without customers, there is no business, so let's start at the crux of the business and move forward. Products and/or services to customers is the medium of exchange for revenue, unless you are nonprofit, then the medium of exchange translates to revenue, donations, and/or grants. Regardless if its a for-profit or nonprofit organization, the customers the organizations serves (yes, serves) are tantamount to a statement of the business. Without customers there is NO business.
Thus, to engage initially and sustain the engagement with customers, the business needs to establish processes that support and engage customers which results in revenue to the business. These processes need to align with and support the culture embodied in the people that represent the business. Together the people and processes are the face of the business to the world outside the business.
Data
Data now emerges and rears its head? We have data, lots of data - of course we do. However, does it provide actionable information? Let's reflect on this for a moment. You have people doing things that are aligned with the mission and vision of the business. Aside from them saying so, how do you know? And, the business products and services are being consumed by the customers, so they must be acceptable. Aside from the folks inside, how do you know?
How do we "measure" the business? Is there data that indicates success and/or failure? If you are in accounting, you might say gross and net profit indicates success or failure. If you are in marketing, you may say new customers. If you are in sales, you may say customer retention. In fact, all of these are right and wrong. The fact of the matter is that depending on who and where you are in the business, the key performance indicators (KPIs) are different. However, the KPIs are the mechanism to quickly grasp the trend of the business. The KPIs of a business need to be understood and visible to the business - at ALL levels.
At the highest level of the business, customer KPIs (satisfaction, reviews, complaints, returns, etc.) are critical along with the effectiveness of the business (accounting, personnel, efficiency, etc.). Increasingly, there is a high correlation between the KPIs within the business and its customer KPIs. Happy customers do, in fact, make happy businesses.
Conclusion
So, people (the voice and the face of the business) using the processes (standard interaction and rule processing methods) interact with customers and suppliers to execute the business. That is realizing the strategy, or making the strategy a reality. The KPIs (the data) then provide an objective measure of the health of the business and how much was achieved relative to the strategy.
You must be wondering... Wait, what about technology? All the marketing and vendors tell me the solution to my problems is their package, offering, computer, system, service, etc. The truth is that technology solves nothing - never has, never will. If it did, the entire world would be using it! There is no substitute in life for water - technology hasn't even started becoming that ubiquitous!
So, in all 5 instances of first-hand consulting to businesses that transitioned from a founder to "beyond the founder(s)" the first step was codifying the strategy of the business. And, from the perspective of the founder(s), it was the hardest because, quite simply, it translated what "came natural to me" into a set of directions for those that came after me. The people, process, and data were the most important and foundational elements on which to begin and build the transformation of the business to achieve the strategy.
Subscribe to MPWRSource Blog