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Newsletter Vol. 13 - Introduction Softengine News is dedicated to keeping you up to date with the latest information regarding SAP Business One systems, Softengine solutions and Best Business Practices. Are You a Best-Run Business? The 7 Essentials of Highly Effective Companies, David Thomson Almost all enterprises are in business to grow, and all companies want to be effective. Whatever your motivation for being in business in the first place-to change the world for the better, create a great place to work, offer a great product or service, and/or present shareholders with an excellent return on investment-growing a company is a must do.
But what are the habits, or what I call the essentials, to grow your business successfully to the next level? To be effective from both a managerial and financial perspective, and have this success be long-term? Why a billion in revenue? Of America's 8,000 IPOs since 1980, only 5% achieved one billion in revenue. They account for half of the employment and two thirds of the market value created by all IPO companies! Companies such as Microsoft, Google, Staples, Amgen, Harley Davidson and many others are great places to work for and invest in. They grew from a million to a billion in revenue with compounding or exponential revenue growth. They utilized 7 Essentials (in fact, now 8) or management practices to achieve this consistent revenue growth. In contrast 25% of all US IPO companies went out of business since 1980. What did these management teams do that differentiated their odds of success from a million to a billion?
The best-selling book Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth identifies the first quantitative or measurable success pattern of America's highest growth companies. David G. Thomson is a former McKinsey & Company Associate Principal and senior executive from HP who has been recognized globally for his insights into what actions will propel a small company into a billion dollar enterprise. He is a distinguished keynote speaker, business advisor and thought leader and has been interviewed in major publications worldwide.
“Whether you are at a million, $20 million, $100 million or $500 million in revenue, applying the 7 Essentials to achieve exponential growth is the secret to become a highly effective company. Of the companies that grew to a billion, over 90% applied 5 or more of these 7 Essentials. Applying one will improve your growth prospects. Applying 5 or more will truly turbo-charge your company's growth. Here are 7 Essentials:
1. First, aligned to your innovation investment or R&D, is the ability to create and deliver "Way Better Value or Benefits" that truly differentiates your business and makes it relevant and valued in the eyes of the customer. We call this a Breakthrough Value Proposition.
There are three essentials to creating exponential revenue growth:
2. Target a high growth market segment, by which I mean a category within a market that is experiencing growing customer demand. Look within $200 Billion markets to redefine a potential billion dollar market segment that already exists, such as in retail, healthcare, technology, etc. You don't always have to create a new market.
3. Leverage Marquee Customers to propel your company's revenue growth. These are your most important customers who are the source of exponential revenue growth per customer. They uniquely help you define your benefits in customer terms and they essentially sell for you! Yes, turn your best customers into your sales force. eBay Power-Sellers are a wonderful example of how a company turned a handful of early Marquee Customers into a force that is over a million customers today. Cisco utilized customer case studies with companies like Salomon Brothers (which has since been acquired) and Motorola in the early days to spread the word. Crocs transformed a small company to a billion with customer testimonials on its website.
4. Leverage Little-Big Brother alliances to break into new markets. Big companies need small companies to fill critical portfolio gaps. P&G is just one example of a Fortune 500 company that explicitly searches for smaller companies to partner with as they recognize their company cannot innovate in all markets.
A company cannot achieve sustainable revenue growth without generating profits to reinvest in the company. There are three essentials that drive profit and cash flow performance:
5. Become the Masters of Exponential Returns by becoming cash flow positive early. In contrast to today's conventional wisdom to leverage debt, these companies were cash flow positive early, often by $20 million in revenue, and remained cash flow positive all the way to a billion. They had little or no long term debt. They reinvested their profits to fuel growth.
6. Utilize a Dynamic Duo of Inside-Outside Leadership to execute the internal and external essentials. One executive or team innovates with customers and alliances while the operating leader(s) focus on operating and innovation performance. Together, they are a dynamic duo high performance team.
7. Balance the Board of Directors with Essentials Experts. Boards dominated with Investors and Management board members tended to be associated with companies that struggled in the long term. Balance your board with customers, alliance partners and a CEO who has led a company to a billion (or a CEO who has led a growth company larger than yours). These members will balance short- term with long-term interests.
Since writing the book, I found an 8th Essential: Invest in Infrastructure. As companies grow from a million to a billion in revenue, the most highly effective leadership teams balanced profitability and cash flow with investing in infrastructure. For example, strategic investments were made in people, processes, systems, assets and IT infrastructure. This may sound like a no-brainer, but it's amazing how many companies, intent on growing, do not make the necessary investments in human capital or general infrastructure.
By now you may be wondering: Do the 7 Essentials to Achieve Exponential Growth apply globally? The latest research indicates that they do. While the US graduates an average of 36 companies/year to a billion, over the past five years, there is an average of 175 companies achieving a billion (USD) in revenue globally. I like to quiz my audiences: Which country is #1 for the greatest number of new billion dollar companies? China, the United States, or Russia? It is the U.S. However, the world is definitely regional. Asia generates over 40% of new billion dollar companies vs. 24% for North America, with the other continents capturing the difference. Asia, therefore, is the new regional leader for billion dollar company creation and growth.
Whichever country or industry your company is located in, applying the 7 and now 8 Essentials will truly turbo-charge your company to become a best run growth company.”
Softengine has formed Business Consulting Group to provide Collective Business Expertise by accelerating early-stage companies, re-energizing and re-positioning established businesses to achieve business success, utilizing talents and resources of its industry professionals combined with a proven business best practices and market development process (world-wide basis with its network of top industry professionals). Services include Advisory Board (Dynamic Business Development team focused in keeping your company on track and accelerating into new business), Business & Technical Assessments, Strategic Planning, Marketing Consulting & PR Management, Operations Support & Staffing, Due Diligence, and Exit Services.
Call or email Barry Lederman for additional details how Softengine Business Consulting Group can help you to apply the above 8 Essentials to achieve exponential growth: 818.704.7000 – blederman@softengineusa.com. |
