1.   Scoring own goals

What are your personal (non business) goals? These should be discussed and defined before embarking on the business aspects of the process. There is little use creating a business direction that, in hindsight, fails to support what truly matters in your non-work life.

2. The higher authority

Assume your efforts have resulted in a beautifully crafted plan. Now, who’s going hold you accountable for its achievement? Yourself? Maybe, but it takes a remarkable person to remain true to the course when the going gets rough. Firm up your coaches and independent advisers in advance of the planning. Better still: have them on the planning team.

3.   Use your bench

Diversity in backgrounds, age, experience and ideas are key attributes in a successful planning team. Remember that two people with the same ideas are effectively one person. A balanced mix of internal and external participants will lead to a higher quality outcome than a team of one. Note that seniority is not necessarily a trait that equates to superior strategic contribution.

4.   Neutral umpires

A strategic planning programme led by an external facilitator, rather than yourself, will be more effective. Ideas from all participants tend to flow more freely and the outsourcing of the facilitation ensures that operational pressures are less likely to disrupt the quality of the sessions or overall timeframes.

 5.   Different game plan

Strategy, by its nature, means to change. “More of the same”is not strategic. Ensure there is a commitment from all parties, especially yourself, to change, stretch and evolve before any planning initiatives are undertaken.

 6.   Stretching and warm ups

Group sessions and off site strategy days are important however it’s the depth of reflection and analysis undertaken prior to these sessions that will help guarantee success. Use thinksheets to collate and aggregate ideas in advance. This leads to a better use of face to face time to discuss and evolve ideas rather than brainstorm from scratch.

7.   Focus on your own game

Your strategic challenge is to meet unmet customer needs. However identifying these can be really difficult especially when customers themselves struggle to articulate their own needs! Beware of creating brand or product homogeneity. Be unique and resist the temptation to simply mirror your competitors.

 8.   The power of Why

People don’t buy what you do; they buy why you do it.  Start your planning with the why and then move on to the what, who and how.  There’s a great Simon Sinek video that is useful for this: see http://bit.ly/wdqtY

9.   Get the team onside

Not all your employees will be able to be part of the process (but they should have at least one representative). So communicate before, during and after the planning to aid buy in. When sharing the strategy, get staff involved in implementation ideas at that time.  Consider setting them the challenge of defining an audacious company goal.  Assign individual actions and let staff know how this will contribute to the overall success.

10. High vis-ulisation

Condense the written output in to a colourful one page visual. Then laminate copies and share with your entire team. We’ve all heard the anecdotes about the best written plans gathering dust in the bottom drawer!

Check out this 3 minute video from Jim Collins (of Good to Great fame)…

So…

1. Confront the brutal facts: tell them how it really is.
2. Engage your team in dialogue, debate and disagreement: before the decision has been made.
3. Show tangible results: success breeds success.

Are our politicians adept in these techniques? Opposition parties favour (1) eg aging population and superannuation costs.  Governing parties focus on (3) eg investment in police numbers lowering crime statistics. Occasionally we have incidences of (2) sometimes wrapped in a referendum eg voting systems

I’d love to hear examples of where Jim Collins’ approach has personally worked for you…

1. Class Act
Derek Handley – The Hyperfactory, a mobile advertising corporation.
You have three options: enable, join or lead the revolution. Well worth watching if you haven’t heard Derek speak before.

2. Most Inspiring
Fady Mishriki – PowerByProxi, a wireless  power technology company.
A compelling presentation around the need for NZ to invest in its youth and immigrants.

3. Best Presenter
Mai Chen –  Chen/Palmer Public Law Specialists and NZ Global Women
A classic example of how to present using impact and humour, to hold an audience’s attention.

4. Most Practical
Mike Carden – Sonar6, performance management specialists.
A useful demonstration of how Sonar 6 reduced their salespeople from six to two and quadrupled sales.

5. The Highlights Reel
For a quick snapshot of the day.

On Reflection
It was a stimulating event with a few practical initiatives already launched via 3000.org.nz.  “Go global, young man” was a common catch cry by all, to all, throughout the day.

My one disappointment was a predominant focus on entrepreneurs and start ups and a lack of  discussion on how our mid sized, privately owned businesses can contribute to the 3000 company goal. Fortunately David Irving referenced these “understated heroes” and  NZ’s “owner manager engine room” heavily during his presentation.

Similarly, there was a strong technology focus during the day, but it needs to be recognised that are far broader range of industries exist in NZ, all with the potential to grow exports and earnings.

Upshot
IceIdeas left me even more motivated to work with those ambitious business owners  committed to grow their $5m companies in to $20m operations and their $20m businesses in to $100m.

I love services: creating them, pricing them, selling and delivering them.  But they have their challenges: the perils of time based billing, continual client tailoring and the need for more sophistication around staff engagement and management.

Two recent experiences got me thinking about delivering services as a product: pro-vices or ser-ducts anyone?

1.  John Warrillow’s book Built to Sell is a recommended read for SME owners. The story addresses the common issue of business owners being the fulcrum around which everything revolves and is reliant. This may be fine until the business wants to seriously grow or contemplate a sale – and the issue is magnified in smaller services companies.

Warrillow’s test for a scalable business is as follows:

Is what your business does teachable? (easy for other employees or technology to deliver) Is it valuable? (specialisation allows you to maintain a high price point)
Is it repeatable? (provide for recurring revenue).

But can your business scale? Google, predominantly a product company, can while McKinsey (being a services company) struggles.  As Alex Taussig puts simply, “if you have to add operating costs (sales, marketing, administration, R&D, etc.) at the same rate you grow revenue, then your business does not scale.”

2.  I recently completed a strategic planning programme for technology business, Navitas.  The directors, John and Steve, had been struggling to build scale over the last 10 years.  With broad technical expertise and quality output, large clients relied on them to deliver complex, bespoke software.  And therein lay the problem.  They were actually offering a service: highly customised, highly consultative, time billed solutions.  They built it once… and sold it once.

While working on diverse projects across multiple technologies was stimulating it wasn’t getting John and Steve closer to their personal goals.  Specialisation, although daunting, was needed. Previous experience and success within the energy industry and a strong competency in metering related software led to the identification of a natural niche.

Navitas are now transitioning to a product based mindset.  One of their goals is to ensure  the next enterprise level project is built once and sold at least four times.  To support this transition further strategies around industry thought leadership,  funding and sales and marketing have been developed.

So, do you have a service offering that could be standardised?  Consider starting by:

• creating a step by step process for its delivery
• give the offering a name and a brand promise
• fix its price
• provide for only minimal customisation and
• ensure no individual (including yourself) is integral to the ongoing delivery of the offering.

Develop it once, sell it multiple times – your challenge for Q2!

Michael Boustridge – President of BT Global Services, USA

Businesses need to collaborate. Building a product from start to finish yourself will become rare. Visual technology is key – harness video & video conferencing.

Derek Handley – Co-founder and CEO, Hyperfactory, USA

NZ is more ‘inventive’ than ‘innovative’. Innovation requires commercialisation, something we need to become a lot better at.

Sam Morgan – Founder,Trade Me

Trust is one of the biggest competitive advantages we have as NZ business people. It is recognised and valued internationally.

Sarah Robb O’Hagan – President Gatorade North America, USA

Play to win in your business decisions rather than playing not to lose.  Also, just because you can doesn’t mean you should. Have the courage to say no.

Dame Judith Mayhew Jonas – director and policy adviser, UK

New skills and experiences gained in the voluntary sector can be invaluable when transitioned in to a commercial environment. Grab each and every opportunity – you don’t want to regret the hesitation.

Dr Karen Wilcox – Assoc Prof of Aeronautics and Astronautics, MIT, USA

Everyone needs mentors and heroes.

________

I was also fortunate to attend the Icehouse 10 year Anniversary event  in late March. Here’s what Tim Alpe, founder of Jucy rentals shared:

• “Follow the kiwi”…he’s had great success with expat kiwis heading up his international expansions

• “Find the king”… and then help that person/employee to build their kingdom

• “Hire people slightly too big for the role “…I’m sure you’ve heard this before

________

Finally I  spent half a day with futurist, David Houle, courtesy of TEC – The Executive Connection. Here are three of my key learnings:

• If you are a middleman then your days are numbered. Dis-intermediation is only going to get more prolific. To stay viable in the middle you’d better be adding huge value.

• Change isn’t something that you will need to occasionally ‘go through’. It’s now a constant.  Adaptability and resilience are key  leadership traits needed to navigate this Transformation Decade.

• Work and place are separating.  The only reason to have an office is to encourage collaboration.  Otherwise….work from home.

One of the benefits of spending a week in Taupo Bay was having the time to devote to my “must read” pile. While I’d scanned Changing Gears when it was published in late 2009, this time I read it cover to cover.

It’s the seminal text on how to grow your business: practical in nature and strongly NZ in context. I found a pearl of wisdom on every page.  Insights from the book that I have shared with clients over the past two weeks include:

• Sales – Profit  = Costs: treat profit as a given rather than the hit & miss variable left over at the end of the year.
• Your business will fail to scale if you remain overly loyal, task focused and isolated.
• As your firm grows so must its management capability and governance.
• Take a break – disconnect from the business (and your blackberry!)

I’m an avid follower of David Irving, one of the book’s lead authors.  You may have caught his monthly management columns in Unlimited over the past four years (unfortunately he’s just written his last one).  David often comments on my articles with a couple of recent pieces of wisdom being:

• Always choose a board for tomorrow rather than slip into the easier choice of one for today. Today is gone tomorrow!

• Simplify the concept of governance by asking owners to think about their current business and the big issues. Then ask what competence they need around them to work through those issues.

After reading this book the natural progression for business owners is to invest in the Icehouse Owner Manager Programme.

Changing Gears is available through the Auckland University Press or at Paper Plus, Whitcoulls and Borders or online at Fishpond.  You won’t be disappointed.

Complimentary Copies

I’ve purchased bulk copies of this book.  If you know a NZ business owner who is committed to doubling the size of their company over the next five years then send me through their name and email: I’d be more than happy to post them a complimentary copy of Changing Gears.

**Offer ends 30 March 2011.  Ideal business size between 5 and 50 employees.

Alongside the dawning of a new year, so does the realisation: “I need some support”.

Given this mood I’m predicting 2011 will see independent governance of privately owned NZ companies finally emerge from its current shadow-like existence.

Struggling with the ‘dreaded’ governance word?  Feel free to substitute with clarity, wisdom, guidance, stewardship or shared leadership.

Effective governance can be the difference between owning a good company and being the owner of a great company.  This broader stewardship brings benefits including:

- Regular time set aside for bigger picture thinking
- Constructive challenge to you as owner
- New strategies and ideas for growth
- Neutrality when holding senior management accountable
- Informed but independent perspectives during decision making
- An extra set of eyes when monitoring business risk and compliance

My experience shows that owners also personally benefit through increased stimulation and motivation as well as greater clarity and delineation of their roles as employee, director and shareholder.

For those companies seizing this opportunity here’s what I suggest:

1. Structure: determine the best governance set up for your company, now and in the medium term

Be absolutely clear about your expectations of what governance will bring. Next, examine your ownership structure now and think how is that likely to change? Envision the organisation in 5 years time – what will it look like?  What is the end goal for your involvement in the business? Analysing all this will give clear direction of the best governance structure: formal advisor, advisory board, independent director or maybe even a full board model.

2: Skill sets: confidently identify the right people with the right experience

Create a skills matrix to define the complete experience required of a governance team for your company. Mark off the owner’s current experience against this.  The resulting skills gap will form the basis of a role description and person specification. Finally, outline a process for identifying potential candidates.

3. Secure: engage the services of the best person

Cast the net as wide as possible to attract potential candidates.  Aim for the best – you’ll be surprised how often someone you thought unattainable is interested (or knows someone who would be). Produce a formal letter of appointment and consider the need for Directors & Officers insurance.

I always advocate payment to your advisors, even if it is somewhat token.  It formalises the relationship and creates an expectation from both parties.  The appointment becomes meaningless if it is seen as a favour or meetings and involvement begins to rank at the bottom of a very busy ‘to do’ list.

But doesn’t New Zealand need a more efficient and effective way to introduce potential advisers and directors to independently owned companies, I hear you ask.  Well, funnily enough, a couple of us have been working on a plan – watch this space!

The problem was their internal accounting team, who were ill equipped for the requirements of a rapidly growing, idea rich and cashflow poor organisation.

This is not unusual. Some of the quickest and most enduring gains I’ve implemented with clients have simply involved upgrading their internal finance function.  Not only does it result in better information on which to base decisions, but the engagement of a competent accountant helps set the tone for the rest of the business: timeliness, accuracy and insight.

What about your business? You may have your headlights on but are they at full beam?

As a business grows, it is common for the finance function not to grow with it.  The book-keeper with no formal training may have been sufficient four years ago but now…?

Here are some signs that change may be in order:

-        it’s the 20^th and you’re yet to receive management accounts from the previous month

-        you’re finance person doesn’t regularly mention the word ‘cashflow’

-        they haven’t attended any external training in the past six months

-        you receive the accounts but no commentary or analysis

-        you find yourself relying on your external accountant more than your internal one

The biggest benefit in upgrading is having your financial information interpreted, not just produced.  Hopefully the interpretation will be accompanied by recommendations.  If you only have the need for one individual, and the dual role of production, interpretation and recommendation is too great, consider engaging the services of a virtual CFO.

I’ve found return to work mothers a great choice of part timer, when a full time resource is not needed.  In return for offering flexibility in working hours you tend to receive a much higher skillset than you’d get otherwise and a very competent multi-tasker!

As with a lot of roles, hire on attitude.  Skills can be learnt but approach and engagement tends not to change.  If your existing accounts person has been in the role for a number of years then trust me – a new approach and set of ideas will be amazingly refreshing.

And when it comes to accounting software, look no further than Xero. I’m a big supporter of them (no, I’m not a shareholder) and am yet to meet a convert that regrets the move from their old software.

Please drop me a note if you’d like any other ideas on illuminating your internal accounts team.

What is preventing our $1m companies turning over $5m, our $5m becoming $20m and our $20m becoming $50m companies?  Some say it is access to capital. Others will refer to the size of our domestic economy.  A few our geographic isolation.  And the old punching bag: Government red tape.

For me the impediment is people and, more specifically, the owner managers of small and medium sized NZ businesses.  The founders, who have the potential to be part of the solution, may now be part of the problem.  Our country needs business builders, not business farmers or simply more business starters.

Has the business outgrown the owner, or would it do if they were not holding back the reins? Here are some reasons why this can come about:

Fear of losing control

Sometimes an owner manager will feel their personal identity is inextricably linked with their business. The individual will only allow the company to develop at a rate that is within their comfort zone, providing a sense of control and security.

Lack of energy or motivation

They’re exhausted. After years of toil, stress, good times and bad, human nature is such that they are not the driving force they once were.

Change in risk profile

The “I’ve got nothing to lose” mentality that may have been the catalyst for forming the business has now transitioned to “let’s not lose what we’ve got.” This is often accompanied by a business owner starting to lose confidence in his or her own ability.

Lack of requisite skills

Owner managers are not noted for investment in their personal professional development, failing to justify either the expense or time away from the business. So the skills they started the company with may be the same skills they are relying on to run a significantly different company years later.

Difficulty letting go

The bloody-minded determination that got the company to where it is now is not easily relinquished in favour of empowerment and entrustment.  Core business knowledge and relationships aren’t fully shared and the concept of hiring people ‘better’ than themselves is uncommon.

So, what is the solution?

Experience shows that entrepreneurs or business starters do not typically make great business builders.  Very few have prior experience as general managers or CEOs. Neither do we have a country of Steve Jobs – founders that have the capability to successfully drive an organisation through its full lifecycle.

There comes a time when every founder needs to allow another individual to take the helm of the organisation.  But this transition shouldn’t be triggered by thoughts of retirement – it could be two years after the business is formed or twenty years. The test is “Am I the best person to build and grow this organisation over the next five years?” If the answer is ‘no’ then let the search begin. Be prepared to share ownership.  Greater success is to be had if your key executives act with the conviction and commitment of an owner.

Note that relinquishing the helm as an executive need not impact your roles as director and majority shareholder. In fact it will probably strengthen the performance of the former and bring greater clarity and expectations to the latter.

I’d also encourage the following:

Implement some form of governance

To be really effective ensure it is a person (or people) who will challenge you.  Resist the temptation to engage an acquaintance you have known for years because subconsciously you know they are unlikely to rock the boat.  Similarly, be realistic about the independent thought and challenge you would get by appointing a long time professional services provider such as your accountant or lawyer.

Broaden yourself

Take time to invest in your own skills and professional network.  You may undertake some governance training (how to be a better director) or a short course on strategic planning.  Alternatively you may engage with other commercial organisations – share your experience as a mentor and get ideas and inspiration in return.

Passion

Develop (or continue) a passion outside the business.  It will help put the business in context and negate the likelihood of idle minds wanting to become operationally involved in the business again.

So take a look in the mirror and ask: am I holding back my business?

You owe it to yourself, your business and your country!

You may be surprised how similar responses tend to be.

I sat down last week and analysed all the strategic plans I’d facilitated for medium sized business owners over the past two years.  As you may know, I encourage the development of individual personal goals as a starting point and then use these to formulate a set of shareholder goals. These goals, along with the company’s values, are the foundation of any strategic planning.

Five distinct themes around shareholder goals emerged:

(Note: numbers reflect % of owners I analysed who included this as one of their five goals)

Growth (100%)

All owners want their business to grow. Their five year goals typically make reference to a target net profit figure but occasionally the yardstick is turnover.

Growth being a unanimous goal is not surprising.  Business owners are ambitious in nature and the expectation of year on year increases is a natural by product of working in a commercial environment. Also, many owners rely on dividends as their primary source of income and the main way to increase this is by growing net profits.

Autonomy (65%)

The majority of owners want their business to be able to succeed without them.

This is often driven by a desire for flexibility (time to travel, spend with family, undertake other ventures), frustration with being so operationally involved in the business, or recognition that business succession is near to impossible when they are so inextricably linked to it.

Peace of mind (50%)

Owners frequently have a goal to strengthen structure and processes within the business. Consistent, documented systems are required to give peace of mind that the business will operate effectively both as it grows (Goal 1) and as they step back operationally (Goal 2).

Linked with increased structure is a wish to implement some form of governance. Again this is recognition that ambitious growth may require external support and that governance aids the pathway for eventual succession.

Reputation (50%)

Having done the hard yards building the company (often from scratch), owners look for ongoing recognition and a safeguarding of reputation. Sometimes this is ego and personal identity driven. Other times it’s broader and more paternal in nature, focussing on the protection of the company’s brand and reputation.

The challenge for owners is that recognition has historically been derived from doing the business (as an executive). The transition required is to understand this can instead be achieved as a founder or owner (shareholder) or as an influencer and guardian (director).

Social Responsibility (45%)

Shareholders often want the business to continue to have a positive impact on New Zealand society or contribute to specific parts of the community.  Sometimes is this is aligned to an owner’s requirement that the company’s current values remain preeminent and enduring.

What can we take from this?

Irrespective of where an owner’s mindset is now, evidence suggests that they will eventually want relief from being the fulcrum around which the business revolves.  This can be partly achieved by having the confidence to hire people that are better than themselves. Taking proactive steps to identify and nurture employees with long term leadership potential and commitment to the company would also be beneficial.

Define and document processes as early in the company’s lifecycle as possible.  Create a culture around this and ensure that no business critical operations are restricted to the knowledge of just one individual (including the business owner!).

Finally, a strong set of company values, some form of external advice and an understanding that reputations needn’t derive from the “doing” will go a long way towards safeguarding personal and business reputations.

(Article title is with apologies to the Spice Girls)