Little things, combined

No cheque too small

I was setting an investment strategy with a research commercialisation organisation last week, and we talked about how they’ll co-invest with others.

Many of their partner investors adopt a ‘no cheque too small’ approach, which turns out to be a valuable strategic concept.

It means that they’ll invest a very small sum (perhaps just $50k) in a high potential, but very early-stage startup.

Why? Isn’t this spreading your chickens too thinly (I know, that’s a badly mixed metaphor)?

Yes, it is, but that’s the plan.

For every 10 such investments, one will bear fruit, and then the $50k is buys access to further tranches; the real value of the seed is the right to further invest. That initial higher risk (albeit a small one) earns the right to seek a lower risk, but much larger, return later.

Question: In what areas should you strategise to gain ‘early access’ to a capability, an invention or an innovation?

Overhead and its discontents

My first ‘real’ job was with a multi-national consulting firm, back in the glory days of the 1980s when no excess was too large. I was proudly told by a partner that my annual salary ($23,100) was less than the cost of the table we were sitting at (I still recall its price tag: $33,000). Yes, a toxic culture, and one reason I left after 9 months.

Fast forward 33 years to today and my conversation was with a CEO (let’s call her Sarah) who is dismayed that she can’t bring overhead costs of her services in below 18%. Sarah’s target is 15% and that includes corporate overhead (centralised functions like HR, IT, finance) and operating expenses (desk space for staff, vehicles, phones).

But, is overhead always ‘bad’ or, at least, to be avoided where possible?

Sarah understandably feels pressure, as a ‘non-profit’, to maximise the flow of funds to direct services. (If she was a ‘for profit’ those flow of funds would be maximised towards profit).

But, this compulsion to reduce overhead misses a key point. Bundling together?all?types of costs that don’t directly generate revenue masks a bigger question:?In what should we reinvest to assure our future success?

Sarah’s 18% ‘overhead’ includes technology innovations, staff and leader capability building, research and advocacy, thought leadership, and partner identification and relationship building. Each of these are, strictly speaking, avoidable costs, but they shouldn’t be, as they’re what every business (whether ‘for profit’ or ‘non-profit’) relies on to feed its future growth.

So, my advice to Sarah is to separate out, in her and her leaders’ minds, ‘costs of doing business’ ($CODB) from ‘reinvested profits’ ($RP). In her business, the two are almost equivalent (each just short of 10% of revenue) and, while both should be optimised, $CODB should be optimised for cost, $RP for impact.

Question: How do you ‘code’ those reinvestments that set you up for future success?

Living with lots

Have you ever persistently misused a word, until someone patiently explained its use to you?

I used to misuse the term ‘morbidity’ — I thought it meant the same as ‘mortality’. However, it’s quite different: morbidity means suffering from a medical condition, whereas mortality means dying (often from a medical condition).

Why am I mentioning this? I’m working on a project with a large university that is conducting ground-breaking research in ‘healthy ageing’. When we asked both researchers and consumers what they understood by this, both talked a lot about multi-morbidity. That is, ageing brings a necessity to get used to having multiple health concerns. Most of them won’t kill you, but they’re all there. Mostly, they’re not even all the same type of thing: a person might be in remission from cancer, have diabetes, high blood pressure, and experience periodic depression, while their arthritis is getting worse, and their eyesight too.

And, multi-morbidities accumulate, gradually. In my mother’s age cohort, 80s and 90s,?everyone?has multi-morbidities. In my and my friends’ age group, mostly 40s and 50s, we are just starting to collect these. I did an informal survey recently amongst my friends and close acquaintances to see how many people I could find?without?a chronic health condition by age 50.

The answer: almost none. Most are invisible: thyroid conditions, diabetes, hearing loss, depression. Some more visible: joint issues, skin conditions, asthma, back problems.

Are we sicker than we used to be? The paradox is yes, because we’re living much longer.

But, it also means that my client, researching ‘ageing well’, will have to allocate their funding to find ways to?prevent?onset?of multi-morbidities and, when they do finally arrive, how best to?organise systems of care and support?so that the person with depression, arthritis, glaucoma, diabetes and high blood pressure, isn’t running from pillar to post, from specialist to specialist, unsure of what the steps in their health journey will be.

Question: How do you accommodate those customers who have not just one need, but many?

If you’ve enjoyed reading this week, it means a lot to me that you click the ‘heart’ below or share with someone else. And, let me know in the comments what your thoughts on any of these topics are.

See you next Friday,

Andrew