Sustainable growth: allocation of time and capital

What got you here, won’t get you there?

Sustainable growth is one of my taglines when working with business owners from my advisory firm Next Act Advisors.? This blog unpacks how sustainable growth is addressed, independent of size, stage, and sector of an enterprise.? Sustainable growth is obtained like a recipe of allocating both time and capital, in this order.? Accompanied by another ingredient: talent. Allocation between the two ingredients is highly skewed towards the CEO’s time and no other executive. I like to say the buck stops here at the CEO level and with consultation with the board.?

For the subtitle, I stole from Marshall Goldsmith’s bestselling book’s title? “what got you here won’t get you there. “My call to action for the CEO, as the leader of the enterprise, is to realize that the team you attract and retain while on the growth journey is as critical as the time you allocate to identify and execute on growth opportunities. As you become aware of the time you allocate to growth hacking, and you round out with different skills within the enterprise, capital allocation decisions more easily fall into place.??

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What follows are real life examples on sustainable growth efforts with three case studies: a division in a? public pharmaceutical company, a sneak preview of work by Kevin Lawrence, of Lawrence &Co, on the Four Forces of Growth,? a leader of a group of growth advisors for entrepreneurial organizations, and a pre-revenue clean tech company that went to market at the same time Silicon Valley Bank and First Republic Bank were melting down.?

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Case study #1?

Time allocation across business divisions?

Situation:? Sustainable growth in the pharmaceutical industry is largely driven by new drug development, requiring on average 7-10 years of development, and billions of dollars in R&D. The large investments required to develop drugs that improve patient lives are awarded patent protection for a 10-year period.??

Three blockbuster drugs were soon to come off patent and the pipeline of new drugs with the status of blockbuster was underwhelming.??

Complexity:??? The division I led had a portfolio of “off patent “ drugs in the cardiovascular, respiratory and anesthesia therapeutical areas, with high fidelity with patients and prescribers and low cost to serve. A second division I led? jointly with a global team was the evaluation of upcoming drug pipeline including clinical development, pricing, and reimbursement opportunities. My team was to focus on the business development strategy for these two portfolios.???

Resolution:?? I asked myself a question: with two very different capital allocation decisions can I possibly bridge the divide by bringing in external talent?? I consulted with the CEO, and she approved. I needed an experienced professional who I trusted and could work with both new and off patent drugs. I found that person who I had developed years before at another firm. The CEO interviewed the candidate and he promptly joined and under his leadership a “Swat” team was assembled, and the search began with the criterion:? license out vs distribution /contract sales or business as usual. The search came up with some “natural owners” of the drugs, and the distribution of the drugs in this space as well as alternative uses of the drugs in off label. We looked at licensing opportunities in force with partners that knew our physician base and were seeking opportunities for augmenting their portfolio. In the end we renewed relationships with old partners and established new partnerships with clinicians for the new drug pipeline while adding to the bottom-line additional revenues worth millions of euros, while continuing to provide patient care.??

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Case #2?

Rightsizing CEO’s time allocation to focus on the next wave of revenue streams.?

Kevin Lawrence, of Lawrence &Co, is a leader of a group of growth advisors for entrepreneurial organizations.??

Sustainable growth, in his definition, is one which requires constant dedication to achieving more time in the upper quadrant of aircraft flight: Thrust and Lift as seen in the photo.?

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Recently I got a sneak preview of an upcoming book “Four Forces of Growth”. His story telling of why companies struggle to sustain growth is delivered with an analogy of a fighter pilots’ struggle with spatial disorientation (spoiler alert) and aptly applies this metaphor to the struggle to sustain profitable growth. A seasoned air force pilot suddenly lost control and had to use wing mates, ground control and analog when refueling and a light flash hit her eyes and she was disoriented.?

From a seasoned pilot’s need to use four mechanisms to sustain flight, to the time allocation of a CEO, Kevin’s draws one’s attention to valuable and actionable takeaways to sustain growth.?

He substitutes the concepts of Lift with that of Opportunities; Thrust with that of Courage; Gravity with Problems and Drag with Fear.???

Sustainable Growth is achieved when 60-80% of the CEO’s time is allocated to growth opportunities. He argues that the drag caused by team players who are not “on the bus” need to be dropped sooner than later. The quadrant of problems or Gravity is where most people spend their time and are compensated- you are not there to problem solve, but to create future growth and finally a simple strategy where 1% is vision like a pilot and 99% of the organization or the aircraft needs to be aligned.?

High performing CEOs and an “A” team need to spend their time in the upper right quadrant to sustain growth. Stay tuned for the release in the Fall of 2024 for this book by Kevin Lawrence where you will enjoy the plane ride on the axes of agony, analysis, improvement and finally Growth.?

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Case #3?

Capital Allocation in a financial market meltdown.?

Oscar Neyra is CEO and founder of Lisus, a venture backed startup that focuses on identifying better sites to source materials for batteries. Oscar recently joined me in the podcast The Founder’s Sandbox where we talked about: A sustainable business model in a sustainable market.?

Lisus began to raise a first round of investment, when SVB and FRB folded.??

“We were born at a time of crisis. and there is a higher bar that you are subject to as an entrepreneur.”?He goes on to share that he has observed in this market particularly that the companies that thrive are those that can self-fund while building a product for the customer. Lisus focused on one product, the Alchemist, rather than several.?

Alchemist is a mineral exploration tool integrated with state of the art remote sensing the have the potential for mineral exploration. And as a materials company from the start, their north star is to be “solvers of the problem” as a Full stack provider. He shares examples of Flextronics or even Tesla, as solvers of a problem?? who have provided more opportunities for revenues than those trying to provide a service.?

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“ Our capital allocation is one that while we need to think of our customers, we also need to think of our timing to revenue and good unit economics.”??

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This blog explored sustainable growth through three examples: my prior experience at a pharmaceutical company in increasing revenues from a portfolio of off patent prescription drugs; a fighter pilot’s spatial orientation regained sustainable growth through use of four mechanisms of aircraft,? and the capital allocation and business model alignment to sustain growth in a venture backed clean tech company.??

At Next Act Advisors, my mission is to work with company owners to sustain growth in enterprise value. If you enjoyed learning more about allocation of time, capital, and talent, please sign up for more articles and consider subscribing to the Founder’s Sandbox podcast released monthly here.?

Signing off for this month,?

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Brenda A. McCabe?

#sustainablegrowth?

#capitalallocation?

#talent?

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