What stops you from achieving growth?

In my recent VBlogs I have looked at HR and Audits, today I would like to address one simple question, which is:

Why do growth companies fail?

This is the big question.  Lots of books are written on the successes and failures of businesses during the scale-up phase.  But in my view, many of the companies who fail to cross the chasm can boil it down to one significant factor - the readiness of the Organization to drive success.  

Organizational readiness for ‘growth’ 

Let me start by asserting that the most important factor is the Management Team capability.  Think about it; you are trusting the Management Team to navigate the perilous stages of growth beyond initial success to viable (and sustainable business) - the ‘growth’ stage.  Are they ready for it? Does everyone know their role in the team and committed to the team success? Truthfully, none of us know if we are personally scalable until we have tried it and come out the other end. I have seen many failures.  It is a tough call to decide whether the core management team can grow until they try.  And linked to this is the willingness to learn, coach and delegate (not abdicate) - having the right attitude here across the Management Team is key. 

Driving to scale also requires having the right incentives in place; both short-term and with adequate long-term equity left. There is a strong sense of fairness and ‘we are all in this together’ when all the early stage employees receive some equity – however modest the stock grant. The employees can model the future based on the company growth and resulting valuation – the CEO/CFO can help bring this to life for employees in the internal communications.  I am sure that many top execs at Oracle in the early 1990s vividly remember when Ray Lane, President presented the vision and resulting chart with a five-fold stock increase. I bet many of the execs that very weekend went home and modelled the stock value on their spreadsheets.  It was a powerful reason to both stick around, double down and also drive for growth. This is important at both a company and to consider at a regional level.

One of the nuances of the technology and product businesses, is that there is a stronger cadre of excellent Product Marketing and Product Management talent in the USA.  Silicon Valley doesn’t have a monopoly on companies achieving product market fit, but it does have a massively outsized proportion of companies that convert from product market fit to global champion. There are lots of views as to why but personally I believe many companies fail because they fail to build a scalable, repeatable ‘Go to Market’ model. This is enhanced by creating the playbooks and implementing standard models with the Customer & Market at the heart.  This reflects the scarcity of experience and talent in European countries compared to the US – from top rate CMOs to product marketing. It’s much easier to sit in Europe and execute someone else’s strategy created on the West Coast - it’s another to come up with it yourself and own end-to-end. That said, much of this is still critical when choosing a European team for your USA company.

I have seen Boards lose conviction and spends disproportionate time on ‘exit’ rather than supporting Management to grow organically and acquire competitors or enter related adjacent markets. The culture of ‘exit’ becomes a cancer for growth companies and typically the mentality switches to ‘short-termism’ where the company is 'polished' ready for sale whereas a potential buyer wants to buy a strong, scalable, sustainable business. This is the antithesis of culture I have seen in Silicon Valley where ambition is global market leadership and becoming the gorilla in multi-billion market.  This ambition is infectious and energizing for employees, customers and partners as well as investors.  Because of this, organizations need to select Board members and leadership teams for expertise and ‘what they can do’ for the business. Many boards lack deep domain knowledge/experience and past ‘street-fighting’ operational experience to support (and sometimes challenge constructively) the Management team to build truly customer-obsessed businesses, managing risk, maximizing growth and creating of value. Many of the examples where I have seen companies fail to drive out of ‘Death Valley’ is poor execution - ‘A’ class strategy with ‘B’ class execution will always be inferior to ‘B’ class strategy with ‘A’ class execution! I once worked for a Chairman who’s mantra was “execute ruthlessly or not at all”..

To conclude, cracking the code for ‘growth’ is essential for achieving growth and in my experience it rests on the Organization being set up for success, and I hope my points above illustrate how to tackle this factor in the right way, to enable fast & sustainable growth.    I’d urge you to start with the end in mind and live in the future and create the plans working backwards leveraging simple but effective strategy execution methods.  Think about the barriers you will face and the team to win with you.