lecture_slides-gtg week 1 slides (2)

Grow to Greatness: Smart Growth for Private Businesses

Part I

Week 1: The “Truth” About Growth

Ed Hessehess@darden.virginia.edu

The Myths About Growth

MYTH #1: All growth is good.MYTH #2: Bigger is always better.MYTH #3: Businesses must “grow or die.”

There’s no scientific research in any discipline that supports these commonly believed myths.

At best, they are half-truths; at worst, they are pure fiction.

The Truth

Growth can be good or it can be bad. Too much growth before preparation can overwhelm people, processes and controls.

The “tsunami effect”

The Truth

Growth can…

1. Stress quality controls

2. Stress financial controls

3. Dilute one’s customer value proposition

4. Dilute one’s culture

5. Put one in a different competitive space

The Truth

Bigger is not always better; the bigger, the more bureaucratic and complex. Complexity may exceed management capabilities and experience.

“Grow or die” is not based in science or business reality. A business must only increase revenue in pace with cost increases.

Grow and die is just as likely. ”Improve or die” is better.

The Eyebobs Conversation

Background: What was Julie Allinson’s background before she started Eyebobs?

Why did she start Eyebobs?

What issues did she have to solve to create a business model?1. Design of product2. Manufacturing of product3. Sales4. Distribution

Image courtesy Eyebobs.com

The Eyebobs Conversation

Growth challenges:

1. People2. Controls3. Technology4. Logistics5. Competition

Image courtesy Eyebobs.com

The Eyebobs Conversation

Interview

After the last lecture segment of Week 1, you will hear a short conversation with the founder of Eyebobs, Julie Allinson.

Image courtesy Eyebobs.com

CEO Quotes

“You don’t want to bring on all the business that you can—growth can easily swallow you.”

“Business is a lot like sailing. You know where you are and where you want to go, and it takes a whole lot of tacking to get there. “

Growth Research

Business research

Consistent above average grow is the exception—it is rare.

: NOPE!

Growth Research

Business research (cont.)

Growth ≠ profits.

Growth requires excess management capacity.

Growth is more likely to occur in spurts instead of linearly.

Growth Research

Consistent, high performance companies have…

STRATEGIC FOCUS

Growth Research

Consistent, high performance companies have…

OPERATIONAL EXCELLENCE

Growth Research

Consistent, high performance companies have…

CONSTANT IMPROVEMENT

Growth Research

Consistent, high performance companies have…

CUSTOMER CENTRICITY

Growth Research

Consistent, high performance companies have…

HIGH EMPLOYEE ENGANGEMENT

Growth Research

Biology research

Many species limit their growth to increase their chances of survival, because growth beyond an optimal size can increase the risks of beingeaten by predators.

Growth Research

Biology research (cont.)

Many organisms have a finite amount of energy to allocate to reproduction, growth, maintenance, and survival.

In some species, growth requires so much energy that growth cannot occur continuously but must alternate with periods of no growth.

The “gas

The “gas pedal” approach

A More Realistic View of Growth

Growth is like Mother Nature.

Growth can be good and growth can be bad. It depends.

A More Realistic View of Growth

Growth should not be assumed; rather, it should be a decision made by weighing the pros and cons and the risks of growing and not growing.

Growth requires more people, processes and controls.

A More Realistic View of Growth

An entrepreneur only has so much time every day.

Growth in most cases requires cash outlays ahead of growth income. How much growth can you afford?

Growth can push you into a different andmore competitive space where you will face bigger, more well capitalized players. The game will change.

If not properly managed, growth is destructive.

A Growth Risks Assessment Tool

1. Why should we grow?

2. How will we grow?

3. How much should we grow?

4. How much growth can we afford?

5. Do we have enough people?

A Growth Risks Assessment Tool

6. Do we have the right people?

7. Do we have hiring and training processes?

8. Do we have adequate financial controls?

9. Do we have adequate quality controls?

A Growth Risks Assessment Tool

10. How will growth create risks for…a. Culture?b. Customer service?c. Customer experience?d. Cash flow?e. Supply chain, raw materials and suppliers?f. Distribution and delivery?g. Financial safety net?

A Growth Risks Assessment Tool

11.How will we mitigate those risks?

12.Do we have adequate daily information to monitor these risks?

13.Who will help us monitor, manage, and correct such risks or results?

14.Do we need to pace growth?

Public Company Examples of Growth Challenges

Toyota Jet Blue

Starbucks

Images courtesy fotopedia.com, famouslogos.org and flicker.com/gtarded, respectively

Week 1: Key Points

1. Business growth is like Mother Nature.

2. Use the Growth Risks Toolto weigh the pros and cons of growth and illuminate your risks.

References

Portions of this presentation are adapted from:

-Edward D. Hess, Grow to Greatness: Smart Growth for Entrepreneurial Businesses, (Stanford Business Books: Stanford, 2012).

-Edward D. Hess and Gosia Glinska, “Eyebobs Eyeware, Inc.,” Case Study UVA ENT-0139, University of Virginia Darden School Foundation, Charlottesville, 2009.

All anonymous CEO quotes are from the Darden Private Growth Company Research Project.

CEO Talks

Julie Allinson, Eyebobs