“We are growing at 5-10% per year and have been doing so for the last three years. We are all making a living, but I am not sure if we are building value. I’m not getting any younger. What do I do?” he asked.
Incremental Growth Trap
This is a company I invested in a few years ago. They are profitable, stable and have brand recognition in their market.
Our board meetings seem to be centered on how to drive those extra three new leads a month.
Or how to reduce the number of support calls by improving the U.I.
Or figuring out how to have the sales guy close one more deal a quarter.
Incremental solutions continue to produce incremental results.
It hit me when the CEO was talking. All our thinking and suggestions are focused on being even more efficient. This happens to all businesses which grow and become profitable. The strategies become all about process and efficiency and not about innovation. This also happens in our lives, but that’s another article.
When Innovation Happens
We innovate when there is no downside. We increase efficiency when we have something to lose.
I asked him, “What can you do to increase sales by 25% this year?”
“Nothing,” he replied.
That was the right answer considering the way he was thinking. In other words, his incremental efficiency mindset is a trap. It won’t allow him to think in big jumps in sales.
To get to the 25% number, he would have to innovate. But how does he innovate? Can he even begin to think that way? Can he get out of “the hole” he and the entire company is stuck in?
I said, “You know your market better than your competitors. You meet with them as the CEO at the trade shows, on sales trips and over the phone. They see you as a supplier who solves one of the problems in their business. You see yourself as they see you. They are stuck, and so are you.”
Secret of Tom’s Success
Years ago I was talking to a friend who ran a vertical market software business here in Atlanta. In our conversation, he told me about a friend named Tom who made a fortune in Silicon Valley.
He was a CEO turnaround guy. My friend obviously had great respect for Tom as he could not stop talking about him.
I asked, “What is his secret of success?”
He said, “I don’t know. He gets called in by the VCs in California to take over companies which are going nowhere. The VCs don’t know how to get their money out of the deals because potential buyers aren’t interested in the companies. Then the VC brings Tom in and, within a couple of years, they exit.”
“Just like that?” I asked.
“Just like that,” he answered.
“I want to talk to your friend Tom,” I said.
Customer Satisfaction and Brand Recognition
I called Tom. He was gracious to take my call. I asked him, “How do you revive these companies you take over for the VCs?”
He said, “It’s a pretty easy formula. I make sure the company has brand recognition in their marketplace. I also make sure the customers are satisfied with the product and services. If I have these two things, then I know I can be successful.”
“What do you do?” I asked.
“I visit with the customers and ask them what they need. Then I build it,” he said.
“I find no one is digging deeper to find the customer’s need. The market has been served for so long that no one is asking this question anymore. Everyone from customers to vendors assumes the way they’ve been doing business is the way business is done,” he said.
Tom approached these “stale companies” with an innovator’s mindset. He found himself competing with CEOs and founders who had adopted an efficiency mindset. He killed them. Shocked them. Eventually outpaced them and left them in the dust.
Uncovering Those Hidden Needs
How do you increase sales by 25% this year? You ask your customers what they need and then build it.
In most cases, you can not ask this question directly. You have to use your market experience and in-depth relationships to uncover the needs. Something is bugging your customer.
They just assume there is nothing they or anyone else can do about it. So they never bring it up. Your job is to get them talking about it so you can build something new that they will buy.
Innovate. Get unstuck. Risk the business. Be curious. Build value.
Think like the entrepreneur you are!
Also published on Medium.