Are you worried that, while your business may appear to be doing well, there may be trouble looming somewhere?
You are not alone.
This is a concern for all business owners. When a business operating system is not fully functioning, you can assume your business is losing potential growth, profit, and competitive advantage.
This is a scary proposition, but one that you do not need to accept. To find and address the issues that slow the acceleration of your business growth and profitability, there is no better place to start than by looking at your company’s top tier.
Examine Your Company’s Leadership
Leadership is essential to the success of any business. Show me a great leader, and I will bet that a strong team, operation, and business are following close behind. If you are in a leadership position, it is crucial to understand the lens you are looking through when making decisions. Your mindset and its corresponding actions will often dictate just how organized and successful your business can be. We start our head-to-toe evaluation of your business with the man or woman upfront.
An important question you need to ask is: “What kind of CEO/leader am I?” The next question is: “How balanced is my strategic decision-making?” The answers to these questions will help you determine which of the four most common lenses drive your organization’s strategies:
The most effective leader uses a combination of all four lenses because each plays an important role in leadership. Unfortunately, most leaders lack balance and overemphasize one lens.
Usually, a leader is either very product/service-oriented or growth-oriented, but not both. Being overweight in one lens leads to tremendous waste. Rather than fixing the one overweight area, the single-lens leader unconsciously damages the others.
For example, if you are a product- or service-oriented leader, your sales and marketing function is probably not producing sufficiently. In these cases, it is common to find underinvestment or cost-cutting in sales and marketing while investing heavily in improving products and services. This is a justified move because your existing customers love you! But the problem is that extra love does not result in enough growth. In many cases, the additional cost of delivering added services and product features results in waste. The market will not accept the pricing needed to justify the added features and benefits. Customers will be happy to take what you are offering for free but are unwilling to pay for it. Some leaders learn about waste in these areas but lack the discipline to address it. I’ll explain this further as I describe the different leadership styles. Today I want to discuss the first lens, the growth-oriented leader.
The Growth-Oriented Leader
Growth-oriented leaders focus most of their organization’s energy on sales and marketing activities. In these organizations, it is common to hear, “More sales will make all your problems go away.” This is true—to a degree.
Let’s face it; sales fund everything. Without sales, you burn cash, and the more sales you generate, the more money you can spend. Such leaders are essential. They find it unacceptable not to grow rapidly. They expect operations to solve whatever it needs to support extraordinary growth. They do not believe in waiting to grow. Growth is their mandate. They see opportunities, seize them, and force operations to catch up.
Keeping up with growth-oriented leaders is like trying to catch lightning bolts. It is incredible to look at different companies within the same industry and recognize these people at work. Their companies grow so much faster than the competition. People who are not growing their companies will justify that lack by claiming to have better products and services—implying that those fast-growing companies are somehow tainted.
Amazon’s Jeff Bezos is a clear example of a growth-oriented leader. Founded in 1994, his company is one of the world’s largest, generating $233 billion in revenue, a 31 percent increase over the prior year.1 Think of how many smaller companies (tiny in comparison) will develop excuses as to why they cannot grow 10 percent. Your business’s identity may be sales-oriented; the founder and CEO may have grown up in sales. Some say that your company can sell ice to Eskimos. That is not enough to be successful in business.
In Bezos’s case, building sales volume was only one of the ingredients to his success. It’s true; having an aggressive growth orientation has made him one of the world’s wealthiest people and Amazon one of the world’s most valuable companies. However, most CEOs’ growth strategies are not as well thought out. That aggressive growth orientation was essential to his business model. His strategy required investing in a costly technology—a sales and distribution platform. He realized that this would be his core differentiator. Once it was built, he would have a competitive advantage. Winning would require sales volume in the hundreds of billions. He and his investors took on what appeared to be a significant risk, and it paid off. Without rapidly building sales volume, Amazon’s model would have failed.
Many leaders have similar aspirations to Bezos but fail. They have a growth plan but no differentiated business model. Twitter is one such company. There is a heavy emphasis on increasing user volume at Twitter, but they failed to think through how their differentiated business model could produce both cash and value to owners. In most industries, the game Bezos played is dangerous and foolish. You need more balance in the equation; you need to understand your business model genuinely, and you need to consider focus. Even though it appears Bezos took a lot of risks, he did focus quite a bit more than people realize and kept his model simple from a macro perspective.
First, he built his business model around the book segment. He perfected increasing visitors interested in buying books, attracting third-party sellers to sell books, and expanded and improved distribution. As there were more sellers, this lowered prices, increasing customer visits, and attracting more third-party sellers. After Bezos completed his platform and distribution model around one product line, he began to extend product offerings, increasing customer visits. This attracted more third-party sellers, and he continued to build out distribution capabilities.
Today, we can purchase, and Amazon can deliver almost anything on the same day. In the end, this model grew company revenues at an almost exponential rate with seemingly minimal effort. As the revenue momentum grew, those expensive platform and distribution costs were no longer growing at high speeds and now were being spread over a much larger revenue base. A key to Amazon’s success is to reduce fixed costs as a percentage of revenue. With revenue in the hundreds of billions, Amazon is profitable and the leader in the market. However, growth-oriented leaders often fail to consider the following factors:
Many growth-oriented CEOs are prone to sell anything and everything. This causes a nightmare for their service operations and makes it difficult for marketing to differentiate them from their competitors. It is difficult for a growth-oriented leader to understand the concept of “bad revenue.” They think catering to each additional need is “simple,” that the customer is always right, and they are always wired to say yes. Making promises that your organization cannot deliver will result in a client revolving door—old clients going out as fast as new ones are coming in.
Next time, I will introduce the other three leadership styles and what they entail. In the meantime, if you would like to learn how you can find and capture at least $1 million in the next 12 months, pick up a copy of my book, The Leader Launchpad, and learn more. Reading my book may be the most profitable investment you have ever made in your business. Or, if you feel you’re ready to commit to making real change, sign up for a FREE 30-MINUTE NO OBLIGATION CONSULTATION. We’ll talk, I’ll ask a few questions, and you’ll gain value from our time. You want to keep rocketing into 2021, and I want to help you do it.