Six Foolproof Ways to Make Sure Your Company Thrives
Fast growth companies continue to hire even as our economy struggles to recover. What makes these companies tick? How do they continue to prosper and grow in these economic times? Here are six timeless strategies for doing just that, courtesy of Verne Harnish, creator of MIT's Birthing of Giants program, and founder of Gazelles, Inc. Whether you run a small or midsize business or manage a department in a larger company, these strategies will work for you:
1. Get an Edge - 10 to 30 times advantage over your competition.
2. Own a Phrase - Own a word or two in the minds of your market.
3. Hyperfocus - align around a single measureable priority.
4. Control Your Cash - fuel growth without outside capital.
5. Write! - Flood the digital space aligning with the phrase you own.
6. Pulse Faster - Fast moving companies huddle daily.
I will cover each strategy in detail during this series of six articles. The first one I want to discuss was John D. Rockefeller's key strategy (Mastering the Rockefeller Habits, by Verne Harnish). And that strategy is Get an Edge - Your X Factor.
Get an Edge - Your X Factor
To build your business to a dominating position, discover an edge that puts your company miles ahead of its competitors. Find an underlying advantage of 10 to 30 times over the competition to dominate your industry (and keep it as quiet as possible so that your competitors don't find out). This is key advice I give to Entrepreneurs and leadership teams who seek help. In fact, failing to establish such an edge can put your business in peril. You don't want it to be easy for others to outpace you.
How do you establish a competitive position that keeps your business exponentially ahead of the pack yet still allows you to gain ground? The key: look at your industry's biggest cost and time constraints and challenge the conventional thinking in those areas of business. What is the bottleneck, shortage, or chokepoint in your industry and how can you control it?
Here are some examples:
First, early in the oil business Rockefeller determined that the real shortage in the industry was not oil or refineries, but oak barrels for transporting the oil, and the iron rings used to construct the barrels. He acquired the firm that made iron rings. And he continued to focus on the transportation chokepoint to get an edge.
Now becoming more contemporary, Barrett Ersek, founder of Philadelphia-based Happy Lawn, innovated a way to close sales in minutes instead of weeks using a proprietary mapping and pricing process.
The Container Store executives discovered their own X factor. The Dallas-based chain, which sells items to help people organize their homes and offices, gives its employees ten times more training than the typical retailer in order to stay ahead of competitors across the country. It currently offers new full-time salespeople a whopping 235 hours of preparation, compared with the 23 hours typical in the retail industry.
Renting videos was a frustrating affair before Blockbuster Video turned the industry upside down. Forced to pay movie studios about $65 for each video, many mom-and-pop businesses struggled to eke out a living and could barely afford to keep hit items in stock. Then, in 1997, CEO John Antioco cut a groundbreaking deal with Hollywood studios such as Disney in which Blockbuster would buy thousands of copies of popular films for $6 apiece, plus a 40% share of rental fees. Bingo. Blockbuster had found its advantage-up-front costs that were more than ten times lower than those of its smaller rivals. With the money it saved, the Dallas-based company expanded its selection dramatically. But what was an advantage then isn't one today. Services like Netflix are renting DVDs through the mail and cable stations are offering video on demand. Your X Factor can and does change over time.
Manager turnover was killing many restaurants in 1987, when Chris Sullivan and Robert Basham formed the Aussie-themed Outback Steakhouse. Wisely noting that many big chains spent millions of dollars to recruit and train new managers each year, they realized that if they could retain theirs for more than the typical six months or so, they'd have an edge. They initiated a breakthrough compensation plan. They asked key managers to sign five-year contracts under which they would invest $25,000 in the restaurant they were going to manage in exchange for 10% of the store's cash flow and a base salary. The deal had the potential to turn $45,000- a-year employees into millionaires, and ultimately it worked. Today about 95% of managers stay with Outback for at least five years-giving the company a 10X advantage over its rivals.
Multiplying Your X Factor
Of course, even huge, exponential advantages can expire. So in the event a new technology or upstart company suddenly changes your marketplace, you should never stop looking for ways to get an edge on your competitors. You don't want to be caught unprepared.
There are unlimited ways to find an edge. The key is to pull yourself away from day-to-day operations long enough to think more broadly about your business. And whether you find your strength in speed, repeat sales, number of acquisitions, or any other avenue, by maximizing your X factor, you can catapult your company into first place.
Stay tuned for our next installment of "Six Foolproof Ways to Make Sure Your Company Thrives" and Strategy #2: Own a Phrase.
Contact David Paul Carter to learn more about how to increase the value of your fast growth firm.
Concept based upon Verne Harnish Fortune Article, Best Advice for Growing Your Business, 22 March 2010.