Understand the New Rules to Stay Competitive

growth

The Rules Have Changed

In a world of constant change and disruption, it’s important to stay agile and courageous. Whether you’re leading a small team or a large company, you will need to be bold and to act without fear.

That’s easier said than done.

Amanda Setili is president of strategy consulting firm Setili & Associates, a firm boasting clients ranging from Coca-Cola to Walmart. Her new book, Fearless Growth: The New Rules to Stay Competitive, Foster Innovation, and Dominate Your Marketsis packed with examples and tools to stay ahead of the crowd.

I recently spoke with Amanda about her work and her new book.

 

What is driving the need for fearless growth?

We all know growth is essential to a business’s health, but no matter what industry you’re in, you probably feel stress brought on by new technologies, changing customer behaviors and preferences, and new competitors that threaten your business’s ability to grow. Here are a few examples:

  • The food industry is investing to keep up with sometimes capricious trends in public perception regarding low-fat, low-carbohydrate, non-GMO, gluten-free, organic, alternative sweeteners and grains, and other choices.
  • The consumer products industry must continuously seek to find new and better ways to interact with their customers digitally. They must respond to changing consumer buying behaviors and even to consumers’ concerns about political, social, and environmental issues.
  • The entertainment industry is being upended, with companies that formerly were just conduits for content—like Netflix, Amazon, Google (via its YouTube subsidiary), and AT&T (via the Time Warner merger)—now creating their own original series.
  • The auto industry is changing gears to adapt to the way ride-sharing services, such as Lyft and Uber, are reducing people’s desire to own a car.
  • The banking industry is scrambling to adjust to new modes of consumer-to-consumer payment (such as Venmo) and new forms of lending and credit assessment.
  • The transportation and logistics industry is responding to trends in globalization, automation, and the rise of e-commerce giants like Amazon and Alibaba.
  • Industrial products companies are struggling with decisions about how best to deploy sensors and artificial intelligence to improve their products’ performance and reduce cost.
  • The energy industry is coping with low oil prices, new government regulations, and emotional consumer sentiment on both sides of the fracking, renewable energy, and coal debates.

If your business hasn’t felt the effect of massive market changes yet, it’s likely that you will soon. And if you wait until disruption occurs, it will be too late to respond effectively.

You must grow your business, but most growth initiatives entail risk of one kind or another. I often hear company leaders saying things like, “Our core business is at risk of disruption. We need to branch out into new businesses to grow, but we don’t have all the capabilities we need—they’re not in our DNA,” or, “We’re in unfamiliar terrain and aren’t sure that customer demand will materialize. There are lots of unknowns.”

To pursue growth, leaders and employees must learn to do things they have never done before, and they must grapple with new threats. All of this adds up to the fact that trying to grow a business in today’s turbulent markets is pretty scary—it’s perfectly reasonable and rational for company leaders to be worried. I developed the new rules of fearless growth to help leaders create organizations that have the courage, speed, and agility to succeed, no matter what the future brings.

 

“To pursue growth, leaders must grapple with new threats.” -Amanda Setili

 

Establish Forward Momentum

What can companies do to grow fearlessly, even when their business environment is changing fast?

When leaders encounter risks in their business environment, the natural human response is to hunker down, tighten the controls, and defend the existing business. What is needed, however, is not tightening controls, but the opposite. You need a fearless approach to learning and adapting to market change, and that means giving up a degree of control—to employees, business partners, and customers—in order to gain control. It’s like learning to ride a bike. At first, the bike seems tipsy and unstable, but once you start going, the movement itself creates stability.

Why Presidential Candidates Need a Founder’s Mentality

This is a guest post by Chris Zook. Chris is a partner at Bain & Company and has been co-head of the firm’s Global Strategy practice for 20 years. He specializes in helping companies find new sources of profitable growth. He is the co-author with James Allen of five bestselling books on strategy, including The Founder’s Mentality: How to Overcome the Predictable Crises of Growth.

Do You Have a Founder’s Mentality?

Few countries revere its founders as much as the U.S. does. From the founding fathers who came together to write the Constitution to the founders of our most iconic and enduring companies and institutions, we see founders as role models of leadership and positive vision in a world where great leadership and the positive energy of hope are increasingly needed more than ever.

 

Fact: 1 in 3 winners of the TIME Person of the Year is a founder.

 

In the past 20 years, nearly one in three recipients of the TIME Person of the Year Award has been a founder (including Steve Jobs, who received honorable mention the year he died). Books and movies about founders have captured the public’s imagination, from The Social Network about Mark Zuckerberg and the founding of Facebook to the eagerly anticipated release at the end of this year of The Founder starring Michael Keaton, about McDonald’s founder Ray Kroc. Entrepreneurship is one of the fastest growing categories of school and class enrollment—everyone wants to be a founder. Whereas trust in our largest companies is at an all-time low, smaller, often founder-led companies head the list of institutions in which we collectively have confidence.

ZookChristopher_2015 (2)Great founders also achieve great results. During the ten-year period from 2002 to 2012, nearly 50 percent of the value created in the U.S. stock market was from 15 companies—like Google, Apple, Oracle, and Facebook—that are part of the ecosystem centered at Silicon Valley, the ultimate crucible for founders. Throughout this period, founders were at the helm or still involved in 13 of 15 of these value-creating companies. Moreover, since 1990, across the entire stock market, those companies where the founder remained influential performed more than three times better than those where the founder was nowhere to be found.

 

FACT: Since 1990, companies with influential founders perform 3x better than uninvolved founders.

 

Even more important for the U.S. is the role of these growing companies in job creation—the issue of primary importance for the average American.  Research by the Kauffman Foundation shows that the largest companies have been net destroyers of jobs in America (as have governments). By contrast, the smaller, frequently founder-led companies are the source of nearly all good new jobs. The data on new company formation and their growth across economies shows that our ability as a nation to encourage, nurture, and celebrate founders is central to making the U.S. economy so robust and allowing us to be the privileged nation that we are.  At a time when ensuring the supply of good new jobs is so important, we should heed the role of founders—and especially the lessons we can learn from them about building the enduring institutions that are the foundation stones of a great country.

Of course, the founders of our country and later of its defining businesses and organizations were human beings, often flawed, with personal quirks or dissonant personal beliefs. Yet our research on these enduring institutions and how the founders set them up in the first place shows that the great founders shared three common traits that enabled their accomplishments and were often infused into their organizations. We should note these three elements as we decide the traits we want in America’s next leaders.

 

3 Common Leadership Traits of Great Founders

First, great founders are insurgents, vocal and eloquent about an inspiring mission to improve the world. From Jefferson’s list of the unalienable rights that define why governments exist to Elon Musk’s desire at Tesla to redefine transportation, to the founders of Google’s objective to “organize all of the world’s information,” a purpose stated in the most positive and inspiring tone was always at the center. We live in a world in which only 13 percent of employees say they have any emotional connection to the purpose of the organization where they work. Yet, those who do have that connection to a positive mission of what their company is striving for are three and a half times more likely to offer innovative ideas or go the extra mile to solve a problem on the spot. This is in stark contrast to our current election year, which has been branded “the most negative campaign in history.”

 

Positive, inspiring purpose statements are at the center of great companies.

 

The second trait that great founders of enduring institutions share is an obsession with the details on the ground, and a focus on (and empathy for) the people at the front line. In businesses, founders were often salespeople or product developers first and the best ones maintained that ground-level mentality even as their institutions grew and prospered. Henry Ford referred to the contribution of plain men who never got into history. Arguably, the greatest contribution of Ray Kroc was his development of a franchising model that allowed all of his store managers to become mini-founders in their own right.

 

Enduring institutions have an obsession with the details and focus on the front line people.

Out Execute the Competition

Irv Rothman is the president and chief executive officer of HP Financial Services, a wholly owned subsidiary of Hewlett-Packard Company. Prior to joining HP, Rothman was president and chief executive officer of Compaq Financial Services Corporation where he led it from its founding to growth of over $3.7 billion in total assets.

Irv is the author of Out-Executing the Competition.  What I really admire is that Irv is donating all of the royalties he earns on the sale of the book to Room to Read, an organization dedicated to children’s literacy.

 

The best way to out-execute the other guy is to know your customer’s business as well as you know your own. -Irv Rothman

 

Attracting the Right Talent

Much of success in business is about finding and cultivating the right talent.  How did you attract and retain the talent needed to accomplish your goals?

Attracting and retaining the right people starts with a leadership commitment to first develop high performers in-house.  And this has to be more than an annual “talent management” exercise.  It’s an activity that leadership must consistently demonstrate is important by developing people and promoting from within.  This sends key messages to an organization:

1)   Leadership can be trusted to do as they say they will.

2)   Career opportunities exist…. No need to look elsewhere.

3)   Leadership recognizes and acknowledges that outside hires are a 50/50 proposition.

In short, provide an atmosphere where people can learn and achieve advancement based on merit.  Not only will the good people stick around, their hearts will be in it.

 

Developing a Culture of Execution

 

Out-Executing the Competition

Your book title is all about execution.  How do you develop a culture of execution?

A culture of execution starts with devotion to the customer.  Since it is theoretically easier to keep a customer than to find a new one, all messaging and reward systems need to be packaged around a “customer for life” philosophy.  And a pay-for-performance compensation system is a must.  Moreover, it can’t be black box; people need to be clear as to what rewards can be expected from results and behaviors.  Once you’ve got all that organized, creating an environment where people have freedom to act on behalf of the customer is crucial. You can’t have a circumstance where people are bound by the linear strictures of a traditional command and control organization. It not only frustrates your employees, it also makes for dissatisfaction on the part of the people on the other end of the phone.