Mastering the physics of running a business
CEOs must have fallback positions for the time when growth stagnates
It is said that 95 per cent of businesses hit a growth plateau in any given five years. Why does this happen?
Most CEOs get resigned to stagnating growth and settle for incremental improvement, feeling frustrated and stuck.
Most business owners are smart and capable and yet 95 per cent of companies are stuck.
Management books from top institutions point to a common set of things CEOs need to do which includes — Work on people productivity; Focus on competitive advantage; Concentrate on serving customers and Focus on customer satisfaction.
Almost every CEO is doing this already. If these steps helped companies grow and scale up, then all organisations be successful. There is something missing here — The distinction between business journalism and business physics.
Journalism describes phenomena: why are Google, Apple, Amazon successful? Journalists research, interview and tabulate findings and come up with insights, develop models and publish articles, books and white papers.
Management books are based on best practices of large organisations. CEOs take those best practices and implement them hoping to succeed.
It’s like saying “I want to be as strong as an elephant. So let me drink elephant milk ...”. Imagine the indigestion.
CEOs are on the wrong diet when they consume business journalism.
The only subject designed to make things work for them is business physics. Journalism, history and philosophy only explain how things work.
Business has become complicated. Many new theories keep coming at a daunting pace. New strategies and new approaches to everything cause so much confusion.
Business need not be this complex. If you apply simple laws of business physics, chances are, your business will accelerate. Three fundamental principles will help us get out of the plateau effect.
Principle 1
Your customers are trying to get a job done for which they buy your product or service. They are looking for specific outcomes. Some of these outcomes are underserved by your competitors.
Create simple innovations to solve these starved outcomes and introduce them to your target audience. Keep improving these innovations until you see a positive impact on sales and cash flows.
Principle 2
There is always a weakest link in a chain which governs the chain’s strength. In your business, there is always a bottleneck which governs sales, cash and profits. As you de-bottleneck each area, business results will start to improve.
Principle 3
You need a set of mature assets to produce results. A computer is a plug-and-play asset, whereas an interior designer’s skills mature over time. Make an inventory of the top 30 pivotal assets and create a 90day asset improvement plan. Perhaps your lead generation channels needs to improve or your execution process needs redesigning.
These three principles, when applied regularly, will help accelerate growth.
And the best part is you don’t need to struggle with implementing complicated bestpractices from large organisations. Or drink the dreadful elephant milk.