The Agile Scaleup

Critical Review

"...keeping you great" Ten Minutes with the Growth Guy

HEADLINES:
 
"Breakthrough Company" Review -- with all the hype and promise, I was expecting to be blown away by Keith McFarland's book -- maybe I'm too close to the subject -- but I could hardly keep focused -- it was so full of platitudes and generalities with very little real insight or specifics -- and in many places his advice, because of the lack of specifics, is dangerous. However, I did find three good pages. See my complete review along with a list of the three pages I recommend under DETAILS below -- and I would love to hear from you if you've read the book -- again, maybe I'm too close to the subject and missed something.
 
Worth Reading -- Quiznos Turnaround -- FORTUNE had a great article this week on how Greg Brenneman, who turned around Continental Airlines, seems to have turned around Quiznos. In every case, a turnaround involves just a handful of key strategic decisions. For Quiznos, Brenneman slashed discounting, simplified the menu from 29 to 21 items, created a $2 Sammie to compete on price with Subway, and developed a web-based ordering system. It's important to examine Brenneman's "playbook" as you look at your own firm.

Stop Doing -- a key to Brenneman's success is analyzing profitability at a granular level (by product, by route, by store, etc) and then stopping the unprofitable stuff!! Duh!! At Continental he started by eliminating inefficient routes. At Quiznos, he eliminated 8 menu items that were the least profitable (this also reduced complexity). Plants need pruning. So do our companies. What are you doing that is unprofitable? Do you even know? When you find out -- prune it NOW!! -- especially in volatile times. Here's an excellent piece on his turnaround of Continental.

Self-funding Bonuses -- Brenneman also did something very simple at Continental. Focusing on the basics, he notes "In one way it was simple: we had to get people to their destinations on time -- with their underwear -- and serve up good food when passengers wanted it. Plus we had to make sure that employees liked coming into work." Therefore the incentive was simple: "We were at the bottom of the on-line list, so let's take the money we save on putting passengers up in hotels, or on other flights, and return it to the workers," he said. This is what Jack Stack means by picking a Critical Number (some measurable target) that will generate real dollars and then use some of the gain to fund rewards.

Bad Profits at eBay -- Meg Whitman, CEO of eBay announced her departure. And her replacement, John Donahoe, announced in the FIRST HOUR that he was reducing upfront fees that have alienated users and driven them to Google and Amazon! Today's NY Times piece provided the best management decision overview.

Listen to Customers -- and this excerpt from FORTUNE: A prominent eBay members network - that the San Jose-based company closely monitors - says that its members listings dropped 14% in the fourth quarter from the previous year. "eBay's marketplace isn't set up to scale well for sellers. Whether you list one item or one million, it's a flat price structure," says Jonathan Garriss, the executive director of the Professional eBay Sellers Alliance. "As sellers build bigger businesses, it makes sense to have their own platform and participate in shopping engines like Google or sell on the Amazon platform."

Finding Opportunity in Economic Turmoil -- FORTUNE Small Business magazine is doing a story and looking for:

• Small businesses and owners who have seen opportunity in the economic turmoil. These could be companies that are seizing the moment to grab market share from weak competitors of all sizes; companies that are buying and leasing capital equipment for rock bottom prices; even companies that are hiring highly skilled workers who are newly available and so on.
• Small businesses and owners who saw the chill coming and prepared themselves, by building cash reserves, for example, or holding down costs.

Contact Malika Zouhali-Worrall at [email protected].

FORTUNE 100 Best Places to Work list out this week -- Google #1, Container Store #20. Top 10 includes Quicken Loans, Wegmans, Edward Jones, Genentech, Cisco, Starbucks, Qualcomm, Goldman Sachs, and Methodist Hospital Systems.

The Private Company Index (PCI) hit an all-time high (so much for a cross-industry recession, right?) with a 1.7 % increase in December and an overall 33% gain in 2007. And the five companies honored with the Growth Company Award 4th quarter 2007 saw an average of 56.3% higher revenue than their own Q4 2006 figures (sense of pride: four of the five are Gazelles clients and the top two participated in our Rockefeller Habits 2 program last week -- congrats).
   
The Top Five Growth List:
Appletree Answering Services -- Wilmington, DE -- Live answering services and call center serving the business  sector.
    High Performance Technologies -- Reston, VA - performance-based architecture service provider for the information technology marketplace.
Indigenous Designs -- Santa Rosa, CA -- Handmade fashions created from organic materials using fair trade practices.
Nationlink Wireless  -- Franklin, TN --  Wireless solutions and software for both businesses and individuals.
Ticketcity.com -- Austin, TX -- Sports, entertainment and major event ticket broker.

DETAILS:

"The Breakthrough Company" Review

First, let me list the best three pages:

p. 44 -- bottom of the page McFarland tells the story how Roger Staubach handled a dispute over commissions that two brokers brought to him. After listening to the two brokers he announced he was giving the entire commission to charity and told the brokers next time to "work it out between yourselves." This became a legend that prevented any further commission disputes throughout the company! I'm going to use this with my children as well.

p. 180 -- McFarland makes an excellent point in involving more people in the strategic planning process in order to create broader buy-in and garner a more diverse set of opinions (research shows that a true dialogue requires 40 -- 60 people). He suggests involving "board members, select managers, and members of the sales team, up to twenty-five to sixty people in all, when setting the firm's direction." We're going to emphasize this more with those using the One-Page Strategic Plan.

p. 197 -- McFarland quotes Scott Cook, founder of Intuit, "Anyone can run a company during the tough times -- it's the good times that actually challenge the leaders." As McFarland notes "what great leaders like Cook understand is that rather than coast during the times that the business is flying high, the company should continue asking hard questions about where it is going, digging more aggressively for ways to tap its latent potential."

Over $250 million -- I did enjoy reading about the nine breakthrough firms McFarland chose to highlight: ADTRAN, Chico's FAS, Express Personnel, Fastenal, Intuit, Paychex, Polaris, SAS, and The Staubach Company, although I personally knew most of their stories through reading the popular press and had already received, in more depth than McFarland provides, the keys to their success. FORTUNE magazine, Fast Company, and Inc. have covered many of these companies over the years and I find their writers much more adept at capturing the nuggets of brilliance and depth of ideas than McFarland. The bigger issue -- McFarland shares that only .10% of firms make it to $250 million. What the world needs is the book on how to get from $1 million to $10 million which is different than what it takes to go from $10 million to $50 million, which is different than what it takes to go from $50 million to $350 million (this is the better cut-off point). None of the critical nuances in making these multiple leaps are captured in McFarland's work.

Made Up Terminology -- what the world DOESN'T need are more made-up business terms. It's driving me crazy how everyone wants to make up labels. And some of his labels are bad -- like calling a company's support system (board of directors, advisors, consultants, mentors, CEO groups, etc) "scaffolding" which he defines as "temporary structures outside the company..." My key advisor of 25 years, Arthur Lipper, has been more permanent than any of my employees, for instance, as has been my involvement in the Entrepreneurs' Organization.

Contradicts Jim Collins -- along these same lines, he contradicts Jim Collins in several places without any relevant proof i.e. he attacks the notion of a company having core values and instead, chooses to describe the importance of a company having "character" -- he's simply splitting hairs and playing to the fact that many firms, admittedly, have botched the whole core value thing. However, it's not a reason to discard the entire notion of core values and replace it with something that will likely be botched even worse since there's no depth to McFarland's analysis. And his relating of charisma and character, again, is just outright wrong -- they don't even come from the same etymology.

Totally Misses the Dynamics of Growing a Business -- much of his advice, since he doesn't provide boundaries or specifics, is downright dangerous. For instance, he drags out the age old platitude of companies having too many layers. It depends on where you are in your growth between $1 million and $250 million. For smaller firms, the issue is often not enough layers. And in India, many of the growth firms, obviously misapplying the notion of having "flat organizations" have spans of control of 15:1 or greater (a problem giant Dell ran into as well). My analysis and research found a direct correlation between high turnover and overly flat organizations. As another example, McFarland fails to give us the points at which firms added a board or built a formal educational department or "upped the ante" -- was it when they were $10 million, $50 million, or after they went public? And was it before or after they figured out their "hedgehog" (hey, I wasn't happy when Collins made up this term as well). Collins is adamant, and I agree, that you must figure out your focus BEFORE doing many of things McFarland recommends. This critical piece of knowledge is neither acknowledged nor disputed.

Something is Not Right -- OK, I'm going on public record as challenging McFarland's claims to have followed an approach anywhere near the rigor of Jim Collins. His book is really full of his own opinions and observations working with 50 plus clients over the five years he's been a consultant and selectively finding pieces within nine excellent firms that fit his experience. Nothing wrong with this -- I've drawn much of my ideas from the thousands of growth firms we've served over the decades. But I don't wrap my claims in the veil of Jim Collins quality research.

Conclusion -- his handful of suggestions aren't necessarily wrong -- there's just no depth into how, for instance, Intuit systematically gathers customer data (something which has been reported on in depth and is worthy of reporting) -- these are the details companies need. And in many cases, his illumination of a critical point is considerably less clear than what is already currently known i.e. Geoffrey Moore's work around "Core vs. Context" and how companies must navigate between customer intimacy, product leadership, and operational efficiency is more succinct and useful than McFarland's "Bermuda Triangle" discussion. Last, there were so many places where an obvious researcher would have not thrown out "pop" conclusions without taking the most basic of steps to give the reader some real insight and validation.

Breakthrough Companies

"...keeping you great" Ten Minutes with the Growth Guy

HEADLINES:

The Breakthrough Company: How Everyday Companies Become Extraordinary Performers -- this week - Jan 15 - Keith McFarland's highly touted book was released, based on a five-year study that resulted in a focus on nine companies that broke through the $250 million barrier. I have the book in hand and plan to read it over the weekend -- I'll come back to you with my feedback. Stay tuned.

Vannevar Bush's "As We May Think" -- on the heels of Amazon's new wireless reading device, Kindle, and Apple's continued release this week of well designed "memex's" I encourage you to take five minutes and read (or re-read) one of the most classic essays ever written about the future of technology published in The Atlantic Monthly July 1945. I'm told that many of the great technology entrepreneurs of today gained their inspiration from this article. Vannevar Bush was the director of the US Office of Scientific Research and Development for the WWII effort and was both before and after the war president of the Carnegie Institute and Dean of Engineering at MIT. In this article he discusses what goals scientists should pursue now that the war is over.
 
Fleck.com  allows you to interact with web pages like you would the pages of a magazine -- think electronic Post-It Notes for the web™. Boris Veldhuijzen is a well-known Dutch serial internet entrepreneur and co-founder of Fleck.com. He's the one who turned me on to the Vannevar Bush article during a recent dinner in Amsterdam. It's exciting how a 63 year old article can still provide inspiration to today's entrepreneurs. Again, scan through Bush's article and see what it inspires you to do.
 
As We May Watch -- David Rich, founder of ICC/Decision Services, a leading mystery shopper and customer experience management firm, is using his recently produced video hosted on YouTube to visually convey the power of his service and "who his shoppers are" to retailers, something he found was difficult to do via just the written word. This video cost David $5000, but he finds it engages his clients better than the written word, who normally wouldn't take the time to wade through his pages of description anyway. Here's a link -- scroll down to see the video.
 
Seeing is Believing -- Brad Skelton, founder and CEO of Brisbane-based ST Group, one of the world's largest movers of massive equipment, also produced a video hosted on YouTube showing how his firm moves one segment of the world's largest tunneling machine using a 14 line trailer and three prime movers in tandem. Here's the link  -- it's just amazing to see how this is done.

Multi-family apartment industry -- quick request -- Richard Roos, VP of Finance and Operations of Ontario-based Venterra Realty, wanted to connect to with other multi-family apartment firms who are further down the path in implementing the Rockefeller Habits -- you can reach Richard at [email protected]
 
Quote of the Week -- Brian Price, President of Rochester, MN-based Rockwood Retaining Walls, noted in a recent conversation about the importance of executive and employee education "I don't want to be the smartest guy in the room!" It's all about surrounding yourself with people smarter than you and then keeping them smart!

Hendricks Dies

"...keeping you great" Ten Minutes with the Growth Guy

HEADLINES: (warning -- big company stories today -- plus Vitamin C IV cancer update)

Ken Hendricks Passes Away -- the world lost a great entrepreneur the end of December. The co-founder of Beloit, WI-based ABC Supply with his wife Diane, they built this roofing, siding, and window distribution company into one of the largest private firms in the U.S. in 25 years with revenues of $3 billion last year. I first heard Ken speak at Jack Stack's "Gathering of Games" many years ago and I marveled at his fanatical focus on customers; his extensive training and empowerment of employees; and his embracing of financial literacy for all his employees. Anyone in a basic trades or distribution business should study and benchmark Ken's company -- just visit one of his local stores and talk to the employees. Here's a link to some latest news -- take five minutes and read the "Ken Hendricks Profile" -- it will inspire you! Ironically, he died falling from the roof of a construction project at his home. He was 66 years old. Tragic.
 
Speaking of Customer Service -- you have to take 2 minutes and read the last couple paragraphs of Jeff Jarvis's blog   (which became a BusinessWeek article) on what Mark Jarvis and Michael Dell are now doing and thinking re: blogs, wikis, and customer feedback. Here's an excerpt -- "Mark Jarvis, Dell's new chief marketing officer, acknowledges that customers are now influenced by peers, not marketers (emphasis mine): 'The challenge is how you create a network of advocates for your business.... By listening to our customers, that is actually the most perfect form of marketing you could have.'"
 
And Michael Dell's Thoughts? -- Jeff Jarvis continues "He predicts that customer relationships will 'continue to be more intimate' and response times faster. He even spoke of 'cocreation of products and services,' a radical notion from a big company. 'And I'm sure there's a lot of things that I can't even imagine but our customers can imagine, Dell says, sounding darned near like a blogger himself. 'A company this size is not going to be about a couple of people coming up with ideas. It's going to be about millions of people and harnessing the power of those ideas.' Once you can hear them." What are you doing to engage customers in coming up with ideas!?
 
I Need Your Suggestions -- if you could hear anyone speak at our fall Growth Summit, who would it be?  Have you read an amazing book? Email me at [email protected] or simply reply to this insight.
 
Whole Foods Gives Away Groceries When Computer System Goes Down -- Mike Jagger, CEO of Provident Security  alerted me to this neat story over the holidays of amazing customer service. The West Hartford store's cash registers went on the blink during a snowstorm so the store manager made a quick decision to just let the customers leave with their groceries without checking out until the systems could be fixed -- all in all, it cost them about $4000 in food and garnered them full page stories that cost more than that! And remember, customers are now influenced by peers, not marketers!!
 
More IV Vitamin C Cancer Research -- Ben Hoffman, CEO of CityHunt, which creates corporate scavenger hunts to increase the "experience" factor of events, knows of my advocacy of Vitamin C IVs (my entire extended family and many of my staff now get them -- knock on wood, no illness over the holidays, which is when I would normally "let down"). He sent me this link to the latest university to get the go ahead from the FDA to move forward with clinical trials -- Thomas Jefferson University, over the next ten weeks, will give high-dose intravenous Vitamin C to 20 non-Hodgkin's lymphoma patients who have failed standard treatments and have a life expectancy of less than a year. And Dr. Jeanne Driscoll, University of Kansas, will release shortly her results from Vitamin C IVs in the treatment of late stage ovarian cancer. In essence, Vitamin C given intravenously, acts like chemo, except it only kills cancer cells, not all cells. And it does it through a simple mechanism -- it creates hydrogen peroxide at the site of the cancer cell, releasing electrons that kill the cell! How simple. But can drug companies make money off something so simple -- that's the barrier.

January 22, Nashville; February 5 Indianapolis -- I'm heading to both cities to lead one-day Rockefeller Habits workshops. Open to the public, Nashville is being hosted by the local EO chapter (Clay Blevins, CEO of Comfort Supply, is my host).  Indianapolis is being hosted by Ray Hilbert, founder of Truth at Work, a Christian Leadership organization.  Information and registration for Nashville; information and registration  for Indianapolis.

Surviving Hospitals

"...keeping you great" Ten Minutes with the Growth Guy
 
HEADLINES: (Theme: Power of Checklists)

Surviving Intensive Care -- if you or a loved one might EVER end up in an I.C.U. please take five minutes and read this article -- and take it to your local hospital administrator and ask them "are your teams using these simple checklists?" Save a life NOW in your community -- it might be yours. Thanks to our Indian partner, Raghoo Potinii, CEO of Knowledge Capital, for pointing out this article highlighting the importance of top performers using checklists.

Quarterly Infection Rates Reduced to ZERO! -- the biggest risk of going to a hospital is getting an infection, particularly from the lines placed in your body. Disturbed by the thousands of needless deaths, John Hopkins critical-care specialist, Peter Pronovost, put together a simple five step CHECKLIST in 2001 for installing lines in the body. Almost immediately, infection rates plummeted at John Hopkins. However, he couldn't get hospitals interested, primarily because physicians felt they didn't need checklists to do their job (sound familiar?).

Save $175 Million -- Dr. Pronovost finally gets the state of Michigan to try his simple checklists in a handful of the worst hospitals in the country. Results? Notes the article "In December, 2006, the Keystone Initiative published its findings in a landmark article in The New England Journal of Medicine. Within the first three months of the project, the infection rate in Michigan's I.C.U.s decreased by sixty-six percent. The typical I.C.U.—including the ones at Sinai-Grace Hospital—cut its quarterly infection rate to zero. Michigan's infection rates fell so low that its average I.C.U. outperformed ninety percent of I.C.U.s nationwide. In the Keystone Initiative's first eighteen months, the hospitals saved an estimated hundred and seventy-five million dollars in costs and more than fifteen hundred lives. The successes have been sustained for almost four years—all because of a stupid little checklist."

Inspired by the B-17 Bomber -- Boeing almost went bankrupt when one of their top pilots crashed a newly designed bomber right in front of top military brass. Realizing their new generation of aircraft was too complicated for even the best pilots, Boeing created a simple checklist and proceeded to sell over 13,000 planes that flew over 1.8 million miles without a crash!
 
The Best Utilize Checklists -- many of the budget-killing mistakes that risk customer capital can be dramatically reduced or eliminated by putting together simple checklists and getting everyone to follow them. Where could you dramatically reduce mistakes and/or increase quality using a checklist?
 
Rockefeller Habits Checklist -- once/quarter I ask/beg executive teams to review the Rockefeller Habits checklist -- a set of habits that help drive execution and keep your team aligned. Pick two items from the checklist and focus on implementing the specific habits over of the next 90 days. Alan Rudy, CEO of IntoGreat, describes how he uses the checklist in this 1:53 minute video clip off the Rockefeller Habits instructional DVD series.