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Idealog—in the ideas business

Growing and scaling your business - without the pain

Innovation is risky and expensive. To be able to offer the kind of returns that attract investment, you’ll need to think big. You have to plan for scale from the word go, because ‘organic growth’ is too slow, too haphazard, and too susceptible to chance.

Fundamental to the success of a business based on investment in innovation is the ability to consistently grow your company, and manage that growth to maximise income. Growth doesn’t necessarily mean more staff, more offices, more shops or more production facilities, but these might be required for you to expand your bottom line.

If you get this ball rolling, it gathers momentum. The bigger the business gets, the more it can invest in continued product innovation, decent staff, marketing and expert support, all of which enhance the chances of it getting larger still.

But it’s important not to create a monster. As Mike Atkinson at Hayes Knight says, “Growth is good, but uncontrolled growth is what can tip businesses over when they can’t finance it.”

The Hyperfactory co-founder Derek Handley watched very closely as his firm grew from nothing to a $10 million-a-year enterprise. “At the beginning you are spinning the wheels, spending your money, telling people why what you are doing is good for them,” he says. “They are sceptical, they don’t really want to hear about it. So you’re just trying to keep your head above water.

“The next step is when people have actually figured out that what you have is interesting and they want to invest in it. Normally that comes through channel partners or people who manage budgets on behalf of other people. In the digital industry it might be resellers, advertising agencies or technology agencies. These become your key customers, but they are really intermediaries.

“This is the dabbling phase. They start spending $10,000, $50,000, then $100,000, $200,000. That’s when you’re really growing fast. Then it gets to a point when they go, ‘This is actually a big business, why don’t we do it?’ and the intermediaries start eating into your business.

“All our clients quickly became our competitors. Then we had to cut them out of the equation and go direct. The intermediaries were either doing a bad job and making us look bad, or doing a good job and keeping us away. Now we go direct to our clients, so we control the brand.”

These things don’t tend to progress on a smooth curve, especially now that the world is in the grip of economic climate change. The Hyperfactory was putting in a growth spurt just as the economic tsunami struck, before having to make a rapid change of tack.

“In three months I had to totally restructure the business,” says Handley. “We had stuff that was designed to start generating revenue in 2011, 2012. Way ahead: all that was just such a dumb idea. We should have just been thinking about surviving and focusing on the core of the business. I think that would have killed a lot of companies, but we reacted quickly.”

The growth gurus

Sue Lindsay was New Zealand Young Executive of the Year, Southlander of the Year and winner of the World Young Business Achievers award in Beijing, China. During five of her nine years as general manager for agricultural co-op CRT, revenues rose from $32 million to $80 million.

She now works as an advisor, trainer and motivational speaker, advising businesses how they can create and manage growth on this scale. One of the tools she uses is a model developed by Tom Peters, uber-business guru and author of the bestselling In Search of Excellence.

This has seven main components:

  • Talent You need to attract the right people and enable them to do the best work of their lives.
  • Ambition Good staff, customers and investors are attracted to companies that can clearly articulate the difference they are going to make in the world.
  • Performance You can’t manage what you don’t measure.
  • Brand This is the collective promise that differentiates the business. It has to be clear, meaningful and strongly communicated.
  • Experience The success of your business is based on the experience customers get at every touch point when they do business with you.
  • Architecture Create a structure to ensure these components fit, not the other way around.
  • Execution Define your methods. Constantly ask yourself if they can be done better, and change them if they can. Don’t be afraid to do them differently from others.

In three months I had to totally restructure the business. We had stuff that was designed to generate revenue in 2011, 2012 … that was just such a dumb idea. We should have just been thinking about surviving

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—Derek Handley

“There is a need at different stages to be a different type of leader,” says Lindsay. “You become a leader and delegator, and then you are looking for the next phase.”

Sopheon partner Jon Perry says: “It takes quite a while for the autocratic type of company boss to crack on. If you still go into the office saying, ‘I had this great idea in the shower last night, build a factory here, paint the new product blue,’ and so on ... that can lead a business down a blind alley.”

In order for your business to grow, you have to let the people you bring on board do their thing, without being encumbered by your way of doing things or your preconceptions of what the business is and does. You are planning for the business to change, so you have to allow that change and change with it.

Congratulations, your baby now has a life of its own.

Originally published in Idealog #26, page 56

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