business growth Warp Speed - Making Rapid Growth Sustainable Business & Economic Review Rapid and sustainable business growth is hard. You are working to meet the needs of a present that never really exists and a future that you can't count on. As the demands get greater and greater the supply of sanity seems to evaporate. Any business runs off of resources. Some of them come from you, some from others, but there are always limits. Growth gets out of control, gets that insane feeling, when the demand outstrips access to three specific resources: Time, People, and Money. Your resources have to be budgeted and invested wisely. The key to sane and sustainable growth is how you invest your resources. This article discusses what and where to invest. It is excerpted from Warp Speed, a book that continues with how to invest. What Restricts the Growth of Your Business? Disgusting as it may be, your business can't do everything. Each business has limits and so does each entrepreneur and manager. From a startup to a market leader each company makes choices about what they will and will not try to do. This applies to: - Time (what the leaders hope that they can get done in a given quarter or year) - People (what the company can hope to do with the abilities and bandwidth the staff has) and - Money (what each effort or project gets to spend.) The choices are critical. A mistake can send your business into bankruptcy. The correct decision can make things work for you for years. The choices never stop because as you grow at warp speed, there are never enough resources. The task of the person who manages or owns a growing business is simple to state. You not only have to do things right, you have to make sure you are only doing the right things. How you allocate your resources is the key to that. What Happens When You Grow Fast? Growth creates a special period for your business. You take orders faster. You have to build them faster. Then you have to ship more orders in same time. Simultaneously you have to find more materials. You need more people to catch up to the new level of activities, and it takes time to find them. When you find them, it costs more to get them. While you do this, your infrastructure becomes stressed. Your building is full. There are not enough electrical outlets or pads of paper. Tactical issues get in the way all day long. Your systems are inadequate and you need time to choose new ones and more time to install them. Then, you and the people you rely on need space to learn how they operate and then tailor and debug them. As the product ships, you need more service people. And since you have more customers, you need to listen more often. You need more marketing people. And since they have good ideas, you'll need more product development people to put the new ideas into a form that you can deliver. And if the product needs to be tested, more people and time to test it. Then you need people who can sell both the old and the new product. They need to be trained, and managed. The faster you grow, the faster this all happens. As you grow, there is more pressure to grow again. Funders and potential employees like to see rapid growth. All of this takes money too, but as you look at what needs to be done the money seems and is the least of it. You expect everyone to work sixty or eighty hours per week and it is not enough. Time looms as the hardest resource to manage and keep. With no growth you can predict your resource needs. You can anticipate time demands and respond accordingly. Your time is under your control. However, when you decide to grow your ability to anticipate goes down as the need to invest increases. Chart A (Graph, resource requirements grow logarithmically as growth increases from gradual state to extreme and as predictability sinks.) Wisely Investing Your Resources Time, People, and Money are the three critical resources to invest in your growth. These are the currencies that buy you opportunity. Your Key Resources: Time, People, Money You do not have infinite money, people, or time. Instead, there is not enough of any to do what you want this year. You have the choice to either allocate resources or let them go to the first person who asks. Rapid growth tends to create resource allocation by noise. Just as the noisiest wheel gets greased, the noisiest requestor gets the resource. As the volume of requests increases you lose your ability to hear what is right and your ability to wisely and sanely manage your business. You start to get that out of control feeling. The best response to these demands is not to invest resources on demand but to invest them according to priorities. You'll recognize the same pattern with cash - balancing the use of money to maximize the return to the business. While developing a pharmaceutical drug, a marketing manager might want to increase initial sales by offering the compound as a pill, an injectable form, and a capsule. You only have so many people capable of designing delivery systems. The decision to offer one or all three is an investment decision where for people are the currency. Time can also be spent or invested. If you recently attended a meeting that did not seem to do much good for you or your work, what could you have done differently with that hour? To create and dominate a market you'll want to choose a point in time to enter the market. The time required to prepare will be a critical resource. You'll need to respond to market changes and competitive threats quickly. If you hear that a competitor is thinking of entering, you'll need time to consider what barriers to erect or whether to abandon the market. Then you'll need time to take action, even if it is as simple as raising a price on a web site. Time is a rate controlling factor to successful strategy. Which is the Most Valuable Resource? You can trade these three resources (money, people, and time) back and forth. For example, with more good people, you gain some time for your own work but with people who need undue attention, that time is lost. The opportunities for tradeoffs are nearly infinite. The fastest way to avoid wasting time is to set your resource priorities in advance. Of the three, time is the most critical. People are second. Money is third. This becomes part of the expressed vision of your business. It guides your investment decisions. Think of each as a scarce resource. Consider how difficult it is to get more of any of the three or to recover from a mistake with any of them. Getting Money Getting money is never easy, but there are hundreds of ways to recover from a sudden need. You can steal from some other budget. You can ask for more cash. You can delay another project. You can sell something. You can go to venture or angel markets. You can borrow the money from institutions or friends. You can slow pay vendors. For both small and large organizations there are many ways to recover from a cash problem in a few months. It is not so easy for a person problem. Getting People If you make a mistake in hiring, it takes much longer to correct. If you hired the wrong person (or the job outgrew him or her) you won't know for months or longer. Then you have to either help the person to grow into the job or move out of it. Either takes even more months (or years in some organizations.) If you move someone out, you still have to find the right replacement, consuming more time. It hampers the growth of your business. Any mistake in people, no matter who is at fault, is expensive to rapid growth. You'll recover, but the price is months or years. Buying Time But what if you lose time? There are only 60 to 100 hours in a work week. When they are gone, they can't be replaced. There is no process by which you can buy back the hours or add them into another week or year. You are without that time forever, there is no recovery. There is always a finite limit to the amount anyone can process. No matter how hard you push a person and organization can only carry so much in a given time, there will always be limits to bandwidth. Time is the most limited and perishable resource. Your task in managing growth is to find ways to use the resource in the best possible way. Which area you err in determines how hard it is to recover Error in : Difficulty to Recover Money Hard People Long and Hard Time Impossible The Currencies of Opportunity When you invest Time, People, and Money poorly it costs you opportunity. This could be a chance to roll out new products and services, an option to adjust your cost structure, the occasion to increase dominance in the market you are in now. The most expensive opportunity cost is the cost of not being able to define and then dominate a new market. New markets are hard - the chance of failure is all too real. To do it right you'll need as much resource as you can conserve. The currencies of opportunities are people and especially time. You cannot buy a new market or customer with cash. It takes good people to find the opportunities, and they need time to think in order to take advantage of them. Growth requires fuel. No business or organization can grow without enough. These resources are the fuel for your growth. Too little money and the right things cannot get done. Too few of the right people and the money and time become unimportant. Too little time and all the money and people are useless. Many problems will not respond to more staff and funding. As Frederick Brooks points out, "The bearing of a child takes nine months, no matter how many women are assigned." Time is the most restrictive of all the resources. When you are growing wisely you are conserving time as much as possible and investing it as wisely as you know how. You are making your growth sustainable. Gradual Growth The most important characteristic of gradual growth is that you can plan for it. You can predict a need for money or people to meet a project or customer requirement. This allows you to forecast your needs well in advance. You can get resource in time and at a reasonable cost. For example, if you have new products coming, you can forecast the need for new salespeople and at what point you should have them in place. Need salespeople about six months before the new product is ready to deliver? You can look for them in advance and do it at a reasonable cost. If necessary, you can choose to wait a little for the right people to come along at the right price. Gradual growth is like building a skyscraper from a complete set of drawings. The business follows a plan and runs according to the plan. You spend your time on plans to fill this building with profitable tenants and to construct the next skyscraper. Rapid Growth Rapid growth is harder to plan for. Like a fast track building, you are working without complete drawings. As you build the third floor, the architect is still doing the work to design the upper floors. You'll get done faster, but you'll spend considerably more energy and money. You'll make some mistakes and invest resource in some poor places. Those costs come with rapid growth. The result is good though &emdash; each floor sits on top of the previous one and you get use of the building sooner than if you are more deliberate. You make a trade, investing more of your time and money to get quicker returns. Of course, you need to make sure you maintain enough quality to support the return. In the new product example, you know the need for sales people is coming, but you don't really have the time to get the sales team lined up in advance. You compromise. Perhaps you use outside reps or hire people who have more or less experience than you need. You do not have enough salespeople yet, so you work overtime. Consider this, if you or the Vice President of Sales are up late writing a proposal, does this really save you money? You have expensive resources doing work that would cost less if you could just do a little more planning. You don't get twice the work accomplished for that higher cost but you do get it done on time. Often, it's the perfect trade off. You invest more time and money to get into a market sooner than if you are more deliberate. If you are an early entrant or a dominant one, that investment may give you excellent returns. You are always paying a premium for rapid growth. You are running the business while you try to plan at the same time. It is a juggling act. If you are not careful, you'll drop balls. The biggest danger of rapid growth is that you'll miss an opportunity because you are moving too fast. Unsustainable Growth Sometimes growth goes out of your control. Instead of you running your business &emdash; it runs you. You are doing things that you never planned and they cost a lot of time, people, and money that you didn't allocate and can ill afford. If you are building that office building you can't build on top of the new stories, you just didn't have the right reinforcement in the lower floors. Instead of going up, you find yourself adding wings and extensions that were never planned. They don't really match, and yeah it looks ugly, but you got it done. If you are launching a product, you find yourself adding and deleting features right up to the last minute. The marketing team is trying to get sales to call on the best long term customers first. Under pressure to perform quickly, the sales team is calling on whomever they think might generate a sale. The development and support teams are wondering how they are going to deliver even half of what marketing and sales are promising. They may never get the product quite right, but they will work lots of hours to backtrack and recreate as they keep up. Doing and redoing is common and everyone takes it for granted. Now you have your key players working harder but doing the wrong things. It costs more time, people, and money but that is the price of extreme growth. It's ugly but you get it done. The gamble is that you'll be better positioned for the future, and that it will be worth it to burn off resources now to be there tomorrow, wherever there is. The cost is high. You not only miss opportunities, you miss details that you need to take best advantage of the opportunities you are working right now. In this growth you may trade customer satisfaction for time. When Netscape was independent it would release early versions of the browser product whether or not the product was fully tested. The growth rate demanded that people work around the clock, even sleep below their desks. It became the consumer's responsibility to wait or to do Netscape's testing. The same phenomenon has been reported with large turbine engines. In an attempt to deliver more turbines faster the suppliers are reported to have cut back on testing, letting the user perform the tests in return for early delivery. Extreme growth eats up resources faster than you want to know. It is not just money. It is people and time. People and time can help create and respond to other opportunities. What happens to a business when it cannot create and respond to opportunities? It is unsustainable, and you are hurting your business. top of article index of articles Articles Business Growth Executive Management Marketing Consultant Support Technology Management List of All Articles The Meyer Group 883 Cadillac Drive Scotts Valley, CA 95066-3303 (831) 439-9607 fax (831) 461-0211 articles index Articles Business Growth Executive Management Marketing Consultant Support Technology Management List of All Articles
email: info@meyergrp.com phone: (831) 439-9607 home | corporate page | hot topics and links | articles | books | have a question print and broadcast media page | about us | meet the team | search | the meyer index © 2000 The Meyer Group | All rights reserved