A dangerous consequence of the common reference to “small and medium-sized enterprises” (SME) is it implies that, when it comes to business, “small” and “medium” are more-or-less the same. They aren’t. A critical question in the life of any thriving small company is: can it successfully make the transition from an entrepreneurial business to an entrepreneurial organization? An organization with the processes, structure and infrastructure to continue to grow and prosper.
Entrepreneurial businesses often start with the vision and passion of a founder who comes up with a better product, service, business-model … in short, a better idea. The business gets off the ground and starts to take off. The founder’s passion and the initial success help to attract and impassion new employees. The company grows. The market responds to the “new and exciting.” The company continues to grow – the entrepreneurial business in its glory!
But over time things start to change. The market buzz starts to fade. What was unique and exciting is no longer so unique or so exciting. Growth slows. The dynamic inside the company changes. Everyone used to know everyone; everyone used to feel connected to the business as a whole. Not any more. This is the critical junction point. The entrepreneurial business is at risk of slipping into mediocrity … or worse.
Here’s what you can do to make sure this doesn’t happen to your business.
1. Operations: From heroic efforts to heroic processes
Small enterprises often rely on passionate and committed people who will turn heaven-and-earth to get things done. Those heroic efforts are recognized and reinforced. And the stories become part of the company lore.
Yet depending on heroic efforts poses two problems: they aren’t efficient and they aren’t scalable. The ongoing need for heroic efforts indicates a lack of well-thought-out, documented and standardized processes. It’s tremendously costly, in terms of time, money and effort, to make up for process deficiencies with ad hoc people solutions. And as people move in, through and out of the business, there’s no guarantee that the next person will be as heroic as the last. The problems emerging from a lack of process increase exponentially as the business grows. Ultimately, they outstrip the capability of the business to solve them with heroic efforts.
To successfully transition to an entrepreneurial organization, a business needs to develop essential processes that are effective, efficient and scalable. While there will always be a time and place for heroic efforts, they should be the exception. Heroic processes should be the rule.
2. Value Creation: From one-hit-wonder to hit-making-machine
You’ve got a better idea? Great. How long before someone copies it? Or leapfrogs it? Or confuses the market into thinking that they can do what you can do? Better isn’t forever.
Consider a company I used to work for: FedEx. FedEx was founded in 1973 with a better idea – overnight delivery. However, recognizing that overnight delivery would soon be copied, they identified the next level of value: “absolutely, positively overnight.” In other words, while competitors might claim to deliver overnight, only FedEx could reliably deliver. Still, it was inevitable that others would figure things out and close the reliability gap. So FedEx extended the value equation to “real-time tracking.” They realized that customers would value the peace-of-mind that comes from knowing the location of their package at any time. And so it continued with additional value elements like customs clearance, deferred service and logistics. By sequencing together new sources of value, FedEx survived start-up, transitioned to an entrepreneurial organization, and became the fastest company at that time to reach $1B in annual revenues.
In short, they transitioned from being a one-hit-wonder to a hit-making-machine.
In part 2 of “Becoming an Entrepreneurial Organization” I’ll discuss people, finances and you.
Michael Canic is president of Bridgeway Leadership, a strategy + execution consulting firm with offices in Canada and the U.S. Bridgeway’s focus: Making Strategy Happen through a relentless focus on alignment, commitment and execution. As a consultant and advisor, he has helped dozens of businesses and other organizations across North America achieve quantifiable results. Michael can be reached at firstname.lastname@example.org or 303.947.4999.