Startup or Start Over?

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Is your startup now a start over? There is nothing wrong in that, so long as you have given it your best shot and learned from it. Maybe things centered around an undefined strategy, an unclear mission, an unaligned team, a disconnection with customers, an ill-defined market or perhaps some other oversight or stroke of bad luck? In any event, an after action review and thoughtful questions from an executive coach may reveal where things went wrong. TechCXO executive coach Piers Mummery explains.

The following article originally appeared on Pierso.co.uk

If at first you don’t succeed, try, try and try again. That is the nature of entrepreneurialism. Sometimes successful entrepreneurs get lucky on the first attempt, but more often than not, a successful entrepreneur will have made many mistakes before reaching success. The trick is to learn from your mistakes. Do not be afraid of making mistakes, nor admitting them to those around you. It’s OK to fail… I promise; I know, and I have been there!

An investor in one of my businesses said once, that it is not a crime to lose money, but it is a crime to run out of money. Now I buy that sentiment to a point in the context of a one-dimensional business, but most businesses can adapt and change and flex according to their circumstances and there are times when you set out with the best of intentions, based on all of the foresight and research and knowledge you have but due to a fundamental issue (often unforeseen), you may be heading on a trajectory towards failure.

I have a personal example of this in a garden retail business that I created and eventually sold. 2 years before we sold the business, we embarked on a very expensive and what we thought at the time would be a killer e-commerce plan to extend our products to our existing customers online. We spent a small fortune on instore promotion and a fantastic e-commerce site, with all the bells and whistles, but when we launched, we found the level of sales after just 2 months, wouldn’t have even paid for a celebratory drink!!

The fundamental reason for our failure that we found out was our existing customers preferred to physically visit our stores for their shopping experience and that in trying to get them to go online as well, we risked cannibalising our existing customers experience in the store. We took a very brave decision to shut down the service after a few months, having spent over six figures on the experience and a great deal of time and internal resources. The result was that we needed to start again, which we did, but with an emphasis on driving local web visitors physically to our stores through local marketing….it worked, but it was an expensive, six figure mistake we made.

The important point here is that there are times, when you give your business the best shot possible, you throw everything that you have and know to try and be successful, but even having done your best, you may not succeed and the skill of great people is to recognise this and make conscious changes. It was Albert Einstein who said the definition of insanity is doing the same things over and over again expecting different results.

Be prepared that at some point your Start Up business may just become a Start Over business and there is nothing wrong in that, so long as you have given it your best shot and learned from it.

Think about what you have learned. Maybe things centered around an undefined strategy, an unclear mission, an unaligned team, a disconnection with customers or perhaps some other stroke of bad luck.

Scale Up – Optimizing for Growth

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Founders flounder, as the saying goes, and scaling up is much harder than starting up.

At TechCXO, we’ve worked with hundreds of startups and see ample evidence to support these truisms, but must the cratering of a startup be the rule?

While startups can draw on pure entrepreneurial energy, creativity, tenacity and downright heroism to start a business, it’s also true that the initial force of will to get started eventually dissipates and new momentum must be created and properly applied to grow a business and refine a viable business model.

In his seminal Harvard Business Review article, “Why Entrepreneurs Don’t Scale,” John Hamm, wondered if there is there an “entrepreneurial personality” and an “executive personality” that are naturally at odds.

He didn’t see that there was, and neither do we. The problem to meeting the scaling challenge are tendencies entrepreneurs frequently display. Hamm sees them as excessive loyalty to early teams; task orientation; single-mindedness/tunnel vision; and working in isolation.

We define the common barriers a little differently and place them in these buckets:

PEOPLE — This materializes as putting the wrong people in the wrong seat or dysfunction due to lack of role clarity and accountability.

PROFIT —In the form of cash crunch/cash management issues, margin squeeze, and inappropriate responses to shifting markets.

CONTROL — Time wasted in issue discussion and inertia, misalignment and siloed behavior.

TRACTION— It’s been said, “implementation without vision is hallucination” and endless, tactical focus on putting out fires verses discipline, repeatable, effective process is a scaling killer.

Growth, then, is the only option. Where to start?

We have found that the initial focus on internal processes actually allow the company to grow faster externally. By taking some time to step back and focus ON the business rather than being buried IN the business, the leadership team can break through to new levels. We’ve operationalized this with an adaptation of the Entrepreneur Operating System. By focusing on 5 key elements and putting them in the context of their business, they can improve execution:

5 Key Elements to Scaling

  1. SIMPLIFY—If one can simplify process, procedure, level 10 meetings, and reporting, new checklists become part of the DNA focused on results.
  2. DELEGATE—Building enough trust to speak openly and establishing a learning culture will allow leaders to “delegate and elevate” embedding growth for succession
  3. PREDICT— Breaking down goals and information into manageable quarterly pulse helps to frame trends and targets for 1 year, 3 year 10 year blocks.
  4. SYSTEMATIZE—By identifying and documenting the core process you will then be able to integrate them to leverage your unique way of doing business.
  5. STRUCTURE—Creating accountability and reducing complexity can be done by clearly defining critical roles and the assigning a number that represents or drives their output can improve the coordinated contribution of everyone. We’ve seen this come to fruiting with legendary coach Bill Belichick’s frequent admonition: “Do your job.”

Often leaders and their teams are pushing ahead in completely different directions. When growth stalls, they may have lost momentum unwillingly by not having the adequate systems, process, or org structure to even know where to start to ‘optimize for growth’.

Just imagine the energy if all of the arrows are pointed in the same direction. To accomplish this, we help companies implement a TechCXO Operating System using the tools of EOS. With over 5,000 companies worldwide using EOS, it is now clear to the TechCXO consultants that those companies that have moved from just running fast to cohesive management teams now have the competitive advantage to win. In The Advantage Patrick Lencioni confirms “Organizational health will one day surpass all other disciplines in business as the greatest opportunity for improvement and competitive advantage—it is the single greatest factor in determining an organization’s success.”

Those who are able to break through the ceiling have built a cohesive leadership team, agreed on core issues solved problems, and been open enough to get the right people in the right seats. The ability to shift from stopping to scaling up is both a mindset and a discipline.

To work on the six key ingredients of business– vision, people, data, process, issues, traction—the CEO or president should be at the table with his or her leadership team. A TechCXO experienced leaders serves as an implementer who provides education, facilitation and coaching. A third party voice can help with course correction and progress.

It takes commitment, but those who want to can catapult their organization to greater profits, productivity and traction.

Before Mounting the Synergy Unicorn: New Skills for Merged Management Teams

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Companies seek to accelerate revenue growth or enter new markets through mergers and acquisitions. A great deal of excitement and justification surrounds the projected synergies and combined financial models.

Synergy: 1+1>2

Or is it?

However, as we all know, few companies realize the true value of the acquisition synergies. When M&A fails, it fails during integration. Much of the effort and capital spent on acquiring the target is sub-optimized or in many cases wasted.

In this piece, I’ll briefly cover what dynamics occur among the senior leadership team that erode synergistic value. And, I’ll discuss the two skill sets that the leaders of the combined entity must have to mitigate value leakage.

[The article was adapted from Matt Oess‘s original blog post]

However, as we all know, few companies realize the true value of the acquisition synergies. When M&A fails, it fails during integration. Much of the effort and capital spent on acquiring the target is sub-optimized or in many cases wasted.

In this piece, I’ll briefly cover what dynamics occur among the senior leadership team that erode synergistic value. And, I’ll discuss the two skill sets that the leaders of the combined entity must have to mitigate value leakage.

WHY M&A FAILS

A major failure mode of integration happens when the two leadership teams from the companies come together. The company’s executives create a detrimental amount of dysfunction when they unknowingly engage in the following:

  1. Jockey for position – Who’s going to sit in what seat when the final org chart has been created? Even the most objective leader can’t help but worry about what role they and their close peers will play in the future state of the company.  Even when the CEO of the merged entity tries to paint a clear picture of his or her future organization, the senior staff knows that “the changes are never over” and “I have to look out for myself or I’ll end up with the short end of the stick”. The human mind is amazingly good at painting worst-case imagery of “what if I don’t get the role I want?”. This drives behavior that destroys alignment among leaders and marginalizes the intended synergies.
  2. Protect my people – Executives can’t help but have a bias for and a comfort with those that have helped them to be successful in the past. As humans, we are also protectors of those we are closest to. And, we want what’s “best for our team”. This dynamic precludes objectivity when assembling the best possible team to lead the resulting company and limits optimal outcomes.
  3. Bias toward “what got us here” – No integration meeting would be complete without several incantations of “That’s not how wedid it in the past” or “We’ve tried that before, and it didn’t work”. Fear is an incredibly powerful force that creates enormous risk and dire outcomes in the minds of the two leadership teams. These barely-detectable fears paralyze good ideas that should be implemented, but don’t. As importantly, these behaviors almost always ensure that the teams can not fully align. And, that dynamic destroys synergy.

Here’s the thing. I truly believe that people show up to do their very best and do so with the very best intentions. And, the leaders who exhibit the above  behaviors do so, unknowingly. The brain’s protection mechanisms kick in to protect our own best interests. It’s perfectly natural for the brain to create the fear-based stories in our subconscious that drive undesirable behavior. And, this is where the change management aspects of the integration erode tremendous value.

So, imagine what the combined executive team looks like, as a unit, from the stakeholder’s purview. Each executive is trying their best and is well intentioned. But, the brain’s protection mechanisms drives the actions of the individuals that combine to create a team that typifies mis-alignment, dysfunctional communication, and poor collaboration.

Before putting in motion all the strategies, goals, org charts, and tactical action plans necessary to realize true potential of a merger, something more important must take place. The two management teams must know about the attitudes and behaviors they are about to engage in. And, they must develop the emotional intelligence skills and support each other to navigate these tough waters.

NOW WHAT?

The first step is to take the unconscious actions and behaviors of these executives…and make them conscious.  

To that end, the first skill set that we must impart to the executives is self-awareness of the mechanisms in our brains that create the behaviors that will destroy the very stakeholder value that they wish to enhance. Left undetected, the executives will navigate through their natural gut feel, which creates the appearance of false truths and leads to dysfunction.

Second, we help the executives build and leverage the necessary observation and communication skills required to create desirable outcomes and support each other. By creating intentionality and dramatically increasing the true situational awareness skills of the individual executives, we drastically increase the combined team’s emotional intelligence (as a collective leadership unit). And, we add a new dimension to their leadership skill set.

This isn’t a one-and-done training. We plan during the M&A due diligence phase. We launch on day zero. And, we support every senior executive until integration is complete and we achieve the synergies. Only through this intentionality and constant focus can newly-formed companies avoid the pitfalls mentioned above.

TAMING THE UNICORN

Merger and Acquisition teams, CEOs, CFOs, and Board Members that are considering buy/sell/merge activity have the power to mitigate the risks and deliver the allusive synergistic value. Strategy and actions are necessary, but not sufficient. Call it an insurance policy. Call it intentionality. It’s a simple formula…

Synergy:

1 + 1 + Team Emotional Intelligence > 2

Every M&A deal needs a program to mitigate these risks. The earlier these skills and competencies are enabled across the entire executive team, the faster the M&A teams mitigate the integration and change management risks. The broader and deeper these competencies are driven, the faster M&A teams create the alignment, collaboration, and communication required to deliver the synergies of the acquisition.