~11K companies/50 high-tech startups born each hour! Beat the odds by doing LESS than your competitors. (4 min read)

I heard this 11.000/hour stat at a conference a few months back and had a hard time believing it.  It just sounded crazy to me.  After some research, there are data to back up this claim   Maybe not so crazy after all.  Here is a representative study:

 http://www.moyak.com/papers/business-startups-entrepreneurs.html

Also, according to the Kauffman Foundation, approximately 430,000 high-tech startups are begun each year in the US.  That translates to about 50/hour or about one-half of one percent of all business started worldwide.

This is a small percentage but still a significant number.  50 high-tech startups born every hour in the US alone is pretty amazing!

However, we also know that only about 1% of startups scale to become mature companies with profits, happy customers and engaged employees.

Survive and thrive

How does your company survive and thrive?  The odds are stacked against you. The main reason is due to poor execution.  Poor execution usually boils down to a people issue which is almost always at the leadership level.

However, there is a proven way to beat the odds.  Focus on four decisions – People, Strategy, Execution and Cash.  (I will touch on 3 of these 4 – sorry cash – stick with me for 3 more minutes)

A recent book I read, Strategy that Works – How winning companies close the strategy-to-execution gap, has some great research showing the common practices of a number of successful companies such as Apple, Frito-Lay, Haier, Industria de Diseño Textil (Inditex), Lego, Qualcomm, and Starbucks.

They use the word Coherence to encapsulate the three main elements involved in closing this gap (excerpt from book follows):

  1. A value proposition that distinguishes a company from other companies (we sometimes call this a “way to play” in the market)
  2. A system of distinctive capabilities that reinforce each other and enable the company to deliver on this value proposition
  3. A chosen portfolio of products and services that all make use of those capabilities

What really struck me most was the second point about distinctive capabilities. Having the courage to go a different way than most and figure out what is right for your business is hard for human beings to do.  It goes against our evolution and our survival instincts.  Establishing these right set of capabilities that fit together to allow us to pull away from the pack of competitors takes work, focus, discipline and a goodly amount of courage. Separating from the herd can be a lonely and dangerous place. Not an easy thing to commit to but necessary to survive and thrive. Here is an example from the book:

Lego Capabilities System

  1. Design of compelling blocks and sets for people of all ages: Lego bases its designs on collaborative innovation among designers and the intensive study of how children play and learn.
  2. Operations oriented toward complexity at reasonable cost: Instead of fighting complexity or passing on its costs to consumers, Lego developed a facility for managing it. It manages the manufacture and packaging of thousands of precisely interlocking parts, all fitting together, arranged so the necessary mix of parts ends up in each building set, and sourced and organized so that profitability remains high.
  3. Management of a consumer-oriented platform: Relationship-building with their network of avid customers, including online and offline activities (such as forums and clubs) that generate community-style engagement.
  4. Learning-oriented brand development: Promoting the benefits of cognitive development and associated skill-building through playing; linking those benefits to their toys and associated offerings, and positioning model-making as a rich, cognitively sophisticated, creative and beneficial activity.

Each of these items alone is impressive but it is the combination that allowed Lego to become the largest toy company in the world. It also pulled them out of a tailspin when they lost their way and faltered a number of years ago.

Conventional Wisdom – Not so wise

Here is a great synopsis from the book comparing Conventional Wisdom to  “The Five Acts” to help companies execute (i.e., achieve Coherence) a solid strategy that differentiates them from all other options:

Closing the strategy-to-execution gap: five acts of unconventional leadership

I have worked at many companies and have attended a number of conferences that boldly brandished the language under the Conventional Wisdom column.  It always sounded right to me.  I have come to realize that conventional wisdom is almost always the exact opposite advice you should follow if you want to scale and thrive. Following what everyone else does (or says) can, in most cases, doom your company to failure or at least commoditization. After all, conventional wisdom sounds like this:

This “telephone” has too many shortcomings to be seriously considered as a means of communication.The device is inherently of no value to us. – 1876

Heavier-than-air flying machines are impossible! – 1895

I think there might be a world market for maybe five computers.  –  1943

I am glad someone decided not to follow that “wisdom”.

Smart and Healthy

In addition to a well executed strategy, having a smart and healthy team eludes most companies.  The company that has both – a cohesive leadership team that bridges the gap between strategy and execution almost always wins.

I have never worked for a company where I have said, “These people are just not smart enough to figure this out.”  Have you?  So,to me, that is just table stakes.  A cohesive leadership team is essential.  (You may recall my reference above to poor execution stemming from a people problem.)

I have worked for CEOs who think because they went to an Ivy League School or MIT or were consistently successful in the past that they will figure it out because they always have. This consistent success and praise can actually work against leaders. To be successful in business there has to be empathy, intention, planning, learning and execution.  Pat Lencioni boils this down to being “hungry, humble and (people) smart”.  If the leaders are missing 2 out of 3 of these or forget this along the way, it can lead to the company’s demise or stagnation.

With so many businesses started every day, it is important for those that are looking to endure to look beyond Technology, Marketing, Strategy, and Finance (i.e. be smart) and look to also be healthy.  What I mean by healthy is:

  • Minimal Politics
  • Minimal front line confusion on the strategy
  • High morale
  • High productivity
  • Low turnover of the best employees

When you are healthy, it facilitates the establishment of a rhythm that creates:

  • A healthy, thriving culture of accountability
  • Where everyone is executing on the priorities and unique strengths to meet or exceed the key metrics that move the company forward, and
  • An environment and communication rhythms where useful information flows easily throughout all areas of the organization

Again, it is this combination of nurturing a smart and healthy leadership team and organization combined with a solid strategy and excellent execution that the most enduring and valuable businesses leverage to scale and thrive.

Be the exception!  Be the tiny fraction of those 11,000 companies that make it. Others have done it, why not you?

Good luck in scaling your business.

Be Exceptional!

(catalystgrowthadvisors.com; bill@catalystgrowthadvisors.com)

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