You Can Grow Your Own Way
Companies have to find their own paths to expansion, but lots of flexibility and a few best practices can make the road a lot less rocky.
- By Lee Pender
- May 01, 2006
Bill Korstad didn't build his company by the book.
In fact, in managing the growth of his firm from a boot-strap startup
with no venture capital funding in 1993 to an $8 million operation just
over a decade later, Korstad didn't rely on a book at all.
"If you were to look at a book of how this should be done, there's
probably some sort of formula to it," says the CEO and co-founder
of Boulder, Colo.-based Unitime Systems Inc., a Microsoft Certified Partner
and developer of enterprise time and attendance software. "The way
we did it, there was no formula."
Korstad isn't alone. The truth is that, despite the wealth of how-to
books available on the subject, if you ask 100 CEOs how they manage their
companies' growth, you're likely to get 100 different answers.
There are, however, some best practices that almost every company can
adopt to promote rapid expansion. The common thread that runs through
all of them is dynamism. Fast-growing companies have to be ready to change
according their own needs as well as those of their customers.
"It's a wild ride," warns Bart Hughes, managing partner for
the communications and high-tech strategy practice at consulting firm
Accenture. But it's a ride that could mean the difference between stagnation
Make a Mark on Your Market
That wild ride begins with a company shaking up its market to jump-start
growth. Any company serious about growing must, of course, start by finding
a way to differentiate itself from potential competitors in order to attract
customers. But that's not as simple as it sounds. Many companies settle
for being bandwagon riders with little to separate them from their competitors.
While those companies can survive, they reduce their chances for significant
growth by not jolting their markets into spending money on their products
The differentiation so critical to growth often comes in the form of
innovative functional capabilities that no other company has yet developed.
Companies, though, can have an impact on their markets in other ways,
such as targeting an underserved industry or, as in the case of eEmpACT,
a Bloomington, Minn.-based Microsoft Solution Partner and provider of
software and services for the staffing industry, combining a revamped
product with an aggressive pricing strategy.
eEmpACT, founded in 1990, took 10 years to reach the plateau of $1 million
in revenue -- longer than leaders at most companies would like to take,
says Tim Giehll, CEO of eEmpACT. Six years ago, looking to grow more,
the company revamped its strategy.
"It was kind of a wake-up call that said that we just can't stay
a million-dollar company forever," Giehll says. "We either have
to grow or just get out of the business."
New product capabilities helped eEmpACT reach new customers, and the
company turned to a pricing strategy that undercut competitors, but brought
in enough volume to allow the company to stay profitable.
"Other companies were selling for $2,000 per seat," Giehll
says. "We started charging $899 for licenses we used to charge $1,800
for. It really did disrupt the industry. Sales increased fivefold."
The once-stagnant company entered into a period of consistent growth;
last year alone, it racked up $5 million in revenues.
Brief, regular get-togethers can help
keep growth-related chaos to a minimum.
So you're innovating, you're streamlining,
you're listening to your customers, you're marketing
your products and services -- you're busy building your
business, and sometimes things can get a little confusing.
That's where Verne Harnish comes in. Founder and CEO
of Gazelles Inc., which serves as an executive training
and development company for midsize companies, Harnish
suggests a simple way to make sure important things
aren't slipping through the cracks: Have the company's
key people meet formally every day.
He's not talking about routine conversations
in the office, either. He says companies should hold
organized -- if brief -- meetings every single day to
make sure that they are on target to meet their yearly
goals and resolve any issues that might arise in the
next 24 hours.
"If you want to move faster, you
have to pulse faster," Harnish says. "It comes
down to an effect of a daily, weekly, monthly, quarterly
meeting rhythm. Pick the right metrics that give you
a forward look. You've got to have headlights that are
shining out further than the speed you're moving."
The concept sounds simple, maybe even
a bit cumbersome. But Richard Cole, founder and CEO
of Geeks On Call America Inc., a Norfolk, Va.-based
Microsoft Gold Certified Partner and provider of on-site
computer services, swears by the technique.
"We have clearly identified the five
things that we intend to accomplish this year,"
he says. "We have a daily meeting that only lasts
five to seven minutes. It's a stand-up meeting with
our executives where we talk about what our plans are
for the day, where we're stuck and what we need to help
move things along. You write a strategic plan backwards."
Harnish says he has converted many skeptical
companies whose leaders weren't sure it was worth scheduling
a meeting every single day.
"Most of the reaction," he says,
"is, 'I can't imagine running the company without
it.'" -- L.P.
Don't Get Lulled to Sleep
Shaking up a market can be a catalyst for growth, but it's no guarantee
of prolonged success. Accenture's Hughes says that many companies fall
into the trap of resting on their laurels and not re-thinking the strategies
that let them crack their markets. Markets change; customers change --
and strategies must also change.
"This is where a lot of companies get tripped up," Hughes says.
"They start off well, but they kind of lose touch with what the market
wants. As the market matures and as customers mature, their definition
of what a solution is changes."
Most importantly, product innovation must be a constant process. B. Chatterjee,
president of Rockville, Md.-based CNSI, a Microsoft Solutions Provider
and developer of applications primarily for public-sector organizations,
says his company broke into the Medicaid market with a unique product
but remains diligent about making sure that the revised solution continues
to meet market needs. Chatterjee's company has consistently experienced
year-over-year growth rates of greater than 30 percent since 2000.
"We entered the market providing a state-of-the-art technology solution,"
he says. "When you do that, your competition wakes up. The only way
to survive going forward is to keep providing an innovative solution."
But it can't be just any innovative solution. Applications must first
meet customers' needs, something many ambitious but misguided companies
fail to realize when creating new products or services, Hughes says. As
always, it's critical not only to listen to customers but also to help
them understand what they need and then innovate to meet those needs.
"Companies get caught up over-innovating in a dimension that has
worked in the past but won't work in the future," says Hughes, of
Accenture. "It's a balance with understanding what the customer is
asking for versus what problem the customer is trying to solve. Sometimes
customers aren't very good at articulating that."
Sweat the Small Stuff
Product development deserves a lot of attention from growing companies,
but the less-glorious aspects of running a business -- cost cutting and
streamlining back-office operations -- also become more important as a
"[Newer companies] are less interested in back-office infrastructure,
process and things like that," Hughes says. "As their markets
mature, they have to be interested in that stuff because their profit
margins aren't as large."
The most effective companies, he says, break down their operations into
components -- human resources, payroll, customer support and so on --
and constantly evaluate the efficiency of those parts of the company,
challenging executives to meet pre-determined metrics. The importance
of cutting costs and maximizing back-office efficiency increases as competitors
catch up with a company's market-shaking product or service innovation,
Hughes says. But any company looking to grow needs to innovate and streamline
at the same time.
Outsourcing is a viable option for streamlining costs and avoiding the
cost of recruiting and retaining staff. Unitime outsources its payroll
operations, Korstad says, and began outsourcing some development to Bulgaria
last summer -- an effort that's met with success.
"The quality of the work they did was far superior to what we could
produce here with our engineers," he says. "We could get things
done much faster."
Outsourcing, however, is not always a viable cost-cutting option, especially
if the service being outsourced is critical to customers and, ultimately,
to the success of the company. eEmpACT reinforced its in-house help desk
after a negative outsourcing experience.
"It was a disaster," Giehll says. "We found that nobody
would take care of our customers as well as we did. When a customer would
call in with a problem, if the support person didn't take care of it,
the firm might lose us as a customer but the support person would never
lose [his] job. In-house, they could lose their jobs. You'd be surprised
how much of a difference that makes. It was a learning experience for
us to try to grow fast, outsource [support], learn that that doesn't work
very well and bring it back in house."
Keep Your Options Open
One of the toughest jobs for the leaders of any growing company is planning.
In a rapidly changing market and within a rapidly developing company,
making long-term business plans is difficult, if not virtually impossible.
"We didn't have a detailed business plan," Chatterjee recalls.
"The detailed business plan was our gut instinct. We look at one
year at a time."
Competitors' innovations, customers' changing needs, shifts in corporate
spending or changes in direction from industry heavyweights can all affect
a company's plans, both in the long and short terms. In fact, Korstad
warns against putting too much effort into planning.
"It's so easy to lay out a business plan, but keeping to that business
plan just doesn't happen," he says. "Don't get hung up on trying
to be super-accurate because there are forces beyond your knowledge that
are going to have an impact on what you see today."
Hughes says that companies can and should plan two to three years out,
but recommends a form of planning that relies less on specific scenarios
and more on potential responses to possible scenarios.
"More sophisticated companies think in terms of options," he
says. "They can't control and predict everything, but [they can]
look for the trigger points and define them." After defining those
flash points -- or potential events that will require a change in strategy
-- planners can come up with a strategic response for each point and prepare
to use it if necessary.
Once again, flexibility is the key. Each company must find its own methods
for managing growth, but adaptable, innovative and well-organized companies
can help make that wild ride a little less wild and a lot more profitable.