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How to turn around and scale up small businesses for sustainable profitable growth

Updated: Oct 4, 2018

A vulnerable, small company that is in the topical business, mostly serving as a contract manufacturing organization undergoes dramatic change to become a specialty pharma business.

A stagnant bank for over thirty years undergoes a major turnaround to become best in class boutique bank.

These are not common examples. Majority of transformation efforts fail and most small businesses have trouble scaling up. Over the past decade we have worked with multiple CEOs across diverse industries, determined to beat the odds.

Those who did successful turnarounds and have been able to scale and grow their companies all had a common approach to transformation as outlined below.

This is not a 5 step linear process, sorry! But if you are looking for practical advice, here is a simplified guide to cover the essentials in a complex transformation journey.

1. Understand the state of the business

As obvious as this sounds, this is one critical step you must do very diligently. Take the time to observe and assess current reality and state of the business. Here are the pitfalls:

  • Be aware of own bias. You think you have the picture – you get it, have seen it before – but your previous experience dictates what you notice.

  • One pair of eyes is never sufficient. You need the input from all levels and multiple folks need to be doing the assessing.

  • Expose the good the bad and the ugly. This may feel uncomfortable due to a variety of good reasons (e.g. rocking the boat, trashing the work of those who came before, exposing people, etc.)

2. Build your team

Another obvious one, but easier said than done. You most likely inherit a team, so inevitably you will have to make changes involving tough decisions.

  • Act fast. The key here is not to linger once you “kind of made up your mind.” We have seen time and again leaders who simply wait too long – it hurts the team and hurts the organization. And when you recruit new members to the team, it can still turn out that it was a bad hire. Now it is even tougher, yet, even more important to act fast. Here we have witnessed those who learn from past experience and those who are protective of their prior decisions and will not act until too late in the game.

  • Choose your allies. You will inevitably work more closely with some of your team members and have more face time. This is needed but likely to create issues within the team. Choose wisely. Assess impact on a regular basis. Make sure to keep the whole team informed and engaged.

3. Dream big, imagine the impossible

The small specialty pharma aims to grow the business tenfold in a few years. The strategy includes entering new businesses that require expansion of manufacturing capacity, competence for new areas such as sterile injectables, working with partners across the globe, acquisitions and more.

The sleepy bank with an ROE under 2% aims to become the best boutique bank with 10% ROE distinguishing itself with outstanding service.

A small biotech aims to develop revolutionary drug for multiple indications of cancer in 7 years with minimal investment.

In all of the above there is a determined CEO who dares to dream big, not constrained by the existing norms, boundaries of the business or by what is deemed possible. They are each extremely knowledgeable and proficient in their respective fields, so they are not operating in blind faith. They have the courage to attempt to do what would appear to others impossible. They relentlessly pursue their dreams and make it happen. Here is how.

  • Make the vision as concrete and actionable. Vision should define success and clarify what you are aiming for. The progress toward the vision has to be tangible and the vision must be achievable through the execution of a well-defined strategy.

  • Make others believe it is possible – find ways to share your vision as compellingly as possible. Those who succeed are well aware they cannot do it alone. While we commonly encounter determined CEOs who have hefty goals, not all have the natural gift of articulating their vision in a compelling way – so make sure you get the help you need if that is the case. Here is how.

  • Use your team’s talent – you must at least have some members in your team for whom this is easy

  • Get the support and coaching you need to be your best

  • Focus on the believers, get going. Even if you are a pro, not everyone will buy in. There are always cynics, ignore them. Work with believers to spread the ambition and enthusiasm.

4. Create the road map

Identify what changes are needed to get from current state to vision – strategy, structure, systems, culture

1) Discover your strategy and identify priorities

In the majority of the small businesses we work with the strategic thinking capability is sorely lacking. The CEO has at most one or two people who can contribute to shaping the strategy. This is where consulting support can go a long way. Many spend hours in so-called strategic planning process but miss the most critical aspect of strategy: What truly differentiates our business from the competition and what drives growth? Where should we play? And what will it take to win?

Once you discover your strategy you can craft your long term and short term plan and identify priorities. These should inform the corporate goals as well as department/functional goals that will enable the execution of the strategy.

2) Adjust your organization structure

There is never a single best solution for the organization structure. There are, however, structures that are incompatible with the strategy. Structure, therefore, must be informed by the business model and adapted to the strategy. In majority of cases this also dictates a function, product, or market hybrids that are not uniform (e.g. a bigger division that has product split). The critical aspect here is allocation of resources that will best enable execution of the strategy.

3) Work on few critical processes to support execution

Structure can only be effective if coupled with the right processes that enable effective information flow and interfaces, clarity on accountability and decision making, as well as, roles and responsibilities. Identifying the processes that are critical for strategy execution is a top priority. It can take the form of regular meetings across functions or departments, management or budgetary processes, to name a few.

4) Build the needed infrastructure and systems (HR, IT)

Any business that has fewer than 50 employees considers HR function to be a waste and most likely will not have invested the necessary infrastructure to have HR & IT systems. Scaling up requires serious investment on both fronts. The HR function needs to establish itself and grow from a single generalist to a department specialized in recruitment, talent development, compensation, performance management and more. IT must support all major processes, as well as HR, and provide a learning platform, and a management dashboard at the very least.

5. Define the desired culture and values

When asked what has been most critical for the turnaround, most CEOs point out to the culture and values. Culture is toughest to nail down without due cynicism, and considered by many a useless exercise that ends up as posters on walls. Yet, culture and values is what defines the “character” of the company and when executed well and shared, it is the single most important propeller of change and growth. Here are the essential steps:

1) Define the desired culture

Instilled by its founders, every organization has a culture that defines it. As the organization grows the culture begins to evolve, deeply influenced by the behavior of its leaders who continuously shape the culture by what they do, stories they tell, what they choose to pay attention to or ignore. Defining the desired culture and making deliberate choices on how you want it to evolve and what to preserve and what to change is an essential leadership task.

2) Identify the values and define behaviors that all can commit to

Values help define the “how” and are the guideposts on the road to success. Naming just a list of values will get us nowhere, instead you need to engage in a collective process to define and create alignment around the behaviors and actions that are needed to live these values on a daily basis. Value statements articulate deeply held beliefs in the organization and define who we are and what we stand for.

3) Institute the rituals to keep the values alive

Even in the best case where the whole organization is involved in identifying the values and behaviors, over time, they still risk becoming plaques on the wall. Instituting processes such as hiring for culture fit, performance management driven by values, value based rewards and recognition and continuously reinforcing the desired behaviors and telling stories that highlight the values in action will simply give the message that you mean business.

6. Instill the discipline of continuous improvement

1) Grow the next level of leaders as change agents and culture carriers

To continue to scale up and grow you must develop a generation of next leaders. As the organization grows, there falls a curtain between what’s really going on in the organization and leadership. The formerly hands on leaders begin to be detached from day to day action and must rely on the next level to shape the behavior of every single employee in the organization. Leadership development, therefore, takes on a significant importance and is best achieved not only through formal training but also through the top team’s involvement. Next level leaders must be aware of all aspects of the business and not just their own functions, understand the strategy and be capable of taking charge. As major contributors to defining it, they own the culture and act as culture carriers for those who subsequently join the organization.

2) Share results regularly, demonstrating the road travelled and progress achieved

Most transformations take at least 2 years and scaling up can be really hard, tedious work. Continuous reminders of where we started, and what has been already achieved becomes hugely important to keep going and taking on the next battle. You must celebrate the wins on a frequent basis and recognize those who have made it possible before heading for the next milestone on the road to success.

3) Cultivate a lean mindset and a discipline of continuous improvement

A final yet critical aspect is to cultivate a lean mindset. Success often breeds complacency, and as an organization with the ambition to play to win, you must keep reinventing yourself and looking out for ways to improve. This requires a disciplined approach to practices that lead you to continuously inquire how to outperform the competition. This is easier said than done as it practically means everyone in the organization is trained to think lean, challenge the status quo and take initiative and lead changes that will drive profitable growth and sustain the culture needed for it.


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