iProceed: Growing high-value companies

Growing how-value companies
What can small businesses learn from large corporations?

The Wall Street hammers companies listed on the stock exchanges to grow. While profitable growth is almost always rewarded, all kinds of growth is welcome. Companies that are profitable but not growing are not highly valued. So why is growth important? Here are a few reasons:

Growth means higher market share (either in existing or new markets, depending on where the growth is coming from) that results in higher market power, ability to command a price premium, and eventually higher profits
Growing companies are better insulated against economic cycles
In most cases, growing companies are better diversified (geography, customer segments, product categories, technologies, etc.) that allow them to mitigate risk, innovate, and create intellectual capital

Growth, however, is invariably painful. It does not come easy even for large corporations, particularly because it requires change involves risk. In my opinion, if all firms had a choice not to grow, many will opt not to. And that is what happens with a lot of small firms that always stay small. If that is what your vision is, it is fine. If not, then growing a high-value company requires a series of well thought-out steps. Ed Zander, CEO of Motorola (and one of the corporate leaders that I admire tremendously), recently laid out his thoughts on what it takes to grow a company while creating value for shareholders:

Do the right thing, always. Particularly with the regulations in place. Yes, many small companies that are privately held, may not be subject to the provisions of Sarbanes-Oxley Act, but no matter what, it still makes sense to do business with integrity. Just take a look at Enron or Tyco Electronics or MCI-Worldcom or a host of other companies that destroyed enormous shareholder value by not doing the right thing.
Listen and lead your customers. I have been hammering this point for a long time (Related link: Customer service and care). You don't exist without your customers and if you don't listen to them, you will be dead pretty soon.
Manage your cost structure. This is particularly important now that even small businesses are facing competition from offshore companies. Remember that no matter what they say and how much they like you, your customers buy from you not because you are a good person or a good company or have a good offering; they buy because you create overall value for them. The moment you stop doing that, the party is over. (Related link: Benchmark for competitive advantage)

Hire only the best. Only insecure losers hire people inferior than them. Always seek out people brighter than you and help them win (because you will win with them). When you surround yourself with good people, good things will happen to everyone. (Related article: How to attract and retain great employees?)
Delight your customers. Customer loyalty is key. Go way beyond what they expect. And remember that customers appreciate even small things when they are unexpected. I have seen so many wealthy people just get so delighted when they go to an expensive restaurant, burn over $100 for a meal for two, and then the head chef walks in with the dessert, and announces that it is a small gift from the kitchen staff. The tip in that case is unusually large (and repeat visits and personal recommendations are priceless). Doesn't cost a thing to the restaurant to do that but someone needs to get creative on how to delight a customer. (Related link: How to treat customers when you are transitioning from a startup mode to sustenance phase?)
Speed and execution. As my fighter pilot friend says, "Speed is life." Once you know it is time to do something, move fast, do not be discouraged by roadblocks, and finish the project.
WOW products, big bets, and own intellectual property. If your offering is no good than the guy next door, only price is the differentiator. So if the next guy drops the price, you are dead. So innovate, take risks, invest in R&D, and stay on the cutting edge. (Related link: Innovation strategies for small businesses)
Know your competition. Being ignorant or being in denial means definite end to your business. (Related link: Benchmark yourself)
Take and manage risk. The correlation between risk and reward is typically strong. Just because you are small, does not mean that you should not take risks. At least you should take small risks.
Measure the right things and be accountable. I am a big fan of numbers. Even an estimate is better than a qualitative measure. So analyze your business to find out what metrics are critical, set goals, and then measure them. Reward for good performance and try to fix what is not working.
Passion and courage. If you don't feel it, stop what you are doing and go find something else that will let you feel it. You will be much better off and your employees and family will also be happier.
Have fun! Remember the bumper sticker, "If it's not fun, why do it?"

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