Notes from LBS Seminar: Growing Your Business

London Business School Executive Course for YPO
Growing Your Business – taking it to the next level
Notes by : Michalis Michael June 2003

Main Learnings:

a) Do the 7 domains test for mainly new or existing businesses/geographies. Check understand and evaluate the following:
1. Market domain macro level – market attractiveness
2. Market domain micro level – target segment benefits and attractiveness
3. Industry domain macro level – industry atractiveness
4. Industry domain micro level – sustainable advantage
5. Team domain - mission, aspirations, propensity for risk
6. Team Domain – ability to execute on critical success factors
7. Team Domain – Connectedness up, down, across value chain
This is applicable to evaluate the opportunity in the Baltic States but also to check on how healthy our current opcos are.
b) Use any combination of 2-3 dimensions to map the companies in our industry in each country and look for “white space” – opportunity. Examples of dimensions for MR:
1. Branded Solutions (Many – None)
2. Size – Revenue (High-Low)
3. Size – employees (High-low)
4. Dedicated Business Development Resources (Many-None)
5. Specialization in Brand (High-Low)
6. Specialization in Distribution (High-low)
7. On-line Capabilities (high – none)
8. Multinational Clientelle (All – None)
9. Local Clientelle (All-None)
c) Define our core competence by asking our clients directly
d) Core competence should be transferable to new products/geographies
e) Recognize individual performance as well as team performance
f) Constant Communication of initiatives – with consumer based consumption i.e. available on the web but somebody has to go there to find the info
g) Some industries look great (oligopoly) until somebody breaks the rules- disruptive technology – usually lower price – addresses a bigger target outside the current target market
h) have people actually work in other departments every now and then to understand and appreciate what other people do which is necessary for their work
i) Create a one page dashboard for GMs, MDs, CEOs with crucial daily/weekly/monthly information to run their business. Ideally measures should give an indication about the future (such as commissioned projects) Possible measures:
1. Cash report in “Cash Days” daily
2. Accounts Receivables in Cash Days daily
3. Gross/Net profit monthly
4. Commissioned Projects weekly
5. Work Completed monthly
6. Exception Reports
7. Client Status (1st project, 2nd, nth project, size of account, frequency of projects)
Monitoring P&L is old-fashioned and is like looking in the mirror. Another quotation which applies here is: You cannot drive a car by looking at the rear view mirror. Need for measures for the future.
j) Borrow against Receivables if necessary and possible in order to grow the business
k) Business can grow by: Innovation, Acquisition and Diversification.
l) There is a need to tackle one or more of the above three possibilities in 3 levels:
Managing (has to do with organization and processes), Leadership (has to do with people issues) and Finance (money is self explanatory!).
m) Outsourcing apart from its other advantages delays payment say to 30 days after completion as opposed to end of the month
n) The balance sheet is key in growing businesses (i.e. estimate cash days)
o) Calculate the Self Financing Growth for each country (SFG)
p) Look at cash days before looking outwards for finance
q) Sometimes increasing prices, thus slowing down growth can be desirable, because profitability will go up and growth has better chances to be self financed
r) If cash rich, offer suppliers early payment or payment in advance for a reasonable discount
s) Key in successful companies is that they make money and do good at the same time
t) Go for “A” employees only. Currently some countries have a couple of As some none and the rest are a few Bs and many Cs, Ds and Es!!! Strong HR policy for recruiting (3 stage recruiting), maintaining, dismissing.
u) Bonus given to staff quarterly for performance over 8 quarters. Always 7/8 sit with the company, and there is no incentive for short term result manipulation
v) Do not recruit on your own image – you don’t need more of you – you need more diverse people who will complement you
w) For large purchases make an offer and withdraw soon after – guaranteed price drop!
x) Play bad cop good cop when negotiating
y) There is a fine line between confidence and arrogance
z) There is a fine line between a visionary leader and a dogmatic fool (when nobody else see her point)
aa) Oracle believe in the world of “thin-client” computing against the PC (possible trend that can affect us)
bb) What is the right measure for success? Return on equity, return on capital, recognition?
cc) A company should be positioned as low cost or premium differentiated. Its bad to be in the middle
dd) Use MBA students for internship
ee) The question to ask ourselves is not how to grow, but how to leapfrog competition
ff) Social return: make money and do good, mums advice: be smart with your money, don’t beat your sister and walk the dog when you are at home
gg) Be in touch with faculties of business schools, bounce off ideas
hh) Book: Managing the Richer way by Julian Richer
ii) There are only 3 value disciplines and we need to know where we are and where we want t o be: 1) close to the customer, 2) product leadership, 3) cost effective
jj) Suck a low profit client and stick to developing the business with fewer profitable ones