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Mastering
Business Growth and Change Made Easy
Excerpted
from the Introduction by Jeff Hansen:
In
the world of high-growth businesses, nothing leads to failure like
success. There's simply something about achieving a high degree
of success that plants the seeds of failure within a business. Most
of us can think of a business or two that comes to dominate its
niche and then stumbles and fails—even when its core product or
products are well established in the marketplace.
For
the last twenty-five years, my passion has been to analyze and define
the internal threats to long-term success. As a college undergrad,
one of my hobbies was to follow the activities of small businesses
and to predict which ones would succeed and which ones would fail.
I had observed many entrepreneurs among family friends and noticed
that success and failure did not seem to relate to qualities I'd
assumed would be critical. At the time, I could see that marketing
contributes greatly to success—as do adequate funding and a great
product. But what surprised me was that, all things being equal,
the entrepreneurs who were intelligent and tenacious and worked
hard did not appear to have a greater success rate.
In
fact, it almost seemed like those who were particularly intelligent
and tenacious had a lower success rate, especially if
they had already experienced some success in their endeavor. With
a success under their belt, they would continue to grow for while,
but then would fail quickly and decisively. It was as though they
hit a wall in the dark and could not find a way over or around it.
The harder they tried, the more exhausted and fragmented they would
become until they expired. I was intrigued. In fact, clearing up
this disconnect was what prompted me to go to graduate school and
study organizational behavior. I wanted to find some answers.
Hitting
the Wall: Is there a Common Denominator?
Many
questions come to mind about these entrepreneurial companies that
hit the wall. Why didn't the find their way over the wall?
Or around it? If their products were successful in the marketplace,
why didn't they stay on top of it and keep growing? Was it because
of some external and uncontrollable force—something unrelated to
the company or product? Or was it because of some internal force
or dynamic that, if more clearly seen and understood, could be managed
better? Would a better understanding of the wall have been enough
to enable the business to continue on its growth path?
After
several years at graduate school and research on venture capital-funded
companies, some answers to these questions began to emerge.
A
Leader's Personal Style sets the Tone for the Entire Organization
One
of my most memorable classes in graduate school focused on the importance
of an entrepreneurial leader's personal decision-making style on
the success of the business. The key points are that, 1)
we manage others in the same way that we make decisions for ourselves,
and 2) a small firm's business and organizational strategies and
culture often mirror the leader's own management style. These were
earthshaking insights. Had the failures I'd observed been caused
by the leader's personality? Are we ultimately limited by the very
personal qualities that cause us to be successful in the first place?
These were the questions that haunted me.
Determined
to find answers, I set out to study a large number of entrepreneurial
businesses, their leaders' management styles, and their strategies
for business growth. It was the early 1980s, and hot demand for
high-tech hardware and software jump-started hundreds of businesses
up and down the West Coast. I decided to focus my research work
on companies that had been evaluated for funding by venture capital
investors. This was a good pool of subjects for several reasons.
First, someone other than I had carefully evaluated these companies,
so my biases would not influence the evaluation. If they got venture
capital funding, an expert had determined that they had a product
with a competitive edge and had a better chance at long-term economic
success than those they did not fund.
Second,
the leaders of these companies and their growth strategies were
targeting high economic growth. Thus, businesses started purely
for lifestyle reasons (e.g. the satisfaction of being your own boss)
would therefore not dominate the pool. These were companies that
wanted to grow economically.
Finally,
Venture Capital (VC) investors are fairly quick to replace ineffective
leaders. This meant that as I looked at small-sized, medium-sized
and large-sized organizations, I would be able to see the type of
leader that the venture capital investors thought would be providing
the company with what it needed to achieve its long-term objectives.
I was able to evaluate the businesses that tried but did not receive
venture capital funding to determine what differences might be observed
objectives. I was also able to evaluate the leaders of funded companies
who lost their jobs and, if so, who was hired to replace them. This
pool gave me a good chance to see which management styles and approaches
to leadership are most effective at different stages of growth and
for different types of companies.
I
compared various groups of leaders—those who personally developed
the innovation on which their company was based, those who were
brought in after the innovation had been validated, leaders of companies
that sought venture capital funding, those who got funding and those
who were rejected, and so forth. The message was clear. Venture
capital investors favored companies managed by different types of
leaders at different phases of growth.
Of
course, statistical research did not tell the whole story. For two
years I traveled up and down the West Coast interviewing CEOs of
high-tech companies to determine how their management styles related
to their business priorities, organizational structures, growth
culture—and ultimately their level of success. This work confirmed
the statistics and validated the strategy of VC investors: Different
styles of management are indeed more effective at different phases
of organizational growth. Moreover, problems develop when a business
moves from one phase of development to the next and one type of
business environment to the next, and its leader and organization
fail to keep pace with the changes. A business is weakened when
it applies a strategy best suited to its prior circumstances in
its new circumstances.
To
the thoughtful leadership of the business, it makes perfect sense
to solve problems the way they've been solved successfully in the
past. They would say, “Why not repeat what produced our prior success?”
This began to explain what I had seen years before. Nothing leads
to failure like success.
It's
tempting to conclude from this research that business organizations
should, if they're serious about economic growth, have a succession
of different leaders, each with the “best” management style for
a particular phase of growth. I resisted that blanket conclusion.
There are thousands of businesses that depend on the presence
and accumulated wisdom of singular individuals, both leaders and
members of leadership teams. The knowledge and skills of specific
people are crucial to ongoing business success. As my work evolved,
I sought to gain a broader understanding of businesses that were
headed by indispensable leaders. I wanted to know what challenges
they faced as they tried to shift gears from one phase of growth
to the next.
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Excerpts
from George F. Russell Jr.'s Forward to Mastering Business Growth
and Change Made Easy:
Leaders
of innovation-driven, growth-oriented business manage many opposing
forces and aspirations. You seek to business an organization that
can pursue goals and implement strategies with deep passion and
commitment. Yet you must also change these goals and strategies
as your business circumstances require. Failure to keep these forces
in balance leads to weakness for both you and the business.
Mastering
Business Growth and Change will help you recognize what's
needed at critical turning points in your business' growth—and it
will help you become a more effective leader. It begins by helping
you understand what kind of leader you are and in what situations
you're most likely to be effective doing what you like to do. Knowing
this is critical: your job as leader changes over time—you can't
always dictate the nature of your most important priorities. As
your business grows, you must be able to identify how your organization
is changing and what it will take for you to be effective in each
new situation. A successful leader must champion different priorities
at different times.
When
I read this book I was struck by the insights it provides into my
own experience as an entrepreneur leading a company that is now
large and diverse. Russell Investment Group is a collection of different
businesses, started at different times. It was originally founded
by my grandfather in the 1930s as a mutual fund company with a local
clientele. I joined the firm in 1958; since then, the company has
evolved from a retail mutual fund company to a deep and diverse
global business that includes a pension fund consulting business
that serves an elite group of global corporations with more than
$2 trillion in assets, a thriving stock index business, a trust
bank, and a developer of multi-manager funds sold as mutual funds
through various distribution partners.
These
businesses took several decades to develop and there were many lessons
learned along the way. But it is clear in hindsight that there were
several clear transitions that required Russell to change the way
it operates, much as described in Mastering Business Growth
and Change . While our company of over 1,800 people is considered
by many to be quite complex, the conceptual framework for business
growth embodied in this book's Choice and Change model
clarifies where we have been and where we have needed to go ….
….
Viewed through the lens of Mastering Business Growth and Change
, Russell's continued success has come from our ability to
spot attractive opportunities and then structure ourselves to take
advantage of them. I believe it's not enough to simply have a good
idea. You also have to be able to build on it, sell it, and deliver
the promised results. At the same time, you can't rest on your laurels;
you can't stop innovating. It's important for leaders to be honest
about their own strengths and weaknesses, so they can surround themselves
with people who bring the needed, complementary skills to the table.
As
a success-oriented organization, Russell has always been interested
in the professional development of our people, our most important
asset. We have used a wide range of training approaches over the
years. Mastering Business Growth and Change does not replace
this training; it sets the context for it. It provides a guiding
framework for the right time to address issues. The overarching
message of Jeff Hansen's book, that wisdom, conscious choice and
disciplined action are the most important traits in leaders, is
an absolute truth. Mastering Business Growth and Change
will empower and strengthen leaders to lead with greater success
over a wider range of situations. I am grateful for the insights
it provides.
—
George F. Russell Jr.
Founder,
Russell Investment Group
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