How to plan the future evolution of your enterprises
Watching weekend matinee movies on a black and white TV at my grandparent’s house was both an adventure and history lesson rolled into one. One of the more memorable epic spaghetti westerns was The Good, the Bad and the Ugly, which starred a young Clint Eastwood (as “the Good”). The plot revolves around three gunslingers competing to find a fortune in a buried cache of Confederate gold amid the violent chaos of the American Civil War in 1862 while participating in many battles, confrontations, and duels along the way.
At times the movie reminds me of power struggles I have been involved in plus seen in businesses and boardrooms over the years.
In fact, the title of this classic movie also inspired me to think about five different levels through which I’ve seen businesses progress or regress as they succeed or fail to adapt to change.
Let’s start at the bottom and work our way up.
5. The Ugly
There are businesses (or business units within businesses) that are simply not pretty to behold when the curtain is pulled back.
They have manufacturing equipment that is old and has been poorly maintained.
They have cultures that are rife with internal stress, conflict and turf wars.
They are saddled with excessive debts.
They have talent and creativity that have been drained and those who remain behave like desperados, with misplaced loyalties.
They are bleeding cash, making losses month after month.
They may have once been good businesses. But now they are on the verge of becoming casualties of mismanagement and a lack of decisive leadership.
They are not long for this world. They need to be sold off, re-homed, or put out of their misery.
But, no-one wants to make the hard call.
Procrastinating seems to take less energy than making the radical changes required to bring integrity to the table.
4. The Bad
There are other businesses (or business units within businesses) that are a mystery.
They’re staffed by well-intentioned people, who are tired and incapable or uninspired to make significant progress. Apathy about the status quo has become entrenched. They don’t review the financial performance of their business on a regular basis. Decisions are made based on feelings rather than the facts.
Revenue growth is flat.
Profitability is line ball.
Their market share and or the market for their products and services is shrinking.
Many lurch from one crisis to the next. They are boldly going nowhere.
Their performance looks bad relative to other business units or divisions or competitors. The Board and management either spend too much time on “the Bad” neglecting other business units or divisions or they spend too little time on “the Bad”, as doing so is painful and leads to conflict.
3. The Good
There are also businesses (or business units within businesses) that have achieved 10% revenue growth on average for the past four years or more.
These solid, consistent performers are reliable, but may be facing increasing competition and margin compression as their industry moves into the mature stage of its lifecycle.
Perhaps these businesses are led by owner-managers consciously choosing to play in their comfort zone, balancing their lifestyle aspirations with business priorities.
The challenge for “the Good” are sharing the pie equitably, attracting additional investment capital for acquisition opportunities that complement organic growth. For “the Good” businesses, expansion can help drive non-linear performance improvements, affording them better economies of scale as well as helping them retain and develop top talent.
2. The Great
There are also businesses (or business units within businesses) that have made the transition from good to great.
They have achieved 20% revenue growth on average for the past four year or more.
Their performance may be three times as impressive as their competitors across one or more KPIs. They have maintained consistent and rapid expansion, making them attractive places for top talent and clever capital.
By aligning their purpose, strategy and capabilities, these businesses have created the greatest chance of winning and have forged a pathway to prosperity.
1. The Extraordinary
An extraordinary business grows at an above-average rate, up to ten times faster than comparable businesses in their industry.
These businesses can make do with considerably fewer resources thanks to new forms of organisation and the use of new (especially digital) technologies.
These businesses have broken through as game changers and challengers.
These businesses are mavericks and disrupt mature industries by challenging the status quo.
These businesses are pioneers and bring innovative solutions to entrenched problems that open up new possibilities, scaling exponentially by accessing rather than owning resources.
These businesses have adaptability woven into their DNA. These kinds of enterprises were rare before 2000, however this new species of businesses have rapidly become global household names over the last two decades, including Google, facebook, Airbnb, Uber and more recently ChatGPT.
Not all business owners want to make the transformation from great to extraordinary. In fact, it is often better to design and launch extraordinary businesses from scratch, as they employ a radically different business model. Nonetheless, all businesses do need an innovation program to enliven new possibilities for profitable growth in the future if they’re going to survive and thrive in a VUCA world.
The Good, The Bad and The Ugly is not only one of the best Westerns ever made, but it also ranks highly in many people’s “Greatest Movies Of All Time” lists — and for good reason. Director Sergio Leone created an enduring masterpiece in this final instalment of the Dollars Trilogy. A perfectionist, he was one of the few filmmakers who believed in bleeding for art, and it’s reflected in the carefully constructed and visually stunning postmodern Western. The Good, the Bad, and the Ugly’s script is terse, but it also includes quite a few profound lines of dialogue including:
“When you have to shoot, shoot. Don’t talk.”
When it comes to shooting or killing a business (or division of a business), it can be hard to separate emotion from logic, particularly for founders or leadership teams who backed an idea or acquisition through their unconscious bias.
The opening sentence of the classic management book Good to Great points out that “good is the enemy of great”. The author Jim Collins proceeds to explain “…that is one of the key reasons why we have so little that becomes great”.
In business, performance is key. With performance, how you organise can be the key to growth. Effective visioning is a powerful tool for organising for the future. Effective visioning essentially asks (and answers) the question “…what would great look like?”, even “…what would extraordinary look like?”.
Understanding these five different levels through which enterprises can progress or regress as they adapt to change is critical for appreciating where your business is now and anticipating where you’d like it to be in the future. Organising for the future often unlocks many new possibilities for profitable growth.
Instead of waiting for a crisis to tip your business into “the Bad”, or even “the Ugly” categories, you can take proactive steps.
One possibility is to engage an organisational design and development consultant (or Chair of the Board who has organisational design and development skills) to help you and your team take a more strategic approach to navigating change.
A strategic planning process tailored to the current developmental needs of an organisation can help leadership teams realise that their long-term vision for a market (or their business unit within that market) is bad; even ugly.
With the benefit of that foresight, you’ll be armed to take appropriate action within a realistic timeframe to preserve the enterprise value within your good, great and extraordinary businesses. You’ll know when to invest or divest yourself of specific business units.
Annual revenue growth is one way to distinguish between the these five levels. In my workshops on “How To Actually Say What Your Strategy Is” I help people determine what the most meaningful, singular, overarching measure of progress should be for their business over the next five years or so.