I attended a presentation on October 9th by Professor Mohan Sawhney as part of a seminar entitled “Scaling Middle-Market Companies through Growth and Innovation,” organized by the Kellogg Innovation and Entrepreneurship Initiative. His key point was that every time an organization makes an order of magnitude change—going from a $10M company to $100M or from $100M to $1B—it needs to reinvent itself. | As noted in the 2008 book, “Stall Points” by Matthew S. Olson and Derek van Bever of the Corporate Executive Board) companies stop growing due to strategic management and organizational decisions. Sawhney noted mid-market companies tend to outgrow their processes. They don’t think like a $1B company; e.g., creating a professional sales organization to keep the pipeline full. Sawhney noted five particular shifts that must be undertaken:
- From opportunistic to strategic, making fewer but bigger, bolder bets. It may seem counter-intuitive, but to expand revenues you need to narrow your markets.
- From doing projects to selling products. Early on, project work helps companies learn and develop their capabilities (while putting food on the table), but companies grow by creating products that can be scaled and sold with a different business model.
- From an ownership model to a partnership model. Early on, it is important for companies to exercise tight control and stay close to customers, so owning channels, supply chain, product development and the like makes sense. But to grow, companies need partners to enhance reach and build brand equity.
- From key people to defined processes. Young companies are driven by personality, passion and key skills. Mature companies need to have processes designed to scale, particular in strategic planning, sales and client management, product development, and recruitment and talent development. Need to determine which processes have bottlenecks.
- From relationships to brands. Early sales are based on relationships. Brand is about broader awareness and reach, to access customers that you cannot touch directly.
By Michael Lippitz