Turn a Great Idea into a Great Business
January 23, 2008 2 Comments
Recently I revisited an excellent book that I had read a few years ago, Good to Great by Jim Collins. When I initially read the book, I viewed it mainly from a corporation’s perspective (of course I was working for a corporation at the time). However, now as an entrepreneur when I look at the key principles contained in this book, I realize that the model that Collins discovered of what makes a business great over the long-term applies to small businesses just as much as it does to large corporations.
Collins writes on the first page of the book, “Few people attain great lives, in large part because it is just so easy to settle for a good life.” Not only does this truth apply to life, but it also applies to your business. As hard as it is to become a good company, it is that much harder to become a great company.
Greatness in business requires some essential components, including focused visionary leadership, commitment to continuous improvement, flexibility to respond to the changing marketplace, passionate perseverance and consistent execution of your strategy over time.
The statistics that detail the lack of success of small businesses are staggering. The numbers tell us that 95% of all small businesses fail within 5 years. Yet when I look at the marketplace, the reason that number is so high is not due to the lack of great ideas. There’s actually an abundance of great ideas in the marketplace. Instead, the reason that most small businesses fail often comes down to the fact that many (some would say most) entrepreneurs lack the willingness or ability to execute essential business principles to turn great ideas into great businesses.
Don’t Settle for Good When Your Business Can be Great!
Good to Great contains some incredible nuggets of wisdom that entrepreneurs can use to grow a great business. Let’s look at a few of them and how they apply to small businesses…
Level 5 Leadership: According to Jim Collins, this type of leadership, which by the way is not common, is defined by those who “build enduring greatness through a paradoxical blend of personal humility and professional will.” This type of entrepreneur is more concerned with building a great business rather than just building a big bank account (read my post “Mission-Driven Entrepreneur“). Besides, one of the benefits of building a great business that gets sustained results over a long period of time is reaping the financial rewards that come along with it.
The Hedgehog Concept: A common fallacy embraced by many aspiring (and some current) entrepreneurs is that you can grow a successful business based simply around your passion. Unfortunately, this idea is only partially true. The Hedgehog Concept says that for a business idea/model to be successful, it must be built around the intersection and close-knit integration of three critical components: 1) Something you are deeply passionate about, 2) Something you can be the best at, 3) and Something customers are willing to pay for. This is essentially your business “sweet spot”. If you are missing one of more of these components, you will be hard pressed to build an enduring, successful business. Ask yourself, “Am I trying to develop a hobby, operate a charity, or build a business?“
A Culture of Discipline: One of the reasons that many people, including myself, have spurned corporations for small businesses is the bureaucratic nature of many large companies. Nevertheless, entrepreneurs have to be very careful not to “throw the baby out with the bath water” as it relates to structure, systems and processes. Every business, large or small, needs these three essential elements to succeed. A sound organizational structure, efficient operating systems and consistent execution of core processes are crucial to your business’s ability to grow from good to great. The key is how these elements are implemented, practiced and monitored. Collins writes, “The single most important form of discipline for sustained results is fanatical adherence to the Hedgehog Concept and the willingness to shun opportunities that fall outside [that model].” Basically, it takes discipline to know what to say “no” to.
Flywheel and the Doom Loop: You are about to read something that is the complete antithesis of our microwave, instant gratification, get-rich-quick culture. Like a delicious home cooked meal, it takes a long time to grow a great company that gets consistent sustained results. Because of a flywheel’s weight, it’s hard to get it to start turning. However, after it starts turning, its weight causes momentum that actually keeps it going and even causes its speed to increase. Good-to-Great businesses build momentum with small successes that over time grow to become big successes. Attention to detail and perfecting what you do well now, especially the quality of your products/services and customer service, will create bigger growth opportunities for you in the future. On the flip side, short-term thinking/planning, chasing opportunities outside of your “sweet spot”, and unethical behavior will lead to a downward spiral that is often irreversible.
Paul Wilson, Jr.
Good to Great by Jim Collins
The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber
Small Giants: Companies that Chose to be Great Instead of Big by Bo Burlingham