Chapter 5 Do's and don'ts when taking off

Watching a business grow rapidly is like watching a rocket launch: some succeed, others blow up on launch, and others are okay half way through, but then suddenly someone announces that the launch was unsuccessful and the rocket must be destroyed (ie: "at receivership status"). It's an exciting process.Those who invest in rapidly growing businesses can reap potentially large emotional and financial rewards.Conversely, "flying too high" quickly drains resources and attracts potential competitors, regulators, jealous rivals (who think you stole their ideas), and scrappy financiers.But there are ways around these dangers.

Fast-growing companies understand that the key is not to introduce the latest products or services, but to add value to customers.They may have a unique technology, but achieving success comes from delivering value to the people who use it. Successful fast-growing businesses also strive to "bring customers into the tent."Customers can become testers of your products, help promote your products or services, and finally become loyal to your products, and will not be "robbed" by competitors.Video game developers have been known to use this intervention the most, sometimes holding contests for "select" game fans to develop new games and features to incorporate the best of the best into their next-gen offerings.

Additionally, businesses that grow successfully understand what sets them apart.Whether you call it a core competency or a distinctive resource, fast-growing companies build and exploit these strengths and use them to chart the company's path. You can have a unique technology, method, product or service, but without the right people, you can't move forward.Arguably, finding, absorbing, and assimilating new team members is a top priority for anyone running a new high-growth business. Failures in this area are often the result of picking people with the wrong skills, hiring people who don't meet the company's growth goals, and hiring people whose attitudes don't fit the company's culture and business model.In a growing company, the most valuable attitudes are learning and flexibility.

Once you have the right people, you need a proper structure.A simple organizational structure is necessary for success, but the structure must serve the needs of the business, not the opposite. This includes minimizing functional duplication as much as possible, finding ways to standardize departments, and developing teams that can take advantage of opportunities, address issues, and use them as the basis for new, expanding departments.Such a team also has other desirable characteristics, such as a shared sense of responsibility, self-discipline, and leadership.Just look at the breakthrough products created by Apple (AAPL) or the first personal computer at IBM to see the power of a team.

Experiments can quickly provide reliable answers to complex questions with no obvious answers.Questions like "how best to reach customers" or "how to minimize supplier costs".As you experiment, you will grow faster and be more profitable if you are willing to capitalize on your successes, learn from them and avoid failures. Experiments provide a path to knowledge.The active accumulation of knowledge by staff and consultants in the back room, coupled with observation of the front lines of dynamic experiments, can lead to success.Businesses thrive on the ability to deliver value to customers and an excellent knowledge of leveraging technology.But the trick to growing fast is that this knowledge and learning must be disseminated to everyone in the business and put to use quickly.

Successful fast-growing businesses have overlapping formal and informal mechanisms for people at all levels to communicate about what they see—providing effective forums for employees to network; and for employees, suppliers, customers, distributors, and Other stakeholders provide an open dialogue mechanism. People not only need to collect information, but also have the responsibility to spend time digesting this information, and then use what they learn to improve products and services. Rapid growth consumes resources.While a few companies take advantage of supply chain relationships and the time lag between payments and collections, few fast-growing businesses can generate the cash resources it needs.

Good managers of growing businesses go to great lengths to ensure that sufficient capital is available in a timely manner.Too many businesses fail miserably when they are too close to the "promised land" because they do not have enough financing. It is important to identify potential investors and get them interested in the possibilities and implications of rapid growth in their interests.Securing follow-on financing to support growth is critical. On the other hand, rapid growth is no reason to spend money like water.It is important to maintain strict cost discipline, stop unsuccessful trials, leverage other people's resources, etc.

This brings up another problem: knowing when to quit.One possible option for those who set up a business is a partial exit, or sale of the business to a "friendly" but larger, commensurately capable business, thus avoiding possible intense competition while also taking advantage of the value.The notion that businesses will grow fast forever is foolish, as tech optimists discovered after the dot-com bust. Investors and employees build and enhance vision from business leaders, get motivation and vitality, and work side by side with management to find the secret to success. Successful business leaders share some common behavioral traits.They focus on building strong teams, and as one entrepreneur put it: "The other team members are smarter than me." They can play to their strengths, find other people to solve problems they can't, and they inject vitality into the business. Vitality, step aside when you can't keep up.

The continued success of Michael Dell at Dell Computer, Bill Gates at Microsoft, and John Chambers at Cisco Systems, among others, demonstrates that viable leadership models that stand the test of time do exist.Over the years, these individuals have not only excelled in their own businesses, but have also made many others rich and successful. The lessons learned from these mature companies should help fast-growing companies overcome the challenges on the way forward. NASA's "man on the moon" venture has been one of the most successful growth investments ever: The project was completed ahead of schedule and on budget.Many of these tricks come from the Apollo moon landing program, which managed to keep the rocket on course and avoid explosions.