13th December 2020 Evolution Partners Newsletter
“You will get all you want in life, if you help enough other people get what they want.” – Zig Ziglar
Hope you’re Thriving!
As you turn left onto Boylston Street there is nothing left. You’re spent. 5 miles ago you conquered Heartbreak hill, and you believed you had nothing in the tank before you got there! Now, nothing. Done. Just put one foot in front of the other with the knowledge that coming out of this Boylston Street turn you can finally see the finish line of the Boston Marathon.
I remember those emotions vividly from when I ran that race in 2012. And it feels a little familiar now in the lead up to Christmas 2020. Only a couple of weeks to go. We’re all spent after the dumpster fire (yes someone actually made a 1-hour video of a fire in a dumpster where they burn masks, sanitiser, 2020 day planners etc) that was 2020 and the questions now are how long until you get a break?
Instead of watching that video for one hour, here’s a much better video, an interview with Satya Nadella, CEO of Microsoft that I watched and really liked this past week. Here’s the synopsis “In 2014, Satya Nadella was appointed CEO of Microsoft, making him only the third leader in the software company’s 45-year history, following Bill Gates and Steve Ballmer. Since taking over, Microsoft’s share price has tripled. Nadella spoke to students about cultivating a sense of culture and purpose, and how through relationships with others, work becomes more than transactional.
”I’ve spoken about the amazing impact that Nadella has had on Microsoft here since becoming CEO, but the insight into his perspective is what I really enjoyed in that video. I especially liked the story about his Microsoft job interview, where he was asked what he should do if he saw a baby was crying on the street. His response “I’d go call 911 from a phone booth” (before mobile phones). Then the interviewer chastised him saying “don’t you know if a baby is crying you should go pick it up, don’t you have any empathy?” From that, he got the job, but also learned the importance of empathy in leadership and has built it into all the teams he has led ever since.
Learning from a really old, enduring businesses
One of the things that shone through about the Satya Nadella interview was the sense of obligation he felt to the legacy that is Microsoft. He genuinely felt the weight that he needed to make the business better under his watch, and honour the legacy that Bill and Steve had passed to him. But Microsoft is 45 years old. The oldest company I work with is 120 years old, and I feel that – even in my role — whenever we’re building strategy and working on the business.
Equally, in my podcast with Kevin we always talk about building an enduring great company, but this week I came across a company that completely reset my perspective on an enduring business and the weight of legacy that can produce for today’s owner-operators. Naomi Hasegawa’s family sells toasted mochi (a toasted rice cake) out of a small, cedar-timbered shop called Ichiwa next to a rambling old shrine in Kyoto, Japan. The family started the business to provide refreshments to weary travellers coming from across Japan to pray for pandemic relief — in the year 1000. This business is 1,020 years old!
How has the company lasted so long? Here are a few insights that may seem familiar.
– The company has a Core Purpose which has remained the same since inception and it’s a religious calling: serving the adjacent shrine’s pilgrims.
– The company has a set of Core Values – based around the family values which include looking after their employees, support the community and strive to make a product that inspires pride.
– Those values lead to a deep understanding of the one thing that they can be the best at, a key component of Jim Collins Hedgehog Concept and that defines all they do, sell Mochi to passers-by. The only drink you can buy is green tea, and they recently refused an offer from Uber Eats to sell through its delivery platform. They know what they can be the best at, and that informs them to say no to everything else.
– They retain low debt levels and similar businesses typically maintain one or two months of operating expenses on hand (in a recent survey of Japanese companies that are at least 100 years old, more than a quarter said they had enough funds on hand to operate for two years or longer).
Read the fascinating article about Ichiwa here This Japanese Shop Is 1,020 Years Old. It Knows a Bit About Surviving Crises
The fat lady starts singing the Facebook song
One of the important things about Ichiwa and similar companies is they see the business as being integral to the family, and their primary role is to pass it on to the next generation. They view it like a relay race where each generation must pass it onto the next.
For me, one of the really troubling observations over the past 10-to-15 years has been entrepreneurs who build to sell, simply because they can’t conceive being able to keep a business. When you go and talk to younger tech founders often they say things like ‘we are building it hoping to be bought by Facebook, or another tech giant’. The troubling part is that they don’t even see it as being possible to build a company to keep, maybe not for 1,000 years, but simply for ten or twenty years. That’s because they believe that if they achieve a certain level of success, they can be squashed like an ant by a tech giant. So, their only hope for prosperity or freedom is to sell the business. When I was younger people might have dreamed of building a company like Facebook, and today many can only hope of selling to a company like Facebook.
That’s called a monopoly, and it’s bad for the consumer, the competitor and the economy.
So, it was interesting this week that a coalition of 48 US state attorneys general filed antitrust lawsuits to sue Facebook, alleging the company stifles competition to protect its “monopoly power.” This is the largest antitrust case since Microsoft in 1998 and follows last month, where the US Federal Government launched a similar case against Google for similar reasons.
If you’ve seen The Social Dilemma, a highly rated documentary from Netflix which investigates the damage done by social media, there’s another complex angle to this issue which, unfortunately, politicises it even more.
It can be hard to visualise the internet, but that’s exactly what the folks at The Internet Map have done. The scale of these companies facing antitrust lawsuits can be put into perspective within a few moments of searching for other sites you might regularly visit.
You (can) buy me life satisfaction
We know the Beatles song ‘You can’t buy me love’, but while you can’t buy love, apparently you can’t achieve life satisfaction without financial security. If, as Maslow’s Hierarchy of Needs suggests we are all escalating a pyramid meeting our basic needs, psychological needs and then ultimately achieving self-actualisation, our full potential, when we then consider the diagram below from this research study we can think about the reason many people are doing what they do, as entrepreneurs, is freedom. Freedom to self-actualise and achieve our full potential.
Last year I wrote a blog post entitled First Survive, and then Thrive where I outlined that before a mid-market business will grow with an effective strategy, it first needs to be financially stable. Sometimes it can take several years for us to stabilise the business, meanwhile developing the strategy, and building the core competencies in the background. Then we begin to create an impact with the strategy, achieving the organisations full potential.
And it’s the same with entrepreneurs and leaders. At a purely personal level, if you don’t have your own finances in order, if you’re not earning enough free cashflow personally each month to not stress about the day-to-day running of your personal finances, you will struggle to self-actualise, to achieve your full potential.
The solar market flywheel
I’ve noticed recently that there are a lot of people building and publishing flywheel diagrams that both don’t make sense to build momentum and aren’t built with the fundamental foundations completely established. Just because someone writes more customers – higher satisfaction – more demand, with arrows between doesn’t mean it’s a strategy. A good flywheel should explain your successes and equally if you applied more resources to any part of the flywheel it should spin faster.
Thank you for partaking in this week’s rant.
Of course, a part of explaining successes is producing data.
This week I found this remarkable graph demonstrating that the cost of solar electricity prices has dropped by 89% in the past ten years, and onshore wind has dropped by 70%. Now for many people, certainly in Australia, the prices have risen remarkably in this period, but that’s because the electricity generation model is supporting legacy infrastructure and is fundamentally broken. This reduction in wind and solar cost can be explained by the flywheel below.
Imagine if you will that instead of electricity generation cost, this graph represented you and your competitors, and you were coal, geothermal or gas. What kind of strategy could possibly combat the power of the solar or wind flywheel? And if you look ten years out from now, what might this chart look like and how would that impact your market?
The point? Understanding your flywheel and the market you are operating informs a critical part of strategic thinking.
This week on The Growth Whisperers podcast
On episode 35 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
Core Purpose: Why Core Purpose matters and how to know if your Core Purpose is right.
This week on The Growth Whisperers Brad and Kevin talk about Core Purpose, why your company exists and why that is important. If you don’t have one, they discuss why you need a Core Purpose, and the difference Core Purpose makes to a company.
Then, if you do have one, they talk about how to know if your Core Purpose is right, with 4 key elements to test your Core Purpose.
Listen to The Growth Whisperers
On my website
Apple podcasts
Spotify
Or watch it on YouTube
From the vault
First Survive, and then Thrive
As a business owner or leader, there is a seemingly never-ending list of advice about how to rapidly scale or growth hack your way to nirvana. But what if it’s mostly bulldust?
Do these transformative programs or this growth hacking actually work?
It’s a complex question, and it depends what you are trying to achieve, but for me, as a person who has worked with hundreds of leadership teams and CEO’s building plans that deliver meaningful results, I think it’s important to break these things into a logical and meaningful order, that is based upon a key premise. You can’t run before you can walk, and you can’t walk before you can crawl.
So before you can Thrive, do you need to just Survive?
“I’m impatient”, that’s the typical response I would get from this question. And how is that working for you? How does that connect to long term, meaningful success?
Well, what does Survive actually mean?
I’ve been working with leaders of businesses from $1m to $250m revenue in one form or another for ten years utilising primarily the Gazelles, Scaling Up, Rockefeller Habits and Gravitas Impact frameworks which suggest that there are Four Decisions you must get right in order to grow. You must have the right people, you must have a strategy which is unique and different, execution which enables profit to fall to the bottom line, and cash reserves and a business model which can sustain the growth.
If we look at each of these are you ready to Thrive, or do you need to firstly Survive?
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Keep Thriving!
Brad Giles
