Evolve into something that is active

Every time I’ve been asked to look at how to grow a business, it always seems to incorporate this tough question: Should we keep doing what we are doing, or get into something else entirely? You know, that exact question is probably uppermost in the mind of any leader who is looking to grow their business.

Be careful here: some of my biggest business battle scars have come from trying to get into a new business that I knew very little about, but thought I could take on because it looked easy. Ironically, finding stuff to do that is easy is hard; I guess because, if it were easy, everyone would be doing it. And, truthfully, if it’s easy, everyone is already doing it. In that case, the only way you can compete is on price. (Which, if you can do that, great—but competing on price ain’t easy.)

In my humble opinion, you need to look for opportunities to evolve your business and evolve it into something that is active. Such opportunities come around far more frequently than you may realize and, when they do, you will need to make a tough call on whether to move in that direction.

While it will be easier to evolve your business than to go in a completely new direction, you are going to create conflict and there will be times when competing priorities impose some serious resource constraints on you.

Ask yourself: Do I invest in my now stable business because, inevitably, it will need to fund where I want to go? Or do I invest in what I think my future is and hopefully open up a new revenue stream? These are never easy questions but, at least, if you are doing something to evolve your business, you might get some form of economy of scale. (While you might not be able to turn $1 into $2, you may—perhaps—be able to turn $1 into $1.57.)

Ultimately though, what is prompting you to evolve? There are likely a number of factors, some good and some bad. I define growth as an increase in the scope of activities and/or renewal of capabilities. Hopefully, this will lead to revenue growth as well as increased profits.

One good reason for growth is to become more competitive. Maybe the core business is under threat or the firm has reached the limits of its natural market, so it’s time to stretch. Dell, and many other firms in the PC industry, reached a point where they had to figure out what was next.

Another good reason to grow would be that the company’s existing resources aren’t being used effectively. Perhaps that leads to developing an internal exploratory environment complemented by alliances-based activities that bring access to new technology and new people. Or perhaps the market is simply nearing its decline stage, so it’s time to look at something else, or let the company itself face the same inevitable declines. Being radical, though, will present far too many risks. You are better to break down the business into its core set of skills and capabilities, and then map those to adjacent markets and opportunities where you can more easily stretch the scope of the current business.

What I’ve seen at many companies is they become good at executing a specific mode, so they repeat and repeat and repeat—even in contexts and under conditions that might not be suitable. It creates huge “path dependency” and becomes very hard for a company to break out of, which may become problematic since your evolution may require you to step outside this box to evolve properly.

If the CEO of a company has an engineering background, loves the products and knows the DNA of the company, that firm is going to be focused on internal innovation and on finding ways to create new products and to go after new market opportunities. A CEO with more of a financial or investment banking background will go after deals—even a specific type of deal—and attempt to buy into a market to get a leg up. Like the engineering CEO, they are gravitating to what they know because they likely have already executed a similar plan in the past. They have succeeded with it before, so they just keep duplicating it. That preference eventually shapes the structure of the company.

If the CEO is M&A driven, the M&A team is going to be powerful and able impose its view throughout the organization, while the alliance team will be at the bottom of the food chain. If you are considering the M&A approach, just be careful and make sure you have trusted people around you. If you have succeeded in the past and feel that you can easily move into an adjacent market, it’s highly possible you will believe your likelihood of success is ensured. Markets are strange amorphous beasts though, so this might be a time when innovation is not required, or when an alliance could be far more powerful than any merger could ever be.

Big Pharma firms were very internally focused before they realized their pipeline was empty. Their R&D teams had gotten so powerful that external sourcing projects received a much harsher screening. For the process to be effective, all major teams should be on equal footing, and be prepared to listen and react. Get out into the new market and try to talk to as many customers, alliance partners and industry leaders as you can. You may need to adapt your plan slightly as you evolve, but that is an important aspect of how to evolve properly.

Apple was very inward-focused, but it became a good example of how to break old habits. They loved their products, and they were very proud of their internal innovation. Their preference was the “build” mode but, over a few years, they were able to develop, borrow and buy skills by creating a very active ecosystem of external partners, and by making a few focused acquisitions in areas of technology they didn’t handle well. (There are many people who believe the App Store is really what differentiates Apple today.)

I could keep going here—just like a business, writing articles on evolution can, in fact, keep evolving—which brings me to my next valuable point: know when you have enough to go on and then act. If you keep scratching at the problem, you will keep finding reasons to be trepidatious about moving forward.

Move forward. If you need to evolve later, well, evolve.