When companies fail to achieve and sustain profitable growth, the external environment is classically blamed as the source of their demise. Whether it's the pressures of digital transformation, industry disruption via agile upstarts, or constantly evolving consumer demands, it's easy to hold these forces responsible for declining business.
But according to The Founder's Mentality: How to Overcome the Predictable Crises of Growth, that assumption is dead wrong. Written by management consulting firm Bain & Company's James Allen and Chris Zook, the book explores research proving that 90 percent of the time, companies are thwarted from reaching their growth targets due to internal missteps, not external issues. In fact, 85 percent of executives site internal vs. external forces as the cause of profitability shortcomings.
The secret to sustainable growth? "The Founder's Mentality," a phrase coined by Allen and Zook to describe the motivating factors, clear mission, and strategic focus initiated by successful company founders from day one. And of the hundreds of companies they researched, those that still had the founder at the heart of the operations performed three times better than those that didn't.
The power of the growth paradox
The death knell for the 9 in 10 companies not hitting their financial targets is what Bain & Company call the "Growth Paradox". It's the idea that, "growth creates complexity, and complexity kills growth." And falling prey to the growth paradox is predictable and preventable no matter where a company is in its business lifecycle, but only if company leaders quickly grasp what's going wrong and know how to respond.
According to Zook and Allen, the key to taking hold of complexity before it kills growth is threefold: embracing insurgency, creating an obsession with the front line, and adhering to the owner's mindset. Chief among these is the owner's mindset.
In fact, after studying companies that performed well consistently over 20 years, James Allen's take is this the best CEOs who ruthlessly focus on simplifying. The worst are those who "are in the complexity creating business. They want to redefine the business in a way that makes them great and big and powerful."
The triple threat of success
To fight complexity's chokehold on company growth, leaders must first introduce -- and then build -- employee fanaticism about three elements of internal power. According to Cook, these are:
- Insurgency: Successful companies are "insurgents," at war with their relative industries over how to best serve the customer. They serve a deeper purpose and are successful at getting their teams bought into, and advocating for, this purpose.
- Front-line obsession: To win the customer-experience battle, companies must be obsessed with their employees' ability to delight consumers. There must be a "willingness and ability to endow people on the front line with both the power, and also to celebrate them as the heroes of the business," Cook noted.
- The owner's mindset: If your sights are set on this trait, you have a strong focus on preserving resources, an instinctual aversion to bureaucracy, and an inclination to take immediate action when something goes wrong.
Organizations that rated highly on all three traits of the Founder's Mentality were five times more likely to perform in the top quartile for their industry. Companies that don't embrace "scale insurgency," or growing and maintaining the benefits of size while still embracing the Founder's Mentality, become "incumbents." As such, they fall prey to dysfunction, bureaucracy, and ultimately, loss of market share.
How to successfully embrace the founder's mentality
So, how do you shield your organization against the growth paradox? First, avoid "overload," or building complexity during a time of high growth. Examples include rapidly acquiring new systems and protocols.
Keep the momentum going by eliminating internal dysfunction and bureaucracy. And fear "freefall," the phenomenon that occurs when a company loses focus on its core mission and lists into obsolescence and eventual decline.
Instead, hone your focus internally and invest in your internal strategy:
- Hire talent that buys into the Founder's Mentality as a company core value. Recruit like an insurgent, not an incumbent, and make sure that your staff stays focused on customer needs.
- Demand accountability. Constant improvement should be the focus of every employee.
- Empower front-line players with a voice at the table. It's critical to celebrate and reward the heroes that build the customer experience every day.
- Fight complexity with rigor. Constantly simplify, narrow, and -- if necessary -- rebuild the core business.
Admittedly, it can often be hard to see the gaps within your own organization. Don't be afraid to seek assistance from a partner who specializes in identifying gaps, driving internal alignment and uncovering opportunities for innovation. By running your company through a service blueprint, an outside agency can help you plan for continued growth, disruption, and of course, insurgency.