Thursday, February 11, 2016

Learning from Start-ups: Speed Does Not Kill

Guest post from Steven D. Goldstein:

I’ve never met a leader who says to his team, “Let’s move slowly.” In fact, most companies think they are moving quickly – it’s just that in actuality they are not. This is why start-ups have such a great advantage. Once they make the decision to start their business they operate at full throttle almost immediately. They know that if they do not build this business, and quickly, they have nothing – so it becomes a fight for their life from day one. Corporate time is typically measured in months, quarters and years, whereas start-ups tend to think in hours, days and weeks.

Why Does It Take So Long

It drives me crazy when I see leaders who believe they have time to ponder. As Mario Andretti, the famous race car driver, once said, “If your car is under control, you’re not driving fast enough” (and this is a man who knows what fast means). As recently as ten years ago, it took a lot longer to design and launch products, or even companies for that matter. But with improvements in technology, resources and cash available globally things happen much more quickly. We’ve all watched the decline of numerous companies who did not realize that the pace at which they were moving, while it might have sufficed before, was no longer going to work in today’s world. They sat by and watched their vaunted products, and in some cases the companies themselves, wither on the vine. In the past, corporate demises took decades, but today the same thing can happen in months and years.
           
I really don’t think leaders intentionally want to move slowly; but there are several factors preventing them from moving fast. Fear is a clearly an element. Fear can lead to endless requests for analysis, meetings, studies and other measures, whose sole purpose is to minimize risk and avoid making decisions. While some of that may have value, the problem is that the analysis is often too internally focused and the time spent reviewing the information exacerbates the fundamental problem itself. I believe that perfection never happens, and that therefore, “85% of very good, now” is a much better plan of action than 100% of perfect.
           
Another common impediment to speed is being too wedded to a plan, and to the planning process in general. These annual plans, typically formalized in the fall of the prior year, take on a life of their own and often are the primary element in determining executive compensation. Leaders tend to want to “stick with the plan” even in the face of new developments. Often I will hear a leader, in response to a new development, say, “Let’s bake that into next year’s plan.” This assumes they will be able to weather the storm until then.
           
Of course, it is unreasonable to expect a large organization to operate completely like a start-up. Yet it is possible, for big companies to adopt some key elements of what makes start-ups so unique. First and foremost, the leader needs to decide that he will embrace a few start-up characteristics and start modeling those behaviors at every opportunity. In meetings, the leader needs to listen differently to what is being said, with a keen ear to picking up on it when people quote longer time frames than are needed, plans for extensive analysis (i.e. paralysis) and other common slowing-down elements. Instead, he needs to ask: What needs to be accomplished in order to make this decision within one or two weeks? Then he needs to have a discussion as to why the recommendation says it is going to take four months. In other words, it’s important to instill a sense of urgency, so that people do not err too much on the side of being slow and careful. People need to remember they are in a war, not at a tea party.

Uniqlo – A Big Company Who Moves Quickly

Uniqlo is now recognized as the Number 1 casualwear brand, not only in Japan, but in Greater China and South Korea as well. The company prides itself of selling popular low priced items with high quality while constantly offering its customers new product lines and specific items. Importantly, it is rapidly opening stores in the United States and Europe, while simultaneously growing its online business. Its business model is designed around speed including everything from product design, supply chain, manufacturing and distribution, sales effectiveness and customer satisfaction – all tuned to constantly provide new, exciting clothing in its stores. The company continues to grow globally at an astounding rate, and demonstrates that large companies can move quickly.

JPMorgan Chase - Collaboration for Speed

Another way for companies to pick up speed is to collaborate. For example, JPMorgan Chase, the biggest bank in the U.S., has partnered with OnDeck Capital in order to dramatically speed up the process of providing loans to their small business clients. By combining Chase’s relationships and lending experience with OnDeck’s technology platform, they’ll now be able to offer almost real-time approvals and same- or next-day funding. Chase will be able to provide OnDeck’s technology platform to its four million small business customers--allowing loans that used to take weeks to be funded to now be made within hours. This is a case of a traditional company keeping apace of the times, rather than risking going the way of RadioShack.
           
More and more, large companies who understand and appreciate the need for acting like startups are training themselves to keep their foot firmly on the gas pedal. Time is not a leader’s friend. It’s vital to get quick wins and learn from failures fast, and to always treat change as a constant. One thing is for certain: Waiting is never an option.


Steve Goldstein is a proven leader who has held executive positions with leading global brands, such as American Express (Chairman and CEO of American Express Bank), Sears (President of Sears Credit), and Citigroup, as well as several early-stage enterprises. He currently works in the private equity industry as a Senior Advisor with the consulting and advisory firm Alvarez & Marsal, serves as Chairman of US Auto Sales, serves as a Senior Advisor to Milestone Partners and an Industrial Advisor to EQT Partners (a global private equity firm based in Stockholm).  He has also advised CEOs and private equity owners providing counsel on performance improvement with their companies in addition to acquisitions and merger integration opportunities. He has served on numerous boards, such as: American Express Bank, Jafra Cosmetics, Union Bancaire PrivĂ©e, Pay-O-Matic and Big Brothers Big Sisters of New York City. Steve has been an investor, advisor, and interim CEO for more than 10 venture backed e-commerce companies. Steve holds a Bachelor’s degree from City University of New York City, and an MBA from NYU’s Stern School of Business. He lives in New York City.

No comments: