Achieving “Accelerated Growth”: Building Enormous Enterprise Value Through Profitable Growth

The Three Core Principles—Leveraging the Insights of Ted Williams, Colin Powell and Albert Einstein

By Jay S. Lucas

Most businesses are dramatically under performing their growth potential – and thus not achieving their full value. In reviewing data on nearly 2,000 public companies and systematically developing over 100 in-depth case studies – and combining this with direct “hands on” experience in client engagements over the past twenty years – the core strategic principles that separate the select winners from the much larger group of underachievers are surprisingly clear and consistent. The importance attached to understanding and applying these principles cannot be over-stated. Whether your situation is a start-up or attempting to re-invigorate a mature business, slight differences in the rate of profitable growth can lead to enormous differences in enterprise value.

Interestingly, each of the three core business principles apply more generally – perhaps even universally – and can best be understood by examining them in relation to their leading non-business advocates: Ted Williams, Colin Powell and Albert Einstein.

Rule #1: Focus on the “Sweet Spot”—The Power and Discipline of Knowing Your Strike Zone.

Ted Williams was the greatest hitter in the history of baseball. He had a lifetime batting average of .344 and is the last person to bat over .400 in a season – hitting an incredible .406 in 1941. He was a natural athlete, but he also approached the business as if it were a science – a discipline to be understood and mastered. This is the essence of why understanding Ted Williams’ approach to hitting is absolutely critical to the way you approach your business.

Did you know that despite his overall batting average, even within the strike zone, his performance could range from being a .230 hitter – all the way to hitting above .400 depending on the exact location of a pitch.

In essence, by consistently choosing to swing at pitches that were in what he called his “happy zone” – about belt high and down the middle – he could hit, on average, over .400 – the best in the modern history of baseball. Conversely, by going after pitches that were low and outside, he would average about .230 – in other words, a marginal player with limited hopes of staying in the major leagues. And, to re-emphasize, these are all “strikes” I’m talking about.

On one level, it is interesting to see the variations in outcome depending which pitches or opportunities he would go after. What’s even more fascinating is the fact that he knew all this and had mapped it out – his own hitting within the strike zone – in great detail, charting out his performance to the precise percentage point.

The implications for business – and how to achieve profitable growth consistently over time – are profound. Rule #1 is to find the “Sweet Spot” or “happy zone” in your business, and have the discipline to play within it.

Sounds easy – perhaps obvious? The good news is that, in my experience, there are some useful clues that can give you guidance in finding the “sweet spot” in your business. In particular, developing the answers to these three questions:

• Where do you make money?

Typically the 80/20 rule applies. When you look at the “true profitability” of your business, you find that some small minority of your business is responsible for a hugely disproportionate share of the profits. It could be a small set of customers or a market segment. It could be a product line. It could be a region or geography. Whatever it is, typically, it is one of the most important leading indicators of your “sweet spot.” In other words, the marketplace is giving you highly reliable data that your core strength – or “sweet spot” – is located right in that area.

• Where do you consider yourself to be absolutely superior to your competitors?

In other words, there is probably a part of your business – or perhaps several parts – where you would say, “We are absolutely the best in the world at doing X.” X could be performing a certain procedure, delivering a particular product, or even as simple as serving a specific set of customers. You might even believe, with justification, that you are so good in this particular part of your business that you have no real competitors – what I refer to as a “competition-free zone.” These are the kinds of questions – when honestly addressed – that can also help point you toward your “sweet spot.”

• Finally, what’s the human DNA of your organization?

Over the years, it has become very clear that certain organizations are good at – sometimes very good at – particular things. The background, capabilities, work experience, even cadence and work style, of its senior team and workforce is geared to doing certain things. The key here is to look candidly at your organization and ask, “What is the basic DNA here? Are we product development specialists? Are we essentially great marketers? Or, something extremely different?” Be as specific as possible – chances are that you will uncover yet another very good clue in finding your “sweet spot.”

Rule #2: Concentrate the Force: The Doctrine of Overwhelming Superiority

Once you have settled on your own “sweet spot,” then what do you do? First, most people define their “sweet spot” way too broadly – so the first step is to take a moment and make sure that it is narrowly defined and as precise as possible: i.e. your “sweet spot” is not that you are a “provider of goods, services and solutions to the Life Sciences Industry” if in fact your whole business is based on one proprietary product line that you successfully sell to three pharmaceuticals companies. So, best to be honest and identify your true “happy zone” where you can successfully hit .400.

Having settled on your sweet spot, now think of your business, for the moment, in terms of launching an offensive – a military campaign. If your objective is “profitable growth,” where and how do you deploy your forces to achieve it

Here, the military doctrine of General Colin Powell illustrates the core principle. As so successfully demonstrated in the First Gulf War, it is the Doctrine of Overwhelming Superiority of Force. In other words, identify targets and opportunities for which you can deploy a massively superior force – and achieve rapid and decisive victories.

This is a brilliant strategic approach, and it applies to business as least as well as it does to military campaigns. By selectively achieving decisive victories at minimal cost you accomplish your objective while also limiting the use or loss of your finite resources. You position yourself to move forward and accomplish another objective – this time from an even stronger strategic position, having just secured an important victory.

Now, apply this logic to your “sweet spot.” By definition, your probability of success, like Ted Williams’ batting average, dramatically increases when you concentrate your growth efforts in the “sweet spot” of your business. Moreover, they further improve – potentially dramatically – when you concentrate your resources on a few select initiatives and deploy decisive force or resources. For your business, this means concentrate on a very limited set of growth initiatives – one or two, maybe three at the most. Make sure that they are right in your “sweet spot” – and then deploy concentrated, significant resources to successfully achieve them.

You not only will achieve your objectives with little yield-loss on your investment, but you will also be pleasantly surprised by one other beneficial by-product . Because you are focusing on fewer initiatives – in areas where you have familiarity and strength – you will achieve them on a faster timeframe than you would have imagined possible. Through “keeping it simple” and focusing, you are beginning to achieve a true acceleration in your growth curve – and generally this will also allowing you to achieve a strategic advantage. In our research and experience, it is this laser-like focus, applied with consistent discipline, that truly separates the high-growth companies from the many others.

Rule #3: Turning on the Jets: The Power of Compound Interest. The Magic of Compound Growth

Assuming that you execute Rules #1 and #2 successfully, there is still one more major step in achieving the full growth potential of your business. You need to stay focused. You need to go back and continually refine your answers: Where is the “sweet spot” of your business? Where are you making money? Precisely, what are the elements of your competitive advantage?

One of the most important questions to ask is: what growth initiatives have been “super winners” – exceeding our wildest expectations? How about those where the result has been just the opposite? This is hugely important data. The “winners” give you even more clues with regard to your “sweet spot.” Moreover, even if you don’t fully understand why they are so successful, it doesn’t matter. Something is working. Aggressively place yourself in more of those winning situations. Redeploy, further concentrating forces and resources into the “winning” area. Turn on the jets.

At the same time, don’t spend any effort trying to fix losing projects. In fact, cut them, stop them, take rapid and aggressive action. Apply generally the same approach to those projects that are only achieving mediocre “middle of the pack” results. You have limited resources – and concentrating investment is the key to achieving “accelerated growth.”

By the way, this is really hard. It runs counter to the natural inclination of most organizations. Success breeds more initiatives and increasingly greater complexity. Every manager becomes invested in and attached to yet another project. Finite resources for growth are spread way too thin – dissipated across multiple areas – and growth evaporates. This is actually a tragedy. And, it happens every day. Why is it such a tragedy?

It all comes back to a very important insight courtesy of none other than Albert Einstein. When asked to identify the most powerful force he had ever encountered throughout his years of study and investigation, he responded immediately, calling that an easy question and identifying compound interest as the most powerful force – the magic of compound growth.

It is hard for most people – even financially oriented business managers – to fully appreciate the impact of this thought and then to act upon it decisively. Over the course of one year, for a company with sales of $100 million, the difference between a two percent growth rate and a fifteen percent growth rate is meaningful, but not hugely impactful. However, this same difference in growth rates continued out over a five-year period leads to dramatically different end-points – a company that is twice its original size – or $200 million – versus one that is barely larger than what it started at.

This is why it is so critically important to aggressively rally forces and resources behind a few select “winning” areas that are close to your core – right in your “sweet spot” – and to take the often unpleasant but necessary action in cutting the many “losers” and mediocre initiatives.

In Sum

Taken together, I hope these three rules are instructive and help provide a “roadmap” for you in achieving accelerated, profitable growth in your company. Their application has been proven time and time again – in both the business world and beyond.