Grow or let go? Planning for an uncertain future

Members of an advisory group I work with had mulled over letting one or two staff go or taking the risk of growing the business before contacting us to explore developing an innovation portfolio approach.

Megan (our resident optimist), Potter (our marketing whiz), and I were working with a CEO who had reached the ‘go or grow’ stage of development.

During the global recession she had kept on extra staff in the forlorn hope that it would be the typical short-term V-shaped recovery.  Now reality had struck home as costs and uncertainties were rising, tax planners were saying the year was going to be a nightmare of on-costs, and the payroll/revenue ratio was bloating.

Megan reminded me that fear (of losing a job) and risk analysis (what’s not happening here) are generally bad for motivation, morale, trust, and finding new customers in tough times.  Canteen chatter about these hard realities and bad numbers had its place, provided it was balanced with some positives: something about progress somewhere in the business, something about when things would improve.

Potter soon had staff bowling lots of ideas and getting better at hitting the wickets but appeared to be less successful in growing the business than in plastering the walls with Post-Its on how to win more tenders or cut back on costs.

Megan pointed out that the ideas getting applied were low-risk, small scale process improvements and marketing promo tools. She told us that the company’s first priority should be encouraging appreciation of the problems facing both managers and staff before bolstering idea counts.

Potter gave us an update and pointed out that there were plenty of great new business opportunities, but none were getting beyond the project review stage and out to the marketplace. What was needed here was an innovation portfolio approach to help with tracking, filtering, blending aligning and leveraging the ideas to hit some new targets for the coming year.

This led us to consider why some smaller companies tend to grow faster and take on new staff.  These companies had a defacto innovation portfolio approach that was more than a list of projects, a project plan for each and a tough-minded approach to pulling the plug on some when times get tough.

Innovation project portfolios need to be “balanced” and focused on creating new customer segments while extending better-value propositions to current customers and their downstream consumers. Reflecting on my experience with large companies, I mused over how large companies struggled with the complexity of innovation portfolios.

Megan’s calm disposition was alarming. She took a marker to the whiteboard and adorned it with triangles. She added a bulge at the top of the tall spire-like triangle so that it looked more like a Russian church spire, and called it the “Steve Jobs type of portfolio”. There was a very short triangle with a long base that she called the “itsy bitsy teeny weeny” risk profile.

There was an equilateral triangle that, wrinkling her nose; she called “theoretically balanced”. She populated each triangle with an even spread of dots. Then she connected the dots by drawing lines (X and Y axes) below and to the left of each triangle. She said the X axis represented the dimension of research-technology based through to market-customer based innovations and the Y axis represents the degree of risk.

Megan established that each section of the company would have a differently shaped triangle because intrapreneurs have different risk appetites and orientations. Leading companies’ employees add dots to their wall charts when a project begins and, naturally, everyone can see what makes up the portfolio.

Potter pointed out that while visual aids could be relatively simple or complex, they were great heuristic (learning) tools that help busy staff see how they can help the company face up to the ‘go or grow’ reality. The leadership team can also use the chart to eyeball alignment with company capabilities and directions.

The shape of a triangle changes over time: it is modified as the size of the emerging pattern of dots change with new intelligence about the potential market. Dots for internal process innovations that are not especially research- or customer-focused get a different colour and sit midway along the X axis.

Healthy portfolios may have only a small number of projects but they usually have a mix of technology-based and customer-centric innovation projects, with the most exciting projects blending the two orientations.

Megan wrapped it up: there is no right shape, as shape depends on leaders’ risk appetite and technology/market orientations. The distribution of dots is as important as the number of dots. Companies with research and technology leanings tend to have a smaller number of larger and higher-risk projects. Leading companies with customer-centric innovation projects tend to generate more profits sooner.

Accounting is a backwards-oriented version of the numbers game that keeps score of progress. Innovation number games are high synergy (2+2= +5) games; the best ones for building a pathway to growth.