Grow Your Business: Expecting the Unexpected
Dan Arens is an Indiana-based business growth advisor.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowWhen opportunity knocks, in the form of growth, you need to open the door. Maybe one of your products went viral. Possibly, a celebrity just happened to mention your product or service. Or maybe it was something a little more mundane; your business just happened to be at the right place at the right time. Regardless of the explanation or reason, you have experienced unprecedented growth. Now what?
Professor Hau Lee of the Stanford University Graduate School of Business, encourages business owners to have alternate suppliers in mind, in advance of a surge in orders. Lee, a supply-chain expert, suggests owners identify components and product items throughout the entire supply- chain, as reported by author Paula Andruss in a recent article for Entrepreneur magazine.
Develop an early warning system you can monitor, which would show increased web traffic or on-line orders. Look for any indicators that would allow you to plan ahead. You might even consider running various growth scenarios with your team: If your sales are doubling every month, determine what needs to be done in order to accommodate a huge increase in demand. You might also plan on how long it will last. Those are the two primary elements that can help drive your next steps, overall demand and the estimated length of the demand cycle.
Several issues come into play when you are dealing with unexpected or sudden growth. First of all, you need to identify the choke points in your business, those points that prevent you from getting to scale more quickly. Usually, the choke points are capacity or throughput issues. Are they on the front end of the process, like dealing with sales? Are they a production or services capacity issue? Are they in the shipping or delivery side of the process? Or is it supply-chain related; like component or raw material supplies?
Once your choke points are identified, begin investigating ways in which you can flex your current process to accommodate demand. For example, if you are in manufacturing, what would be involved in going to another shift, on a temporary basis, until demand subsides? If your company is service related, paying a little overtime can go a long way to avoid having to hire someone until it is necessary. Shipping or delivery issues can also be addressed with overtime or outsourcing. By looking ahead in your planning process, you can also be developing solid intermediate and longer term relationships with other firms who are not direct competitors.
Robert Sutton, author of Scaling Up Excellence: Getting to More, Without Settling for Less, says
“Companies that scale well have sacred constraints, things they can never screw up. At Starbucks, it’s the whole coffee-drinking experience. The smell, the sound of the beans grinding.” Sutton stresses, throughout his book, co-authored with Huggy Rao, that getting bigger for the sake of bigness is not what it is all about, it is also a function of getting better at what you do or what you make as you grow. Your product or service must be right the first time and every time. Seldom, in today’s business environment, are companies given a second chance to correct a previous screw up.
The owner of Nut-Butter, Justin Gold, experienced many happy problems when he faced unexpected growth. His Boulder, Colorado company, which makes various hiking trail eating products, started out by making product in his house. Soon, according to Leslie Josephs of the Wall Street Journal, Gold was faced with high demand and capacity constraints on his commercial grade food processor at home. Gold was able to scale up his manufacturing after taking loans from customer Whole Foods Market Inc. Initially, he tried outsourcing but was unsuccessful for two reasons, his orders were too small and there was concern about his nut based products impacting nut-free production processes. While Gold was initially faced with rejection for his outsourcing concept, he did not quit, he just pivoted in another direction.
Author Thomas Koulopoulos says this about planned or unplanned growth. “I’ve seen companies that run like a well oiled machine for years suddenly choke on fast growth which strains their systems and people. You need to plan for growth. Invest in systems that will scale, use cloud based computing, create training and mentoring programs to onboard new hires, don’t skimp on internal accounting systems and staff, most importantly scale at a rate that your organization can absorb.” View unanticipated growth as an opportunity to build your company into something better.
Dan Arens is an Indiana-based business growth advisor.