In his book Mission Possible, Ken Blanchard describes a present curve and a future curve. On an X/Y axis, the present curve is a gentle slope pointing, one hopes, upward. That upward tic is the gain represented by incremental growth due to increased operational effectiveness. Of course, it’s the transformational initiatives that give your company that hyperbolic or hockey stick growth, so you want to have people working on both kinds of items. Jeanne Lee, in her Forbes article on Exit Strategies discusses midmarket leaders struggling to make good exit decisions in a rough economy. It is true, it is always more difficult to lead when times are tough, but never loose focus on building value and exit strategy questions will be much easier to answer. Choosing the right initiatives can help you stay focused on value building.
What’s the difference between a candidate transformational initiative that increases operational effectiveness versus another one that can trigger hyperbolic growth? Using the area of ﬁnancial management as an example, a company might realize that it needs to upgrade the accounting and ﬁnancial systems. It realizes it has a need for an integrated customer management system that has all the components of human resources, payroll, accounts payable, accounts receivable, and cost accounting built into it.
A second candidate transformational initiative might be to recapitalize the company because its line of credit is currently too restrictive in a new market segment it is attacking. What’s the difference? Upgrading the accounting and ﬁnance systems is going to take a lot of hard work. It will make the enterprise run more smoothly, but it’s a foundational item as opposed to a transformational process. Recapitalizing the company, by contrast, is a big deal because recapitalizing might allow the company to expand into a whole new business area, hire a new sales staff, or do something else that will create the kind of growth that gets everybody—from management to stakeholders, Wall Street analysts to potential buyers—excited and enthused. It triggers huge growth possbilities as opposed to incremental growth.