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The Blueprint to Exponential Growth By Steve Ernst, CPA  In one of the most extensive and thorough analyses of data that would reveal traits and indicators of truly strong and sustainable growth, David Thomson published Blueprint
to a Billion. A former Hewlett-Packard, Nortel and McKinsey & Co. executive, Thomson spent years building the quantitative model that uncovered a short list of the commonalities that distinguished those companies who have planned, experienced and maintained "hypergrowth."
This book has sound advice for CEOs, key executives and professional service providers who aspire to become (or are consulting those who aspire to become) the next Microsoft, Google, eBay or those under-the-radar billion-dollar companies such as Tractor Supply. Companies that leap from a big idea to revenues of $1 billion and beyond in a short period of time share a common success pattern. Of the approximately 7,500 U.S. corporations that went public after 1980, 25% have gone out of business. Just 5% or 387 of them achieved annual revenues of at least $1 billion by 2004. This elite group – we call them "Blueprint Companies" – account for half the employment and 64% of the market value created by the total set of these IPO companies. Clearly, the disproportionate success of these businesses makes it apparent that they are the heart of America's innovation and growth. I caught up with David between his many speaking and consulting engagements to ask him what "blueprint" these companies follow to produce that level of performance. Steve Ernst: David, how long did it take you to put together the empirical data and then to analyze it to come to the conclusions you outline in your book? David Thomson: It took me three years of research and quantitative analysis to find the patterns and identify the "Essentials" that are common to the companies who stood out as the Blueprint Companies. SE: What are those "Essentials"? DT: The Blueprints had the following in common:
SE: A lot of those traits seem or at least sound like common sense for most senior executives. Are they not that common-sensical, or do the executives overlook or fail to use them? DT: It's not the fact that they fail to realize and use them, it's more that they fail to use all of them at the same time. About 90% of the Blueprint Companies did at least five of the essentials simultaneously. SE: There has to be some luck involved. Can you say that the successful entrepreneur creates his or her own luck? Is that too simplistic? DT: There's a belief that luck plays a greater role than it really does. In fact, the winning company works ahead to be prepared to seize opportunities when they present themselves and works ahead to create opportunities. One of the blind spots or mistakes is building a company to sell it. To maximize the company's value, you should build to grow. If you arrive at $30 million, the inflection point, your odds of getting to a billion-dollar company faster are far better than anybody originally thought. SE: Tell me a bit more about the last essential, about the Board being comprised of experts in the "essentials." DT: Companies that went to a billion had boards that were balanced with four types of "essentials experts": a big brother or alliance partner, a community leader, a marquee customer, and a CEO from a company that made it to a billion dollars. This team counter-balances the investors and management team. With the companies that went on the four-year trajectory to a billion, 60 percent had a big brother alliance partner on the board, and 30 percent had a marquee customer. SE: Can you explain the "big brother" alliance and "inside/outside" leadership essentials? DT: In a big brother alliance, you first need to find the right kind of partner with common interests. When there is chemistry and trust, a formal contract isn't always necessary. This is an agreement between people. Second, avoid granting exclusivity, but always push for it. If you rely on multiple partners you can hedge your bets. Finally, use equity as a carrot to encourage mutual performance. As for the inside/outside concept, the company is really led by a pair – not just one entrepreneur or CEO who does it all. This is a blind spot for many entrepreneurs who want to keep control of the business. You need the pair to execute all seven Essentials. The outside-facing leader is really focused on big brother alliances, marquee customer relationships, and sharpening and defining the value proposition. The inside-facing executive is primarily focused on operations. SE: What's next? Besides your consulting and your speaking engagements, what are you working on? DT: My new research is focused on the management teams of ultra-successful, entrepreneurial companies. What are the common characteristics in the ability to "lead forward." What does it take for management to finally get to think and lead "beyond the quarter." What skills are present in those executives who make decisions that enable growth in the future, not just in this or the next quarter. |
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