Jeff Standridge:
Hey guys, welcome to another episode of the Innovation Junkies podcast. I’m Jeff Standridge.
Jeff Amerine:
Hey, it’s Jeff Amerine here. Glad to be back.
Jeff Standridge:
Man, how’s it going?
Jeff Amerine:
Not too bad, can’t complain.
Jeff Standridge:
Very good. Well, you know, we’ve had a series on leadership. We’ve had a series on strategy, multiple episodes on strategy. Our most recent group of episodes have been focused on client acquisition, sales marketing, messaging, and those kinds of things. So what do you think about a series of episodes now focused on operational effectiveness and financial disciplines?
Jeff Amerine:
Those are two super important domains. I don’t see why not. Makes a lot of sense to me.
Jeff Standridge:
Very good, very good. Why don’t let’s, let’s just start about, may have some listeners out there who are trying to scale or trying to grow their business, whether they’re trying to double, triple, quintuple, or maybe 10 X their business. And we talk a lot about 10 X growth or exponential growth or sustained strategic growth. So let’s talk a little bit about the, about the role of operational effectiveness in, in a company that’s trying to grow consistently. So talk a little bit about that if you don’t mind.
Jeff Amerine:
Yeah. Well, in operational effectiveness, oftentimes begins with a commitment to repeatable processes, right? Documented, repeatable processes that are easy to understand, that are well understood. A lot of times when you have failures in scale, it’s because too much information is locked up in key performers between their ears and not written down, not documented, not proceduralized in a way that you can actually scale and you’ve got repeatability of what you’re trying to do.
Jeff Standridge:
Yeah, you know, I can’t tell you the number of executives that I work with that, um, so many of their processes are tied to the people doing them versus the repeatability of them. And as a result, what ends up happening is that CEO and, or members of his or her executive team spend a lot of time not operating at the top of their license, not performing at the top of their license. So they’re, they’re doing tasks that, that only they can do. And as a result, they find themselves executing the, the work of the company versus spending time actually trying to grow the company or make it better or what have you.
Jeff Amerine:
Yeah, it’s a common problem of, of sort of the, in some ways, the cult of personality around a key person. And they’re, and, and in some extent, in addition to not having repeatable processes, they’re doing a fundamentally poor job delegating and, and a rule of thumb around that is if someone can do something as 60% as well as you can, it’s time to delegate, get them trained up. They’re not going to be a hundred percent. That’s probably why you were.
Jeff Standridge:
That’s right.
Jeff Amerine:
a leader of a department, a leader of an organization, a CEO, but when they get to that point where they’re 60% is good, give them the chance to learn a few things and delegate that task or that function to them.
Jeff Standridge:
So when you’re working with clients, how do you advocate to them or how do you guide them through determining what to delegate and how to delegate it?
Jeff Amerine:
Yeah, I think, I think some of it, and I always start with, uh, what would happen if you took a month’s vacation and who would do what and, and for some businesses, they’re like, no way I can’t go away because I have to do this. I have to do that. And then you ask questions about, well, who’s at that next echelon of leadership and what do you have them assigned to do? And what is it that you have that you’re so critical to that you can’t count on that next echelon and a lot of times they begin to realize I haven’t empowered these people. They don’t know what they’re supposed to do, or they’re so scared of making a mistake that they bring everything to me. In which case the leader becomes the bottom.
Jeff Standridge:
Yeah. You know, I have, I have leaders go through a process of tracking their time in 15 to 30 minute increments for, um, for call it two weeks. The first thing I have them do is I have them calculate their annual salary divided by the number of work hours in a year. And usually that’s a 2000 roughly. Uh, have them do that. And, and I say that this is what your time is worth to your family and then I have them, if they’re the top executive in the company, I have them, I have them take the, um, the revenue of the company and divide it by 2000, because that’s what your time is worth to the company. And usually it’s somewhere, you know, north of hundreds of dollars an hour, uh, for the, for their family to thousands of dollars an hour in terms of their worth to the company, and then I asked them, how much time are they spending, uh, on tasks that are
14, 15, 20, 25, $30 tasks. So we do that to get their attention. Then we actually have them track their time for two to three weeks at a WAC in 15 to 30-minute increments and start identifying things that they’re spending way too much time on that are really low-value tasks. We also have, and I know you’ve seen us use this before as what we call the delegation matrix and effectively have someone draw a plus bit giant plus sign on a piece of paper. And the vertical axis is things I love to do versus things I dislike doing. And then the horizontal axis is things I’m not good at to things I’m very good at. And so you think about it, you know, not good, don’t like it. Not good, but like it. Good, but don’t like it. And good at it, and I like doing it. And really try to get people to move where they’re spending their time up to that upper right-hand corner. You know, I say you should be spending 70 to 80 percent of your time in the upper right-hand corner, zero time in the lower left-hand corner and no more than 10 or 15 percent of your time each in the other two corners. So just some techniques we can use to get them to start thinking about where they’re spending their time, if you will.
Jeff Amerine:
Absolutely. Well, and if they do that, it frees them up to work on the business, to think strategically, to build external relationships, and they’re not mired in details that team members really ought to be handling. It makes a lot of sense.
Jeff Standridge:
Yeah, that’s right. That’s right. So let’s talk about some of the benefits beyond just being able to work on the business. The benefits and maybe even some of the challenges of companies that are trying to scale. What do you see when you’re working with companies that are on that scaling trajectory in terms of some of the biggest benefits there?
Jeff Amerine:
Well, well, I, you know, the benefits of being well organized is obviously you’re able to take on that growth puts a lot of stress scale and growth puts a lot of stress. It puts, it puts stress on team. It puts stress on, uh, potentially on the performance of systems and infrastructure. All those things are really important. And in understanding what the limitations are, both with your people and your systems and your infrastructure is really kind of a key thing. And I think being completely reflective and introspective and honest about where those limitations are is kind of where you start. You really have to be able to shine that mirror and say, these are the things that are preventing us from growth, and whether it’s team members or infrastructure.
Jeff Standridge:
You know, I guess technically, the word scale itself kind of implies a degree of operational effectiveness and operational efficiency, right? So technically, when we say that we can scale something is that we can grow revenue much more quickly than we’re growing incremental expense to support that revenue. And so to be able to do that, you know, you have to have at least some degree of operational effectiveness and operational efficiency in order to do so.
Jeff Amerine:
Yeah, it’s true. It’s true. And I think there also has to be a fundamental understanding of, of the nature of the business. So if it’s a, if it’s a labor-intensive, if it’s a, uh, a trust-based business. Versus some kind of technology platform, those are inherently more difficult to scale. You can scale based on finding more people that have the level of expertise that you need in order to be able to grow those accounts, grow that business. Some other businesses, if they’re based on a platform, it’s just a matter of the technical infrastructure there and can you sell it and acquire customers well enough to scale. So understanding that the nature of your business as you’re thinking about scale is really important as well.
Jeff Standridge:
Yeah, I know you’re right. And having a system in place to be able to manage your business and to plan for and manage the growth. So we use what we call a strategic growth system. Vern Harnish has his scaling-up methodology that he and Geno Wickman have kind of compared notes on with Geno’s entrepreneurial operating system. And there are a number of those kinds of platforms or systems out there, and having that you can adapt to your particular company, to not only plan for the growth, but also to address the risks, the challenges, and the issues that arise in your operations when they present themselves is vitally important as well.
Jeff Amerine:
A lot of tech ventures make the mistake of trying to scale before they’re ready. And they burn up a lot of money. They end up incinerating a lot of cash as some of our colleagues will say, because they may not have product market fit. They may not have repeatable procedures. They might not have the right people in the right seats. They try to scale prematurely. They burn up all the money. They don’t get as far in the market as they expect to. So there could be real risk. You have to know when you’re ready. And I think the strategic growth system is one way, plus with GrowthDX is an initial view into where the strengths and the weaknesses that you can be prepared for growth.
Jeff Standridge:
Yeah, the GrowthDX is our growth diagnostic, uh, the strategic growth diagnostic that assesses seven domains of, of potential growth. And, uh, and then of the, the SGS or the strategic growth system is generally the system that we put in place to help organizations to scale, you know, I don’t know who, who was the one that said it first, but, uh, going back to the comment that you just made, you know, but they said, do what doesn’t scale before you try to build something that does scale. You know, and I used to have that same approach when I ran an IT shop as a software development shop, was that people would come to me wanting to put software around a process that they haven’t even really documented yet. And that is a recipe for spending lots of money very, very quickly and getting nothing in return, incinerating a lot of cash, as you said a moment ago. So I used to say, look, write down your process, automate it with a spreadsheet.
or a Google doc or whatever, run it that way for multiple cycles and iterations, make improvements as you see as you run it through those iterations and the improvements that you need to make. And when you think you’ve got it humming on all cylinders with your spreadsheet, then come back to see me and we’ll put some software around it.
Jeff Amerine:
Yeah, exactly. I mean, it is kind of a fundamental mistake when you see, uh, ventures of any size make commitments to software platforms without fully understanding how it all works, even whether it’s manual or whether it’s with available free tools. That’s a recipe for disaster for sure.
Jeff Standridge:
That’s right. So we’re talking about scaling your business, growing your business two times, four times, eight times, 10 times, whatever that number is. And the impact of operational effectiveness or the importance and impact of both operational effectiveness and financial disciplines. Today, we’re just kind of setting the stage with both of those. And we’re going to come back and unpack those in a few more episodes over the course of the coming weeks. You ready for that?
Jeff Amerine:
I’m ready for it. Can’t wait.
Jeff Standridge:
Should be good. All right. Thanks for joining. This is another episode of the innovation junkies podcast.
Jeff Amerine:
See you next time.