Winning - Jack Welch [71]
ONE OF THE MOST EXHILARATING things about being in business is starting something new from inside something old—launching a product line or service, for example, or moving into a new global market. Not only is it a blast, it is one of the most rewarding paths to growth.
Another route to growth, of course, is through mergers and acquisitions, which we’ll look at in the next chapter. Here we’re going to talk about companies getting bigger organically.
Now, starting something new from within an established company is easier said than done for one good reason.
It requires managers to act against many of their perfectly reasonable instincts.
Few typical corporate managers, for instance, have the burning desire to send their best people to start up a manufacturing facility halfway around the world or to pour R & D dollars into a risky new technology. Nor do many have the urge to give new ventures, at home or abroad, a lot of leeway.
But to give any new venture a fighting chance to succeed, you do have to set it free (somewhat). And you do need to spend more money on it and cheer louder and longer for it than may feel comfortable.*
Managing a $50,000 new product line in its first year is harder than managing a $500 million business in its twentieth year. And going global is just as challenging. New businesses and new global ventures alike have few customers or routines. Neither has a handy road map to profitability. That’s why they need special treatment.
Too often they don’t get it.
Over the years, I saw countless new businesses launched within GE and many expand globally. Recently, I have been involved with several companies in their quests to grow, and in Q & A sessions, I’ve heard people describe their difficulties in starting new ventures.
It seems there are three common mistakes companies make in launching something.
First, they don’t flood start-up ventures with adequate resources, especially on the people front.
Second, they make too little fanfare about the promise and importance of the new venture. In fact, instead of cheering about the potential of the new venture, they tend to hide it under a bushel.
Third, they limit the new venture’s autonomy.
All of these mistakes are completely understandable. Starting a new venture, be it a new voice-over-IP device or a call center in India, means making a bet. Most people instinctively hedge their bets, even as they place them. The irony is that such hedging can doom a new venture to failure. When launching something new, you have to go for it—“playing not to lose” can never be an option.
Here are three guidelines for making organic growth a winning proposition. Not surprisingly, they are antidotes to the mistakes just listed above.
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GUIDELINE ONE: Spend plenty up front, and put the best, hungriest, and most passionate people in leadership roles.
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Companies tend to size their investments in new ventures according to the size of the venture’s revenues or profits starting out. That’s shortsighted, to be polite about it. Investments in R & D and marketing should be sized as if the venture is going to be a big winner. And people selection should be made with the same mind-set.
Speaking of people, companies have a habit of sending expendable bodies to run new ventures: The old manufacturing guy whose children have grown and is looking for added adventure in the two years before retirement is sent to a foreign location to start up a new plant. An OK but unexciting manager who has been quietly running another business is given a new product to launch.
It’s nuts. For a new business to succeed, it has to have the best people in charge, not the most available.
In fact, leaders of new ventures have to have some of the “garage entrepreneur” in them. They need to have all four Es and plenty of P.
One thing is for sure: new businesses with limited resources and good-enough people stay small.
I can think of two cases when we almost killed new ventures within GE by underspending on resources and people.
PET is a cancer-detecting imaging