In Business Today, It’s Adapt or Die
Posted by Trevor on 13 July 2012 | Post a Comment
George Rathmann, who Forbes Magazine once called the Bill Gates of the biotechnology industry, sadly passed away this year. I had the great privilege to work with him in my last regular job before I started my own company. Over dinner one time I was waxing lyrical about an idea for a business model when he stopped me in mid-flow and said “You don’t know what business you are in until you get into the business.” Although I didn’t get his meaning at the time, that turned out to be the best piece of business advice I ever received.
No doubt some of you have heard various accounts or have read studies suggesting why companies fail. Many of these studies seem to point toward one conclusion: 70 percent of company failures are caused by cash flow management issues. That is like saying that most people die because they stop breathing. It is meaningless. There is a physiological reason why someone stops breathing and dies, and there is an underlying cause for cash flow management issues that lead to business failure.
Unfortunately, there are fewer studies that examine why companies succeed compared to why they fail. Amir V. Bhide, author of The Origin and Evolution of New Business is considered a leading expert on what it takes to succeed or fail as an entrepreneur. His respected study examined hundreds of successful ventures, and he concludes:
Coping with ambiguity and surprises is more important than foresight, deal-making, or recruiting top-notch teams. Entrepreneurs don’t need unique ideas and venture funding. Rather, they must be able to adapt quickly to changing business conditions.
It is your ability to adapt to the changing conditions of a small business that makes the difference between survival and failure.
That is what George Rathmann had tried to tell me. The day after you start a company nothing is how you predicted it would be. It doesn’t matter how much capital you have, or how well you know the industry, or even how qualified you are to own a business. What you need is the ability to adapt or die.
How do you become adaptable? Simple. When you work for a regular company, you typically possess one job function for most of your career. And because a larger organization has a multitude of employees serving every function, there’s not that much of an opportunity to step out of your role and become involved in other functions. As the leader of a new small business, however, most entrepreneurs have to be the resident expert in every function from sales to manufacturing to accounting. That is what catches most people out.
What I often observe is that people starting a small business feel they are good at only one thing because they have never been exposed to other job functions. Consequently, the first thing they do is hire outside experts to perform those business functions, but the services of those experts are costly. And that is why most companies run into cash flow issues early on. It is an expensive endeavor to recruit executive teams to run small businesses. The key to avoiding this pitfall is to expose or educate yourself to the various aspects of a business before starting your own venture. It is less risky that way.
Aside from studying the nature of small business through reading and online research, there are hands-on ways to broaden your knowledge base. You can shadow someone who is considered a functional expert within a company, your own or someone else’s to learn more about what he or she does and the job issues involved, or you can attend educational seminars that address specific business functions. You can also attend department specific lectures and focus groups, where you can network with others and become familiar with the current trends and issues within their respective occupations.
All of these approaches will provide you with a little more experience and knowledge, which will help prepare you for adapting to the unexpected in operating a small business. While cash flow mismanagement may be the means of delivering the deathblow to most companies large and small, it is merely a symptom of an entrepreneur’s or a company’s inability to adapt quickly enough.
Adapt or die is the mantra for the successful small business. For me the secret to an entrepreneur’s ability to adapt unemotionally to constantly changing conditions is to get educated across functions.