What does it mean to build a business?
I often say to people “We are building a business, not just trying to operate one”. But what does that really mean? As we go into planning mode for next year, I recently had a chance to revisit my views on building with my senior team.
As I see it, if you are trying to grow, there are three classes of company-building activity:
1-Build to process the orders you get
2-Build to prosecute an opportunity
3-Build for sustainable value
You might think these go in some order (associated with company stage perhaps) but in my experience, companies of all sizes find themselves engaging in these depending on their circumstances.
The important part of building is the outcome. The outcome of building activity is your position in the market. This is the position that you earn relative to others and the amount of leverage you then get then to apply to defend and grow your position.
Evidence that you built it wrong, or were engaged blindly in the wrong kind of building are :
Your growth stalls
You succumb to downward price pressure in a race to the bottom.
You are suddenly be indistinguishable from others competing for the same dollar
Your brand is eclipsed by a competitor in a space you thought you were leading
You can no longer attract the right people to work for you
It all shows up in the share value. You need to build and be clear with yourself and your team about what you are doing, for how long and what the outcome will be.
A final word, while there is nothing wrong with building your organization to attack a specific thing at a specific point and time, I am most interested in building for sustainable value. The scope is broader, the growth can be slower and it’s often less exciting but it creates a more durable company with more durable options.
