The Tyranny of Incremental Goals

For companies on a calendar fiscal year, it will soon be annual budget time. You know what that means. Operating managers dust off last year’s numbers (forget using 2020 as a baseline), increase their revenue targets slightly, and do the same for operating expenses. They’ll set a goal consistent with expected growth in GDP, or in their specific industry and that should do it. Slow, steady progress is the order of the day. Play it safe.

But just how safe is it? What is the expectation when we set these goals? That we’ll do the same things, the same way with the same people and processes and we’ll get better (slightly better) results. Really?

Some years ago, I was working with a privately held $22 million company. Their sales had plateaued; no matter what they did, they just were not able to move to that elusive $25 million mark. The frustration of their owners and of their senior team was apparent. Finally, we suggested a different approach. We began with three of the most compelling words any organization can employ: “what if we ... .”

What if we set a goal of $50 million? Crazy? Well, maybe. At first, the response of the senior team was some eye rolling. But we stayed with it and talked it out. Finally, someone said “Well, one thing’s for sure. We’ll never get there doing what we’ve been doing.” Exactly!

A goal that ambitious requires a new way of thinking and a different plan of action. Growth through acquisition was accelerated; two companies were acquired within 36 months, raising sales a total of $18 million. The new customer accounts that came with these acquisitions led to even more new customers in similar industries. Because they demanded new types of services, investments were made in equipment, technology, and new capabilities. Many of these were not even on the owners’ radar just a few short years prior.

These new services opened the door to a new kind of customer: larger with more complex demands and requirements (and much higher value-added). A retooled, multi-step selling approach was created with an emphasis on first discovering prospect needs, then developing a detailed proposal. 

This change in selling approach led to another important shift. They made decisions about what to stop doing (as in chasing smaller, transactional “can we bid on that” prospects). The transformation was dramatic. Over the ensuing years, sales grew to more than $90 million with still more growth in sight.

In their book “Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds,” a trio of McKinsey & Company consultants share their extensive research on businesses that grew, those that treaded water and those that contracted (some of which went away entirely) over a period of years. Overwhelmingly, those who made “big moves” grew substantially and moved to the head of the pack in their industry.

Big goals require big plans. Most importantly, they force a different kind of thinking. An accelerated form of thinking. Assessing risk and making sound choices are needed competencies as companies plan for their short and long-term future. One thing seems certain. Staying in place is a ticket to nowhere!

For more information on assessing risk as part of strategy development, contact me at truncalephd@gmail.com.