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My ‘Rule of 40’ for Keeping Your Business Alive and Vibrant in an Era of Radical Change

If it’s been a while since you’ve heard from me (at least in the form of blog), that’s because in May of 2018 I left the Pegasus Capital  private equity world and took on the CEO position at TwinLab a 50-year-old branded nutraceutical company in South Florida. 

I had not done a CEO gig in almost 8 years, and although I sat on multiple mid cap Boards during that time its much different when you are really in the day to day and oh my, had things changed in that time. It was as though a vast transformation had taken place that I wasn’t aware of making my base education at Kellogg Business School and CEO Training at Ralston Purina back in the ‘80s and even my experience as CEO in the 2010’s seem positively antiquated.

My goal here is to share with you some of the revelations, practical perspectives and insights I’ve acquired during the past 18 months, and hopefully help enable you and your company to stay one step ahead of such revolutionary advances in the next decade.

Friends in business have asked me to tell them one thing this experience taught me that was the most compelling and that they should take into consideration. So here it is, what I call my Rule of 40, which I’ve divided into four basic components.

The first explains the meaning of the name I’ve given this rule: if there are any business value propositions that you are still hanging onto that are 40 years old or older, now is the time to consign them to history.

To put this in perspective, it applies to any business that dates back to the 1980s. If yours is such an enterprise, and still operates essentially the same way today that it did back then, or uses value propositions from that era — you’re in trouble. That’s right, in trouble, although it may not be readily apparent. But you need to go through every aspect of your business’s current value proposition, from supply chain, marketing and customer service through packaging, ingredient profile, performance and so on, and do so relentlessly until at least 40 percent of it has been brought up-to-date, then start working on the next 40 percent so that within a few years your entire business value proposition has been transformed in a way that gives your company greater relevancy and makes it more in tune with these rapidly changing times. It might even mean the difference between its being seen as a dinosaur or a dynamo in its particular field.

One thing I can guarantee you is that right now there is a group of young entrepreneurs rethinking your business proposition and planning on disrupting it with something more cutting edge. So, the answer is to beat them to the punch by doing it yourself.

I’d recommend you start doing so this very month with a goal of modernizing 40 percent of your operations this year and doubling that percentage by the end of 2021, so that within just two short years you’ll have revitalized 80 percent of your enterprise. This is the most compelling lesson I have taken out of my turnaround experience, and the one that I can’t impress enough on the CEOs of companies that are not only 40 years old, but half that age: PROGRESS or PERISH. Keep it part of the ethos, the zeitgeist of the company always to be changing and innovating and not resting on either its laurels or its initial value propositions. As poet Robert Frost put it, Too many fall from great and good for you to doubt the likelihood.”

The second component of my Rule of 40 is one that is very simple to identify but not necessarily simple to execute. (Drumroll here, please.) Make sure the average age of those on your board of directors is no older than 40. At a time when advances in technology are being driven by a whole new generation, I can’t explain how important this is for any CEO in order to execute the change necessary to transform his or her company and keep it vibrant.

The hardest part of this is identifying those brilliant Millennials who understand the latest trends and their significance in the scheme of things and creating the kind of incentives that will keep them excited about incorporating such developments into your business. While this may seem like a simple enough metric to identify, it will take your entire executive or leadership committee to locate the right individuals. So, I’d advise you to start this process of looking for young, free-thinking board members to support your initiatives at the same time you begin that of transforming your business. But at the same time dont forget that older workers, or even retirees can bring you the benefit of experience, business acumen or skills that cant be replicated.

Where and how might you find this new blood? Often, such individuals are apt to be working in small agencies and start-ups that have a handle on the latest technologies, some of whom you may encounter in the course of utilizing their services. You also might try consulting websites like Board Prospects, ExecMagic and of course LinkedIn. But it takes a concerted effort to accomplish this, and it needs to start ASAP.

The third aspect of my Rule of 40 is to strive to have women comprise at least 40 percent of your executive or leadership team. In a world where lifestyle decisions are increasingly made by women, our enterprises desperately need the benefit of their values, ideas and views, as well as their practical experience and wisdom. And thats in addition to the fact that companies that continue to be male dominated are now largely viewed as archaic, not to mention stodgy.

The fourth and final part of my Rule of 40 is to pay a visit to your VP of Human Resources or Admin and make sure they’ve gotten the memo that the company is about to undergo a transformation that will require a major cultural change — one that will call for bringing in new people with different talents and backgrounds. In fact, I’d recommend you revamp all of your hiring requirements and rethink both your positions and the scope of qualifications and attributes that you want candidates to have. I especially like the idea of hiring non-college-educated applicants and those who have gone to school and worked in other cultures, particularly developing countries. Key attributes such as the ability to think on different levels and be flexible in decision making should be emphasized in recruiting new employees.

If this blog causes just one company to change its approach to hiring and gives you one new idea with which to start the decade, it will have accomplished its purpose. Feel free to email me or call if you would like to further discuss how these concepts can be put into practice.

Onward and Upward AZ

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