The same attitude that gets a business off the ground can sometimes be the cause of its failure.
I’m back in the United States (Durham, NC) after a 6-week consulting stint in México and I’ve started my MBA program at Duke’s Fuqua School of Business. This past Friday I finished a 3-day orientation that included a memorable talk by a Managing Director at Accenture Consulting.
What was notable about the talk (besides his impressive career), was what he said about start-ups and entrepreneurs. He said that ‘many new organizations fail not because they do too little but because they do too much too fast’.
The CEO and entrepreneur at the dialysis system I worked for this summer has been trying to aggressively grow his business, and until recently was doing so with not-so-well founded information. The system was established in late 2011 and currently operates 3 different clinical sites.
I was able to help the business by consolidating their financial, operational, and clinical information into a very efficient and effective reporting platform; giving the organization the much needed visibility and decision support for everything from day-to-day operations to long-term strategy.
However, instead of slowing down the aggressive strategic plans to focus on critical financial and operational challenges that were identified by the newly created reporting program, the CEO decided to continue full speed ahead with his plan to open several new clinics in and around central México.
What’s wrong with growth? Nothing under a functional and profitable business model. However, scaling a bad business model will put you out of business faster because not only are you consuming more resources (i.e. cash) with bigger operations, but also accelerating the losses by replicating a bad business model.
So as I sat through the lecture by the seasoned director from Accenture, I began to think about that CEO and how his ego may be driving his company in the wrong direction; doing too much too fast and with a less than optimal business model.
Getting the right business recipe for success would appear easier under a smaller scale operating model, where changes / corrections are less costly, can be made quicker, and results are reflected much faster. Maybe he knows something I don’t?
Well as one might imagine, I did observe several reasons why the CEO was pushing aggressive growth, but none that I can share publically. Let’s just say that the business is worth more to him than to me (literally), so short-term / long-term consequences need to be considered here.
The business lesson that I come away with from my summer experience is that entrepreneurs should recognize their personal leadership / management limitations and how company health and business growth is often tied to those limitations.
I’ve heard this lesson echoed by many venture capital professionals who have frequently replaced entrepreneurs with seasoned executives to fill leadership / management gaps in the organization depending on company growth stage.
I’ve agreed to continue working with the CEO and his management team to help them resolve the issues that are straining their resources and hindering their operations, but it is really up to the CEO to decide how many resources he is willing to commit to the challenges they face, since resources are already scarce.
Can he put his ego away for the sake of his stakeholders? The next 3 to 6 months will be a make or break period for this clinic system so what happens next is very important (and exciting) as many hemodialysis patients rely on it for life saving kidney therapy.
Thank you for following my summer blog.
Saludos from Durham!
Jose Magaña Paredes
Master of Business Administration
Master of Environmental Management
Candidate 2016, Duke University
Fuqua School of Business
Nicholas School of the Environment