In 2011 Sea-Level created the “Path to Operational Excellence” series, which served the community well for many years. In 2018, our theme was “The 4 Levers of Gross Margin”. The theme in 2019 was the “Operational Journey”, and in 2020 our messaging was largely around “Adding Security to Your Managed Services Offering”, although COVID shifted it to “Crisis Financial Planning”.
Sea-Level’s theme for 2021 will be community education around “Scalability”; how the business changes, how the leaders change and the operational changes that companies must work though in preparation for multiplying their current revenue.
Most companies are looking for a “Grow the Company” outcome. When we say scalability, we want you to Consider these 10 Scalability challenges.
- Leadership Team Development – The Rule of 7 dictates each manager should have 7 direct reports, which means that for every 7 employees you hire, you need to hire someone that has both the technical skills you need and also has leadership qualities that you can develop. Lack of leadership in the pipeline is the number one reason companies stop growing. If you hit a leadership deficiency barrier, you can expect to be stuck for at least 2 to 3 years. To create alignment and accountability, as your leadership team reaches around 4 members, you will need to embrace a management strategy such as Gazelle’s Scaling Up or Geno Wickman’s Traction/EOS.
- Strategy and Culture – Yogi Berra said it best, “If you don’t know where you’re going, you might not get there.” We like the EOS methodology around defining your 10-Year Target, 3-Year Picture, 1-Year Plan, Quarterly Rocks, and Weekly To-dos. Leadership teams that create alignment from today to 10 years from now usually make great things happen. Culture starts with your mission and vision. Sea-Level’s mission is, “We drive growth, operational excellence, and increased value with education and continual accountability.” Our Vision is “To make a measurable positive impact on people and companies which inspires the international technology solution provider industry.” Your core values determine who should be working at your company. If you have individuals who do not represent your core values, they should not be part of your company. You must be hiring, firing, and making all business decisions based on your alignment with your core values.
- Acting with Urgency – Scaling requires understanding what action everyone needs to take next, setting deadlines and holding each other accountable to get stuff done. If growing a 5% CAGR is the goal, you will move at a certain pace. If you plan to grow a 30+% CAGR, accomplish your yearly goals at a quarterly pace. Your team must learn to prioritize time and work urgently on the most important tasks to accomplish your monthly goals each week and your quarterly goals each month.
- Revenue Generation – Revenue growth can come organically through marketing and sales or it can be acquired through mergers and acquisitions. Regardless, marketing and sales must scale in sync with service delivery. As the company scales, you must develop and work a solid plan and accurately measure Marketing Qualified Leads (MQL), Sales Qualified Leads (SQL) and lead conversions into opportunities and opportunity win ratios. Your plan must work backward from revenue and margin targets all the way back to the number of MQLs needed. Because the Rule of 7 always applies to every part of business, don’t forget to develop sales leadership.
- Directed Communication – As companies grow and scale, information becomes noise. In smaller companies, since everyone does everything, you must “broadcast” even small pieces of information to everyone. As the company grows, you must direct communication to only the individuals or groups that need that communication. We also must devise ways to communicate other than email, such as dashboards.
- Financial Literacy – The CEO is responsible for the balance sheet and net profit while the service executive is responsible for gross margin (GM). Create a budget and manage it. Financial performance should NEVER be a surprise. Low maturity companies tend to keep financial information confidential from the employees. High maturity companies (those more prepared to scale) teach employees to understand the financial status of the company and help them understand their role in making a positive impact. The progression we normally see in MSPs is the owners share GM information with the service manager first. As they become more comfortable, the next step is to share GM with the entire team and the full P&L with the leadership team. Ultimately, with the right financial literacy education, the entire team can drive the full P&L. Check out Jack Stack’s The Great Game of Business.
- Process Improvement – You can accomplish desired business outcomes (1. Grow the Company, 2. Lead the Company, 3. Manage the Company and 4. Deliver Best in Class Services) are accomplished by facing each of the over 50 Business Challenges (e.g., efficient service flow, understanding agreement profitability, visibility for client satisfaction, measuring by metrics). Each of these Business Challenges are solved by tackling each of over one hundred Operational Solutions (e.g., ticket triage/dispatch, service KPIs, QBR processes, client documentation standards). Sea-Level recommends that every manager spend at least 10% of their time (4 hours/week) working on the business by prioritizing one of the 100+ Operational Solutions and working each one through the Sea-Level 5 Phases (1. Understand the Best Practice, 2. Document Your Way, 3. Train Your Team, 4. Implement the New Process and 5. Inspect What You Expect).
- Working with Data – Low maturity companies really do not have data to work with, due to the lack of standardization and low process compliance. As a matter of fact, at this stage you really do not need data because the decision makers are close enough to the day-to-day client interactions and tickets that their “guts” are very accurate. As companies grow and mature and the decision makers are distanced from day-to-day operations, the dependence on having good data and KPIs becomes critical. The dependence on good data will drive higher commitment to company processes compliance. Data analysis skills and business intelligence literacy become invaluable.
- Simplify to Multiply – If you’ve been to the Southwest of the US, you’ve probably had an In-N-Out Burger. They have over 350 locations, and if you have a craving for one, be prepared to wait in line. Their menu has 5 items on it. Double-Double, Cheeseburger, Hamburger, French fries, and beverages. That’s it. They do one thing — burgers. And many would argue they do it the best. Take a page from the In-N-Out playbook. Do not try to be everything to everyone. Decide what you are best at, standardize, productize, nail down your value proposition, and get set to scale. For example, let’s say your PSA has 3 work roles and 10 work types. That makes 30 possible combinations, 1 correct and 29 incorrect possibilities during time entry. Adding just 1 work role you now have 40 possible combinations, 1 correct and 39 potentials for error. This just adds confusion for your engineers, managers, admin staff and even your clients.
- Standardization – Companies that are prepared to scale have standardized these 5 categories: offering, solution stack, core processes, company brand, and staff development.
Your 2021 Scalability Challenge is to score 1-10 in each of these 10 categories.
- If you scored 85+, buckle up!
- If you score under 85, it is time to prioritize and get to work.
Finally, download the 68 Key Decisions to Increase the Value of Your Business.pdf.
As always, your Sea-Level team is ready to help!