067: Ron Carucci - The 3 Biggest Pitfalls of Growing Your Company

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This week's show is all about the three big pitfalls of growing your company. And we have a special guest, another coach on today who's going to share their consulting company, share their work, and how they address the big pitfalls that they see. I wonder if you're dealing with any of these and need to tackle it head on. Hello and welcome again to the Scaling Up Business podcast. I'm your host and growth coach Bill Gallagher on the show today. With us is Ron Carrucci. He's the co founder, managing partner of Nablet. He's been in the business of helping companies grow and scale up for 30 years and he's worked all over the world. He's going to share with us the three big pitfalls that they see companies deal with in growing up and I'm just so excited to have him on the show today. So welcome to the show, Rod.

Bill, great to be here. Thanks for having me.

So you're up in the Seattle area. I understand you too are a recent empty nester.

Actually, within the last 24 hours my wife and I, she was off in LA getting my daughter settled. I was in New York getting my son settled in New York. And we arrived back in Seattle actually a little within 10 minutes of each other and realized, wow, it's official. We're graduated. We are officially graduated from parenthood. I know that's not true, but it's fun to tell myself that. But it's definitely an odd season where you don't know whether to celebrate or grieve or both. But yes, I am into that new phase.

So I have a son and daughter too who are both now out of the house and I'm just a few more months ahead of you than that. Our daughter moved into our guest cottage earlier, but she's I mean, she's still on the property, but she frequently, she's like, she did a national tour, she works as a photographer, videographer for recording artists and stuff. She, she was like going all across the, the country this summer with the, with the rising new recording artists doing their stuff. And it was like, it was both, it was sort of exciting but also very unsettling. And I think there's a, there's something here as well for our businesses that I, I'm just sort of noticing as I speak, which maybe isn't the best idea, but. But that growth and changes produce unsettling moments where the old rules and ways and things don't apply. I know there was some excitement and some trepidation, some anxiety and some discomfort for us as our kids moved out of the house and went off to school and went off to whatever they were doing. And then all our old patterns and we found ourselves fighting and then we found new things to do and, but the old things are unsettled and you have to sort of reinvent and adjust and deal with the new, don't you?

That's just so true of life and business and parenting. I taught a workshop in preparation for this. I actually taught a workshop on empty nesting last year. And the who's that person across the bed and what do I make of them now? But also your relationship with your kids reorients itself, right? What does parenting really mean to a 25 year old? And what relations do you get to have with them? And what advice do you get to give them and not give them? And everything's changing. And I think for many leaders and businesses, the desire to impose certainty and predictability and to impose what I know becomes so intensified the minute disruption sets in. And that dissonance between all I know and all I don't know is very uncomfortable.

Yeah. So nice segue there.

Nicely done.

Because I don't think our listeners were tuning in to hear all about empty nesting. Some will face it in the future, some have already fixed it. But, but there is, there is some clear connection to growth and transitions. So tell us, before we get into the three big pitfalls, how do you even get into this business? I know you've been in it a long time of helping companies grow, but what, you know, what was the moment that led you into it? What's your path been?

Gosh, you know, I think I call it evolutionary for sure. Early I was fortunate early in my care, in my last career to realize that I was in the wrong career. And too many people don't discover that till 20 years after being in the wrong career. But I was in the arts field and I was doing very well. I was very successful. But on some deeper level, I was bored but didn't quite understand how to say that when you're 22, that's hard to admit, but I was touring in Europe and doing some work for the US military and State Department. And we were in Germany and Dachau at the concentration camp. And we were in the chapel and doing a program on. It wasn't called diversity then, but that's what we call it today. But in the room were military soldiers from West Germany and America. There were diplomats from East Germany. The wall was still up, but there were some. It was beginning to get ready to come down. There were civilians, there were enlisted people, there were State Department people. It was quite a mix of people who all had little respect for each other and had to work together, but didn't know how to get along. Yeah. And we were doing work on presenting to them stories of what it meant to give past intractable differences. And in one of the conversations, one of the group processing moments, a young soldier raised his hand and in a very, very courageous moment of vulnerability, said, I'm just so tired of being trained to hate. And I was stunned that a story that I had presented provoked him to think that way. And I wanted to know more. So we chatted a little bit. But afterwards I actually went out for a beer with him. He probably wasn't much older than I was at the time. And I was so fascinated by how he was being so honest because of something he saw us do. And I think I would point to that moment, in hindsight as the moment I realized telling great stories was interesting. But engaging other people's stories was far more life giving to me. It was the conversation that brought me life, not the actual telling of a story. And I think that began a path for me from one career to the other. A much better career for me. And over the course of those 30 years, I've certainly spent a lot of my time inside organizations, helping them become better, more honest, more truthful, more competitive. But I think at some point I realized that it is hard to be a prophet in your own land. And if I was going to be able to express my deep passion for organizations and how to organize human endeavor, I was going to have to do that by not being part of one. And so I began my own organization with some friends. And we started navalin 13 years ago as a way to express our desire to help organizations optimize the collective efforts of their people and realize their aspirations.

Interesting. So why don't you tell us a little bit? I don't know, maybe you can share an example or two of clients you've worked with, where you've had to help them grow and overcome some of these things.

So, as you alluded to in your opening package, we repeatedly find three very common ditches into which organizations have put themselves. It's the classic $80 million company trapped in the body of a $20 million organization, or it's a $250 million company trapped in the body of an $80 million organization. They have grown, but they have not scaled. And no one ever told them that scaling requires growing up, and they don't want to do that. And so we typically find we walk in and much the way you see a teenage boy wearing his dad's suit, you see way too much bloated costs having bolted on things impulsively and no sense of identity of who they're trying to become and who they are. And so the three of them are really focused around first strategic identity. One of my very first questions I asked my leader clients is show me your strategy and I'll get handed a mission statement, a vision, a value statement. I'll get a financial plan, I'll get a sales forecast, I'll get a P and L. I'll get every artifactual counterfeit you can think of. But I don't get a strategy. I'll get a bunch of goals. I'll get product quotas. But when I say, tell me who your competitors are and why you're better than they are, tell me why customers should choose you over them. Tell me what you are better at and show me the capabilities you have invested in to get better at things that make you different than anybody else. When I get the basic tenets of strategic identity, I get crickets I get no sense of. And if you can't tell me what you're saying no to, tell me what customers you won't serve, tell me why you shouldn't serve them. You have no strategy. And so they have not made trade offs. They've said yes to every piece of revenue they can get their hands on. They sure we can do that, some mantra. And they convince themselves it's a good thing that it's based in service versus based on an impulsive and neurotic inability to say no. And so the first ditch is you don't know who you are. But having gotten past that, you don't Know then how to organize your assets. And so I've got bodies of people running around doing all kinds of things. I have jacks of all trades, masters of none. I have no sense of specialized skill. I've taken critical competitive work and competitive enabling work, and I've mixed it with necessary, busy work. And so it's all diluted. I have not defined the swim lanes of people in which to organize the work. You know, an organization is no different than a baby growing inside its mother. Mitosis is happening all the time. Cells are dividing all the time. But if you're not orchestrating and organizing very carefully how that mitosis happens, things just divide. They just prolife. Activities proliferate without any sense of purpose or intention. But if you have no strategic identity and know who you are, there's no reason for that activity to proliferate with intention. It just proliferates. And so the second ditch is you don't know who you are. The second one is you don't know how to organize what you do. And the last ditch is you don't know who's leading the way. So it's so often a painful moment when a new entrepreneur gets his Series B money or his, his MVP status or something has happened where a new influx of funding has happened. He said yes to 20 customers. You know, at the same time Costco called, that's always a common one, or Walmart called. And now you try to, you know, 24 7, get stuff out the door. And suddenly you have people who are, well, woefully ill prepared to lead. And so you have to go outside and lay over them and bring in leaders from the outside who don't know who you are, don't know your DNA, don't know, and they start imposing all of their own different versions of your strategy. And now you have, much like that person who's come out of way too many cosmetic surgeries and has been nipped and tucked way too many times and their face is all distorted. You have that person in the form of your organization looks like that. You can't detect any coherence, you can't detect any intentionality. You can't detect any sense of momentum or passion because people are just exhausted from running around like chickens with their head cut off. And so the third pitfall is you can't lead your way forward. And so all three of them are often at play simultaneously when we enter organizations. But any one of them can derail and be your ultimate demise. All three of them are certainly a very difficult thing to overcome. But the sad but most hopeful part, I would tell your listeners, Bill, is that they're all avoidable. They're all so easily, unnecessarily ditches. You have to be in by simply having the discipline early on to set an identity and stay in your swim lane. Say no to things that fall outside, that stay focused. Intentionally scale your organization around your competitive differentiation and prepare people to lead early so that when you need them, they're ready.

I think a lot of times, I mean, at least one of the key things that we see with folks is in the beginning, like, what's your differentiation? What are you really good at? And they say a bunch of things, but it's all from, like looking in the mirror. It's all from navel gazing. And they don't know from their client's perspective, and they have it narrowed down to the core ideal client. And then ask those people, because who you are for people that are unhappy with you and that you really shouldn't be going after is a different thing, and you shouldn't be going after them. So distilling who the ideal client is and then who you are for them and what makes you different and all that are critical pieces of our strategic work. We draw on, well, among other things, the work of Bob Bloom in the Inside Advantage and his lessons there, but also in Common service and some other rules or frameworks and leaders for figuring out kind of who you are, who you should be working with and what makes you unique and different. What you were telling in getting ready for this show about a luxury goods company that you did some work with and maybe could share a little bit more to bring it to life for us.

Sure. So, you know, we walked into a company that had migrated it up in value to a marketplace where they had not served before. They were selling, you know, more commoditized versions of their product to a broader audience. But realized they had a. They had. There was a major opportunity where they were to serve a more premium client. And they actually were successful at developing the product that that marketplace wanted. It happened to be a lot of demand, but they did not develop the rest of the enterprise to back it. Right. So you now have customers with very different expectations who need to be served very differently. You have to tell your story and market your product in a very different way. All of the other things that needed to be required that came behind living in that luxury world were not there.

So they had not been in luxury. They'd been in something else. And then they moved into luxury.

They had been in the same product line but to a more broader based audience.

Got it? Yeah, got it.

And so, and from a basis where your basis of competition is being able to take cost out, you're competing a little bit on price, you're competing a little bit on some value play, but mostly it's, you know, it's a broader reach. Right now you're in a much more niched place where the quality expectations are higher, the investment requirements to get the margins you're going to get are higher. And all of that they understood in theory, like to your navel gazing point, but not in practice. And so they got themselves into some real trouble because they hadn't done all of the work to say we've now self identified with this product to these customers and the marketplace rewarded you for it quickly, but now the work to come behind that with all the other necessary parts, your old DNA is holding on the operational excellence and take cost out and keep your margins lean. All the things that actually undermine the very identity you said you wanted to become, you're now presiding over your own demise. And so they've had to do a. They're still doing it a whole lot of work to get the organizational muscles in place needed to serve that customer base and sustain it.

So they're committed to the luxury segment and they've moved there and now they're reorganizing the way they work and their structure for that.

They're trying to. There's still lots of internal debate and lots of internal dissent about how much of it is necessary. You have a lot of people who are still coming from the old DNA and that's hard to give that up. And then you have leaders who are trying to learn to lead in that environment who have never done that before. And so they're trying to elevate the altitude of their leaders to a different place while building in the new muscles they need to do it to be able to sustain the place they earned, not so much by accident, but with some luck and some skill, but certainly a lot faster than they might have intended to earn it. It's a classic be careful what you wish for moment.

Right?

Well, we just saw somebody win the super lottery, right? The Powerball or whatever it is, like, oh my God, be careful. Your whole life, I think, just got.

Ruined and you have no idea it's coming. And congratulations on those 5,000 brand new.

Best friends you just earned 5,000 V. Probably more manageable. If you think about it though, lots of companies wish for the flood and then when you get the flood. You have to deal with the flood. And if you learn to live in the higher waters, then you've accomplished, you've actually scaled. If you can do more than survive a flash flood, if you can learn to live long term in that new environment. Right.

Yep, yep. Flash floods, a great metaphor. But. But, but the. Here's the problem, though. Learning to survive the flash flood still has you on the defense.

Right.

And what happens is those survival instincts become norms. They become the way of life. Learning how to ride the ride on top of the flash flood and keep it going is a whole other set of muscles. And I think part of this company's problem is that it's learned to survive in defense mode, dying in the flash flood. But that doesn't mean it's thriving and growing. I think they're still figuring out the difference between, okay, well, we're delivering these products and people are still paying for them. But you know what? My consultants on the team and your thing just went on Facebook and found a whole group devoted to bashing you in anger. Not a good thing. And I'm not even sure how many of you even knew it was there.

Yeah. So.

Yeah. Learning to play defense and not drown isn't the same as winning.

Right. Right. So there's learning to really, truly operate and thrive in a new environment. So in this case, they were moving into that. I mean, I can think of clients all the time who. They've got something. They. They were in one city, and then they added a couple cities, and now they're like, you know, hey, we could take this thing nationwide. And. And that's when they tend to engage folks like you and I because either they want to start to take it nationwide, or it's going nationwide, and they just can't even keep their head above water. And they're looking for some help and some guidance. I probably get. As often as not, people are. They're plateaued or they're in a rut, and they. They see an opportunity, they want some help to get out of it more than the people who are in the middle of thrashing and drowning. And. And those people tend to throw money at problems, and they don't necessarily always say, let's rethink everything.

Well, that's because then a year later, they're in the ditch, and then they call.

Right, Right.

And you. You know, I. My wish you'd called a year ago is often what I. What I could have now. Now my options are narrower. Right. Yeah, because you're in the ditch. And so you have to dig away the chaff to find the core goal, to say, okay, let's, let's salvage this. Whereas when they call you, when they're, you know, on the, on the, on the way up, the problem is now I've got to impose constraint. You don't want, I have to impose discipline. You don't want, I have to impose turning down work and revenue for the purposes of you catching up with yourself and getting out of your dad's suit and putting on one that fits that you don'. Want. And so I'm nothing but an annoyance to you, but I'm the best thing that could have ever happened to you if you listen.

So the first thing that we were hitting on there is your first pitfall is strategy. Getting clear about who you are, what makes you different, unique, what's your compelling advantage, who you should be working with and being and figuring out what to say no to. Right. The clarity of that, that lets you focus on stuff and sometimes that alone will cause some growth. I know one very, very small company I worked with happened to be a friend and I encountered him at 3 million and just getting clear on things helped him get to 11 million very quickly. But then comes the next piece. And we talked about this on a show maybe a year ago now with Daniel Marcos, who's another one of the coaches of my group about scaling versus just throwing different things at it. And Daniel said how, you know, you'll see a company in the beginning, like you can just run your book, run your business out of your checkbook and if anybody has that kind of thing anymore, right, so just use the register and tally it up at the end of the year and throw receipts at somebody and maybe at some point your, your sister in law comes in and does something for you because she did a little bookkeeping once for somebody else and then, and then Maybe you get QuickBooks online and that gets you going, you know, you said a little something, but at each stage, right, There's a, there's an evolution. Before you know it though, you're moving rapidly through tens or hundreds of millions of dollars and you know, knock on wood, God, God help us all and all that quality problems. But, but that sister in law isn't somebody who's going to become your controller or CFO of the bigger company. In most cases they're not going to. Even if they could go learn the specific content skills, it's not really in their DNA to drive. All of your people aren't necessarily growing and reaching in the same way or along the way they realize, oh, they hate bookkeeping anyway. And what they really want to do is paint or, you know, who knows what, right?

I'm laughing because I've heard all these.

You've heard them, right?

I've heard them. We've heard them all.

But then also the systems have to evolve and you have to move to this and that. And then you get a couple different systems, then you start to create some conduits and interconnections and then you go and you implement something called an ERP system. And suddenly all the pieces of the company are talking in real time to each other and somebody enters some bad orders or test orders or draft orders or makes mistakes, but then leaves them in the wrong status and production suddenly thinks that you need more goods than you knew and puts things in purchase and in production. And suddenly now you have a massive cash problem and everybody hates each other and like that. So each stage of growth requires an evolution of systems. And not everything makes the cut, right? You have to say goodbye to that system that you had before and those people and some of the process, you have to continue to redesign and rethink that to scale versus just bolt on, as you were saying, right?

Absolutely. And the problem is most leaders don't do that in advance, right? They do it when they're feeling the G force. And the problem is they do it in a bunch of nip and tucks, right? So they have somebody else. There's somebody over here doing financial systems, they have somebody over here doing HR stuff. There's somebody out there looking into new production systems or new outsourced manufacturing opportunities or traveling to China to find it done cheap. So they're not treating it as a system, they're treating it as a bunch of discrete scalability problems and they're looking for economies of scale. But the problem is when you assemble a whole bunch of economy of scale solutions into one thing, it doesn't make an organization. It makes a bunch of bad nips and tucks. Now you have to put in a bunch of band aids and linking mechanisms to try and get the whole thing to work like a machine. And you're now wasting capacity and hemorrhaging just having people run around trying to make all this thing fit together, rather than stepping back and taking an enterprise view at truly systemic design work that looks at the hardware and the software, the people, the culture, the skills, the work products, the job designs, the departmental designs, the governance and decision rights is usually a big one. You don't just. You distribute the work, but you don't distribute the authority or decision rights or resources. And so now you've got a really upside down organization. You don't design core processes that you can scale. You don't teach people what they are. So your best bet is to step back and do this as an enterprise and do it one time as an integrated set of scaling organizations, not as a bunch, as a series of triage moments that lady, you assume will all just work itself all out and it'll all settle all down and then it will all work nicely together. Because that's what I wish for.

Well, I think yes. So we envision a future. We design the organization that we want to become. It's possible to get ahead of yourself. I know one mistake I made with the prior businesses. I envisioned that future and I laid out the parts and I imagined the people and the roles and things like that and the systems and like that. And then I bought the big computer system that I would need when I was $250 million, except I was very, very far from that. And I went and implemented it. And it sucked time and energy and resources away from the team and introduced all kinds of problems. It was a critical strategic error on my part in growing that company and one that I have learned from and try to work with our clients on over time. Right. Not to imagine the future and then be careful about when you implement it well.

And you know what, people, you know, the classic excuse I hear is we don't need that now. That's the time to do it.

Right.

Right.

If you think waiting till you need it, till you're feeling the pain is when the time to start doing this that you're already a year too late.

Yeah.

And then you never. And then you never catch up. Right. You're always behind in preparing your organization to scale and your revenues are exceeding your deliverability.

Well, in my case, I was five years early. Right.

But you know, I'd rather be that early than that late.

So the last thing, the third thing you talked about is growing your own leadership. And this is one God, I've dealt with this already twice today. You want the coach to come in and work with you on your strategy and help you with the organization, the systems, and get the good execution habits in place and all that kind of thing. But you're not working on your own leadership and there are gaps in your style. Probably the biggest thing that we see is the leaders not developing their people, not altering their style to work through other people, not shutting up, not all of that. And I Wonder what you see in all of this and how you tackle it.

So we just a bunch of years ago we completed a 10 year study. We've known for 20 years that the rise up in organizations, the transition to a broader altitude, about 50 to 60% of executives fail in the first 18 months. We've known that for 20 years. But when it started to become my clients, it started to get personal. So we embarked on a 10 year study, 2,700 interviews. We isolated 100 leaders in mid ascent to watch what landmines could possibly be causing half of them to fail and discovered lots of those landmines. But the great news is we were able to isolate statistically four very consistent patterns that set those leaders apart who could rise up and sustain themselves. They can find the book on Amazon. It's called Rising to Power, the Journey of Exceptional Executives. There's also an executive summary at our website. But. But the great news is the ability to rise up regardless of what size you are and lead at the strategic altitude and orchestrate the work of others below you. It's learnable. It's not learnable when you get there. You should learn it beforehand. But they're very predictable things that leaders who succeed up there do. And they can be learned.

Yeah, I think that's the key thing. And I've now learned to tell this to leaders beforehand. Look, there's a few different ways this thing's going to fail. This initiative, this effort, this undertaking, this thing you're hiring us to do. And one of them is you think this is for everyone else but you.

Exactly right. Yeah.

So you've got to be as much at work on yourself and your leadership as you want because the organization is an amplification reflection of you and your leadership team. And all the things that we see here, we'll see out in, in the organization.

Yep. And if you're leading to, if you're leading at the wrong altitude, you're. You're causing compression and you're compressing your. Everybody else below you is going to even lead at the worst level. And people who should be leading in your. We look at three different systems. We look at the strategic system, the coordinating system and the operating system. And Even if you're 30 people, you have all three. And if you're dipping too low from the top, the people at the bottom are just spectators watching.

Yeah, it's really brilliant. All right, so we've hit on three big things. Getting clear about your strategy, not being unclear in your strategy, not bolting crap on, but actually designing the scale of your business, all of its systems, process people and that kind of thing, and then developing your leadership over time so that you aren't the lid on the growth of the organization. Three big pitfalls and some of the approaches or ways to do them. Ron Carrucci has more available on this@navillent.com transformation of course, we'll put the link to that in the show notes as well. So you can just go find it if you're driving to work right now or riding a train or flying on an airplane, whatever it is that you're doing. And you can see what they do. We obviously do work with very similar people in similar situations to this. And so I was excited to get sort of a contrasting perspective and another person doing this work on the show today. I think it's really helpful. I'm so glad that you came on the show with us, Bill.

Thanks so much for having me. I appreciate it. If your listeners need to know where to find me, you can tell them where to find me and I'd love to have them come visit.

Yeah. Navalant.com transformation you're up in the Seattle area and then just to remind you of the stuff that we've got. So we do regular public workshops. Of course we have our YouTube and content stuff like that, but we have upcoming public workshops year round. You can go to scalingupbusiness.com and see the next couple ones in this area. And then of course on the website you can also download, subscribe, get both these and our regular blog updates with articles, tips, tricks from a whole variety of experts on all of the challenges and how to overcome them for scaling up your business successfully. You can subscribe there to this and scalingus.com in addition you can download that free growth guide there and it'll tell you how to start running your your own scaling up team meetings and and get some of that stuff going. So tools there toolsavelin.com as well. And thanks so much again for being on the show with us. Until next time everyone, thanks for joining.

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