I’ve had a lot of conversations over the last month about Ironheart’s approach to maximizing corporate value for growing companies. A lot of those conversations lead to the question of ‘when to start preparing for the extraordinary event?’
Here’s the (long-winded) answer:
The first piece of the answer pertains to the realities of corporate trajectories.
One of the myths about corporations – and I’ve worked with some of the largest all the way through to early-stage tech companies – is that they navigate to secure their growth objective in a zig-zagging pattern deftly moving through a field of obstacles, challenges, and opportunities to achieve a significant financial gain at the end of the course. Think of an aerobatic plane peeling through wide open blue sky with a plume of brilliant smoke showing the grace of its motions.
Virtually all corporations, regardless of size, move in large macro-trajectories. Think of a rocket launching into space in a beautiful arc, with only periodic short bursts from small thrusters to make tiny gradient adjustments that keep the rocket on its trajectory.
Corporations are complex, multidimensional beasts. Most aren’t built for sudden jags.
Certain extraordinary corporate events, like pursuing a major capital round, closing an M&A deal, or winning a major commercial sale, can present a jag in the trajectory. This can be beneficial to the deft company.
Nearly as likely, it will have a taxing or even destabilizing effect on the company’s short-term operational performance and longer-term development.
[M&A, for example, is fun and newsworthy. Who doesn’t like champagne and glitter? But the number of M&A transactions which are ultimately judged as having had an adverse affect on the companies involved – including many of which are ultimately written off in their entirety – is remarkably high.]
But I'm jumping ahead.
The second part of the answer is understanding the sport of curling. Yes, curling.
Perhaps you’ve seen the sweet beauty of this sport every four years during Winter Olympic highlights. The thrower in a graceful slide across the ice on approach, and then gently pushing the handle of the stone – looking somewhat like Grandma’s teapot filled with concrete – to launch its smooth trajectory, balancing force and speed relative to the physics of mass, friction, rotation.
Then two other players emerge to furiously sweep at the ice in front of the stone, never touching it, working to perfect its path towards the cross-hairs of the goal. The idea is – and I understand that the physics at play here is a point of heated debate amongst scholars from Canada to the Nordics – they are heating the ice through friction to create a thin layer of water on top of the ice and thereby reduce the friction that affects the stone’s path.
Like the small thrusters on the side of a rocket.
The roles and functions in curling are metaphorically similar to what goes on with a company pursuing a growth trajectory.
The fundamental mechanics of the thrower are imperative to launching the pure arc of the stone. Then, the sweepers – my favorite spectacle – are vigorously affecting the glide path of the stone to stay true or make minor course corrections.
The goal is an elegant release, a smooth glide, and a beautiful landing on the goal.
Gun to the Head
Back to the original question: “When to start preparing for the extraordinary event?” And the third part of the answer.
I had a law professor one time that took the Socratic method to the next level of intensity by not only asking questions of the students to provoke learning, but then intensifying the experience by stating that you had to answer in the next three seconds. “Make a decision, dammit.” He intensified this highly affective experience by stating, “You have a gun to your head.”
[By the way, IMHO, it was a fantastic teaching technique. Nothing trains responses under pressure more than effectively arguing whatever point you have bleated from your lips with less than full approval from your brain than his exhortation about a ‘gun to your head!’]
The challenge for a lot of executives is that they won’t make the decision to begin meaningful preparation for the extraordinary event – the M&A transaction, the capital round, the transformative sales opportunity – until they have a ‘gun to the head.’ That 'gun' emerges when revenue growth starts to lag, or the rate of cash burn becomes worrisome, or a competitor starts seizing the real or perceived momentum in the market.
The better answer is to start at a point sufficiently far in advance to conceptualize and deploy those strategies which will ultimately drive corporate value. Essential (but under-utilized strategies, particularly in the mid-market segment) for driving this value include:
+ Increasing the visibility of the company in circles of thought leadership for prospective buyers, partners, investors, analysts and other influentials;
+ Shaping the contextual environment (traditional, social and industry media) with messaging that builds the foundation for later negotiations on strategic approaches, synergies and ultimately valuation or pricing;
+ Increasing the breadth of prospective buyers, financiers and partners, by developing approaches of foundational engagement for subsequent leverage;
+ Developing differentiated and meaningful metrics early so that the company’s value proposition can be substantiated in a quantitative way; and
+ Scrimmaging the key spokespersons of the company so that they speak with a common voice on key issues critical to the subsequent extraordinary event.
[Note: Everyone I’ve talked with in the past several months has a war story of the executive who sends up the red flags during diligence because they are poorly prepared and botch a critical answer. There is no reason for this to happen, which lowers the probability and efficiency of transactions, as well as potentially leaving money on the table in terms of lowered valuations.]
What I am suggesting is that execs work earlier on the mechanics of the thrower, and the techniques of the sweepers, and put the company on an elegant growth trajectory.
What happens all too often is that the company waits too long and has to literally jam the stone with their broom in order to get it closer to the goal. They act as though they have a gun to their head.
Those experts I’ve been talking with have seen this 'force-over-grace' approach time and time again. And the inevitable result is lots of unnecessary finance, operational, logistical, or personnel-related challenges that have a very real impact on the probability of a deal closing, and most likely its closing value.
What these experts haven’t seen is a purpose-built platform for intentionally solving the problem. They have said almost in a refrain, “I wish I had known about this 30 days ago.”
The point is to not wait until you literally have a ‘gun to your head’. When this point is reached, your team is operating in a reactive, forceful and even fearful manner.
Launch your company towards that event which will define its extraordinary future earlier and intentionally from a point of grace. Just like in curling.