In 2018 Paolo’s company achieved excellent results. Rising turnover and good margins. 2019 started very well, too, but one thing worried Paolo more and more: the pipeline of the new projects was thinning out and the phone, since few months, was not ringing as frequently as usual.
by Raffaele Contino, Strategy & Marketing Consultant of Hike Up Consulting Srl
In May 2019, Paolo became anxious about the situation and decided he needed to do something about it. He had already tried various things: he had entrusted an agent for more than one year, then, for a couple of years, he hired a new sales manager who knew many people in the sector … but unfortunately nothing produced appreciable results. Besides the concern for the turnover, Paolo was also managing some delicate situations inside the company. Some key trusted employees expressed discontent and a couple of them even resigned. They complained about a pervasive disorganization and the impossibility to work at their best. Furthermore, as if that were not enough, even customers started complaining about delays and misunderstandings, in some cases quite serious, which obliged Paolo to step in directly. Many entrepreneurs and managers, like Paolo, cope with the critical task of managing a growing company. A situation that requires them to apply a new approach to be effective. In the mechatronic and component sectors, many small and medium companies have performed well in recent years and, in some cases, they have grown notably. However, this trend was changing already since 2018 for many of them, and 2020 wiped it out in just few months.
In my opinion, three main barriers limit the growth of medium-sized companies:
1) Marketing
2) Organization, systems and processes
3) Leadership
Effective marketing
Many companies, especially family-run ones, almost exclusively rely on a single channel for the generation of new sales opportunities: word of mouth. Although word of mouth represents an extremely important channel, it turns out to be ineffective to assure a sustainable and predictable growth. Especially when the company size increases. Therefore, it is necessary to supplement it with a marketing activity able to attract new customers, as well as talents, external collaborators and the ecosystem of relationships that is vital for growth, particularly in unfavourable market conditions. Nevertheless, doing marketing does not mean only communication. Communication is just the tip of the iceberg. Marketing means defining to whom to sell, what and how. Doing marketing allows companies to better understand the requirements of their market and to find the growth path that best suit the company’s culture and core competences. Because real results comes with focus, while trying to please everyone leads us not to really attract anyone. We all realize it but too often, we fall into this trap. Marketing means “getting out of the building” and talking to your market, creating new relationships with real people and talk to them. It is crucial to anticipate trends and opportunities. This can be done both through activities that exploit digital assets and contents (website, newsletters, videos) and direct contact activities (email, phone, LinkedIn). On all these fronts, technology and automation provides us with various instruments to be more effective and efficient. A technology that nowadays is accessible to any budget and allows even small companies to make the difference. Fortunately, in 2019 Paolo had found his way by employing a young business developer who, supported by an external consultant, had brought these methodologies into the company. In 2020, when many were obliged to stop the development activity, Paolo’s company went on developing new important opportunities and especially opening up long-term commercial relationships.
Organization, systems and processes
Another barrier that prevents many companies from growing is represented by the organization and by the systems and processes that comes with it. On one side, many big companies tried to control their structures with slow, often cumbersome, processes, but on the other side, too often I come across mid-market companies where there are no clear responsibilities and shared performance indicators and where, in order to make a step ahead, the entrepreneur needs to step in directly. Actually, this should be a wake-up call for many entrepreneurs. Problems with clients that become so big to require the entrepreneur direct involvement; important quality matters that are neglected for months and months; corrective actions agreed and shared by the team that are lost in execution. In these cases, the first step is to make sure that the right people, focused on the activities that bring results for the company, manage all key functions. I am not a fan of organizational charts, and I think it is more often useful to draw up a list of all necessary functions and to match each function with the responsible person (the person who recognise problems when they arise and take action as a result). In this way, identifying problems becomes easier: are there some functions without a responsible person? Or with more than one responsible person? Are there any people responsible for too many functions? If you could choose, would you employ the same people again? Paolo did this exercise, and he realized many issues in its organization: he one function not managed at all, two functions where there were two responsible people (none of the two feeling responsible for that) and his name appeared too often as real decision-maker, even when it was clearly unnecessary.
Building leaderships
The last barrier, but I believe the first in term of importance, is the capability of attracting and retaining talented people, able to guide the company beyond its limits. In many family-owned enterprises, the entrepreneur represents the primary big obstacle, because in the aim of keeping under control all company aspects end up being the bottleneck. In this case the main impact is on people: valuable employees feel delegitimized by frequent interferences and especially, in the long run, they lose interest in what they do. Therefore, it is fundamental that owners find their own space where to operate, focusing on what they do best, leaving to their managers the freedom to find solutions and, why not, sometimes letting them make mistakes. Paolo understood that his ubiquity was a serious limit to the company growth and decided to invest more in his people, helping them to grow through training and delegation. Moreover, he had created an executive committee constituted by his first collaborators, with whom he monthly discussed the most important projects and critical tasks.
