managing the growing venture
TRANSCRIPT
Managing the Growing Venture
Gaurav Karakoti – VLMP/04/07Gaurav Malhotra – VLMP/04/08
Kumar Anshul -VLMP/04/10Devidutt Mishra – VLMP/04/14
T Umashankar – VLMP/04/25Praveen Sharma – VLMP/04/21
AgendaLife cycle of a ventureProblems during growthImportant concepts for entrepreneurFramework for developing growth strategySummary
Life cycle of venture
Start-up Early Growth
Late growth and maturity
Pre Start-up
Sales
Time
•Ideation•Business plan •Seed fund•Legal issues
•Initial customers•Cash out flow
Profit
Problems with GrowthGrowth can dilute effective leadership and
controlIt might lead the venture , away from its
goals and objectivesLack of training and employee development
might lead to poor quality controlFinancial problemsCan lead to stress and burnout of founding
team“Two-thirds of new employer establishments survive at least two years, and 44 percent survive at least four years and 95 percent fail within five years” - Small Business Administration, US
Important concepts entrepreneur should know
How customers behave
Rogers - Adoption of innovation curve
Fixed capital arrangement
Fixed capital required for setting up offices, factory building and equipments
Equity through issue of shares (ordinary/preference)
Debt - Term loans – Issued by state financial banks, some
have option of conversion to equityIssue of debentures – Interest paid on maturity
Cash flow management Cash to cash cycle time = Sales receivables in
days + inventory in days- suppliers payable in days
Trade credit – Negotiate with supplier for extended credit period
Deferred credit – Any case of capital equipment purchase banks works a guarantor for deferred payment
Bill of exchange Bank Overdraft facility
Other FactorsDon’t neglect external macro factors like
changing regulation, labor market and monetary policies
Good time start some small CSR activities if you can afford it
Changing priorities Start UP Growth
Sales/Marketing Sales/Marketing
Obtaining external financing Internal financial management
Internal financial management Human Resource Management
General Management General Management
Human Resource Management Production/Operations management
“Entrepreneurial Start up and Growth: A classification of problems” Phillip Olson & David, Entrepreneurship Theory and practice, 1993
Questions to be answeredWhat
How
Who
Managing Growth – Dynamic Model
Vision and Strategy
People
Organization structure
and Process
Entrepreneur
Alternative growth strategiesDepends upon Products, Customers and
geography.
Existing
NewProducts
Customers
New
New New
New
Geography
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Questions to answer
Which markets/customers will we serve, and which we will we not ?
What results do we endeavor to deliver to these customers ?
Balance value to customers and costTo determine Operational tasks and financing
requirementResource commitments What are the basis of competitive advantage
established and how to maintain it ?
The Entrepreneurial Strategy Matrix
Business Horizons 40 (May–June), 73–77. Sonfield, M. C., and Lussier, R. N. (1997). “The Entrepreneurial Strategy Matrix. A Model for New and Ongoing Ventures.” ©1997 by Indiana University Kelley School of Business.
Entrepreneurial Strategy Matrix
Organization Structure & ProcessesManaging by
Context(1)
Managing by results
(2)
Managing by behavior
(3)
Managing byContent
(4)“you know the product , you know the plants, work with sales/marketing team to determine appropriate quality level and then make these products as cost effectively as you can
I have developed this budget-in terms of quality, quantity and cost. Figure out how to make it happen
(2) Plus “ ..to achieve these results you will have to close plants A,B , start sourcing from Far East “
(3) Plus “ I will come with you to plant A,B to tell them what's going on”
Managing transitions in a growing enterprise, Michael Roberts, HBR
Organization Structure, and Processes
Management styleResponsibility
Content Behavior Results Context
Strategy & Operating
Do analysis, formulate plan , strategies and budgets
Prescribe analysis to be done, criteria's to be used assumptions to be made
Define results along financial, competitive and market dimensions
Define Mission
Organizing Group tasks. Define job units, structure and performance standards. Oversee and coordinate day to day activity
Prescribe actions and behavior
Define results required of specific organizational unit
Create Culture
Staffing Recruit , select and train
Prescribe approach, fix criteria for selection
Define performance standards personnel will be held to, as well as reward and punishment system
Instill values
Managing transitions in a growing enterprise, Michael Roberts, HBR
Alternative Managerial Approaches
Laissez-failure
Professional
Management
Bureaucratic Style
Entrepreneur Style
Use of Formal Coordinating Mechanisms
Del
egat
ion
Of
Res
pons
ibili
ty
Low High
Low
High
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Organization structure and processWhat are the key tasks, and how can these be
broken down into positions that map onto the availability of staff in marketplace ?
What responsibilities can be delegated to the senior layer of management ?
How can I – as the entrepreneur maintain required degree of influence over these tasks and how can I build coordinating mechanisms ?
What are the key values to be institutionalized as culture, and how can this process be accomplished ?
PeopleWhat specific knowledge , skills, experience,
and aptitude are required for the set of positions that have been identified?
How can individuals be hired, trained, evaluated and rewarded to motivate superior performance?
What attitude towards customers, suppliers and fellow employees must new hires possess, if they are to fit into existing culture and be effective contributors to strategic success?
EntrepreneurThe entrepreneur’s vision largely determines
firm’s strategyThe entrepreneur’s value’s drive the firm’s
cultureThe entrepreneurs management style creates
the features of organization structure and process
Transitioning from doer to manager to leader
What is my existing model of management , and where it is likely to “ hit the wall” as we scale-up?
What changes are required and what tools do I need to be competent in?
How can I get feedback on my own performance ?
Do I even want to attempt, to make this transition?
Entrepreneur
SUMMARYGrowth forces companies through transitions
for which the management may be ill prepared
Dynamic fit between Vision & Strategy, Organization Process and structure, people and entrepreneur
Growth challenges the founding management team who may lack skills to lead a larger, more complex organization
Entrepreneur should also change himself according to the organization need
Thank you & Questions for discussion