What makes some companies take off while others struggle?

While it’s true that market size, timing and old-fashioned luck do have their part to play in helping some companies grow a lot faster than their peers, ultimately it comes down to how you approach growth internally.

It’s usually the companies that move fastest that win in the end. Many founders say that speed is their secret weapon.

Over the past decade, I’ve worked with scores of fast-growth companies and met some of the world’s most inspirational leaders. Time and time again, I’ve seen that the rapid growth of great ventures comes down to one thing: execution.

Quality and speed of execution are the principle ways that founders can supercharge growth. Breaking this down further: the number of decisions you implement, multiplied by the speed you make them, determines your growth rate.

The execution equation

The model for effective execution is simple, and looks like this:

(quality of decisions) x (speed of decision making)
= (rate of growth)

At the basis of this way of thinking is the concept of constant testing and iteration. Every time you make a decision and put it into action, you create an opportunity for growth. Even if the decision turns out to be wrong, you are learning something.

Every so often, something you do will give you a significant growth boost. It’s impossible to theorise what will work and what won’t; only when you go to market do you find out. This is why you want to strike a balance between the volume of decisions made – which ultimately move your venture forward – and the quality of each decision, which gives the strategy a greater likelihood of success.

Empowering decision-makers

To achieve high-quality decision making, you need to be crystal clear about what you are trying to achieve. This may sound obvious, but companies are often very bad at it.

This means having clarity on five key measures:

Mission

Strategy

Objectives

Milestones

Company Culture

I’ll go into more detail about the power of each of these metrics in future posts but, for now, it’s worth saying that being clear about what the company stands for and wants to achieve, and how each member of staff can own their contribution to that progress, is a precursor to great decision-making.

Remember, there is no objective measure of whether something is a good or bad decision – only once set in the context of whether it helped your company achieve its end goal can you say if it was good or bad.

To choose one example: you might say that a decision that boosted revenue was a good decision. But if it boosted revenue from clients that didn’t fit your strategic vision or came on low-margin projects or required product development outside your roadmap, it wouldn’t necessarily be good. So, defining what good looks like for you, and effectively communicating that throughout the organisation is essential.

It’s not reasonable to expect people to make good decisions without having access to all the necessary information. Beyond clarity of mission and strategy etc, there also needs to be transparency around the activities across the company. Think about how you make information available, and come up with mechanisms for spreading it throughout the company (town halls, newsletters, cross-functional groups). Remember: transparency also delivers trust – a key element of helping people take responsibility and make decisions.

If your people care about outcomes and feel they have a stake in the business, they will spend more time and energy seeking innovative solutions and making much better decisions. Shared ownership doesn’t have to be equity, although that can be part of it, it really comes from being listened to and involved in idea creation and input into strategic direction.

Boosting growth through parallel decision-making

Let’s say one in five new initiatives has a significant impact on your growth. If we compare two companies where one makes decisions in series and one in parallel, the company running five parallel tests grows five times faster.

Henrik Landgren is now a partner of EQT Ventures but he cut his teeth building Spotify, where he discovered the power of parallel testing. He says that, in the early days, Spotify would test new features in sequence, carefully observing the outcome of each test before moving on to the next. This was slow and laborious, so the team changing its decision-making process to a parallel system. By introducing multiple new variations, Spotify was able to learn much faster, and growth took off.

Create a culture of urgency

To make decisions fast, you need a culture of urgency. Too many people think this is created by setting aggressive and unrealistic targets. There is some truth in that, but targets on their own aren’t enough – and if you continually set targets that aren’t reached, they lose their power. This is my personal viewpoint but the best stretch targets can be hit 50% of the time. This means that while they are not easy to hit, they remain possible.

To create the culture of urgency, combine targets with measures that accelerate the speed of decision-making. How fast do you respond to enquiries? How often do you release product updates? You also need to remove bottlenecks. These include: committee meetings and manager (or founder) sign off/involvement. Bake speed into the way your company operates.

As your organisation scales, you’ll also need to avoid second-guessing decisions. If you or your managers think a bad decision has been taken, don’t overrule (first of all, you might be wrong) but also you’ll set a culture where decisions need to be checked or approved by you. And never say “I told you so” when things go wrong. No matter how tempting.

It is important to create an environment where failure is accepted. You don’t need to celebrate failure, but it has to be OK to fail. Even when you fail, you learn something useful for the future.

“In Silicon Valley we don’t celebrate failure, we celebrate learning”
Reid Hoffman

It’s OK to try something new or different and for it not to work. It’s not OK to execute the plan poorly and to fail – there are good and bad kinds of failure.

Part of this is being prepared to make decisions without all the information – you can spend a long time waiting for more data.

“Being wrong may be less costly than you think, but being slow is costly for sure”
Jeff Bezos

Jeff Bezos puts it like this in one of his shareholder letters:

“Type 1 decisions are not reversible, and you have to be very careful making them. Type 2 decisions are like walking through a door — if you don’t like the decision, you can always go back.

As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention”

The double-edged sword of success

As Bezos notes, when companies scale, it becomes a lot harder to achieve rapid execution. As you get bigger there’s a lot of things that can make you slow down. Hiring more risk-averse people, slow communication, too much process and numerous other factors all start decreasing agility. This is why many companies fail to maintain excellence as they scale and therefore grow more slowly (or ultimately stop growing altogether).

There’s a myth that once companies achieve scale, they have “made it” and the hard work is over – but actually it only gets harder at this point. That’s not to say it’s impossible. At Google, the search giant implements so many changes to its code per minute, that when something breaks it can be very difficult (and expensive) to work out which tweak is responsible. You’d think that this would slow the pace of innovation and change. But the engineers attacked the problem differently, building a new way of testing code updates continuously to accurately pinpoint the moment that the code is compromised.

Google is not alone in integrating its product development and IT operations (the practice is known as DevOps) in this way. Facebook and Amazon have also invested in continuous delivery. There’s an interesting McKinsey report on how this has been achieved. Basically, it comes down to a mindset change: as the leader of a larger business, you have to obsessively scan for any barriers to speedy execution and delivery and tackle them as they arise. This may involve building more automation into your processes, or better communications with staff. For example, Google knows that sloppy code could break its whole system, so it not only maintains strict guidelines for developers, there is also a system whereby random pieces of code are automatically sent to a distribution list to be peer-reviewed.

You don’t have to be a high-tech company to adopt these strategies. No matter what industry you operate in, there will always be a way to streamline your execution and decision-making processes. It just may take a bit of initial head-scratching.

Maintaining rapid growth is incredibly hard – and very few companies manage it, but making sure you have a process and structure to deliver fast-paced decisions will ensure your organisation is in the best possible shape to scale at pace.