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The journey north

In the last part of the series, the authors warn that founders must make sure resources aren't ensnared by complexity while scaling up

James Allen Dunigan O' Keeffe & Bhavya Nandkishore 

When Subroto Bagchi and a group of colleagues launched Bangalore-based Mindtree in 1999, the company's mission was clear: Mindtree would bring a human face to technology by doing aspirational work for its clients, creating shared wealth for all constituents and building a company with a strong social conscience. Over the past 15 years, those three cultural imperatives have powered one of the world's fastest growing technology firms. But, as Bagchi explained in a recent blog post, Mindtree's future growth will rely on the company's ability deepen its expertise in important areas so it can help its customers reach even higher.

"We are shifting from being a culture-led company to one that is expertise-led and culture-backed," Mindtree's chairman explained in a recent blog post.

Every growing company reaches a critical point in its development when sustaining profitable growth means adding the systems, capabilities and talent that will allow it to achieve scale. The hard part is doing so without losing vital elements of the company's founding culture in the bargain - what we call the founder's mentality. After working with 190 leadership teams as part of Bain's Developing Market 100 initiative, we have learned it requires a focused, sustained effort to define a core strategic mission, translate it into a repeatable model and use that model to embed the within the organisation. We call this multi-year challenge The Journey North, and have broken it down into six critical steps:

Step 1: Define the insurgency precisely and maintain it maniacally

The journey begins with a question: Why do we exist? And the right answer isn't to increase shareholder returns or boost gross margin x per cent relative to our industry. An insurgent mission comes from the gut and must be embodied in a clearly articulated everyone in the company can understand. We challenge CEOs to list their on a hand. The thumb represents a succinct statement of the insurgent mission. The fingers outline the critical capabilities the company needs to deliver it.

Such brevity and precision help embed strategy within the enterprise. But it is also critical to co-create the strategy with those we call the "kings of the organisation"— the individuals or teams most accountable for delivering what you sell. That means working with these pivotal employees to translate strategy into clear 'non-negotiables'— the essential behaviours and frontline actions that ensure they deliver strategy consistently.

Step 2: Build an operating model that scales without sacrificing speed
Insurgents are in a period of hyper growth, where organisational issues are often far more critical than closing the next sale. Too often, the sum of the organisational decisions made during this phase destroys the company's most important strategic capability: speed. Leaders must get three things spectacularly right: First, they must create an operating model built for speed. Second, they must build an organisational model that fully empowers and supports the 'kings'. Third, they must be clear about how they will scale the business and keep the model simple. The goal is to force leaders to consider the 'cost of complexity' in all decisions.

Step 3: Use the professionalisation agenda to balance heroes with systems
Insurgent companies thrive on heroics and defying the odds. But eventually they need to grow up. They have to add talent, capabilities and systems to bring order to the chaos of rapid growth - the unsustainable hours, the lack of control and so on. Too often, however, these efforts fall flat. The problem is not professionalisation per se. Rather, it is letting the professionalisation agenda become an end in itself. Strategy, not a checklist, should guide decisions around which systems, processes and new capabilities are (or are not) mission critical. When hiring, leadership must choose and integrate professionals to complement the heroes, not replace them.

Step 4: Build the right learning systems
One indisputable benefit of growth is learning and it starts with building clear feedback loops between the customer and the kings. Leaders create learning organisations by making it clear through role modelling that everyone is responsible for listening to the customer. Companies also have to reward employees for learning from one another. A peer-to-peer learning system encourages constant sharing of experiences, so all can take a speedy flight down the experience curve. Too many companies have hub-and-spoke learning systems that discourage the sharing of best practices. As one participant in a DM100 workshop told us: "I have learned more about the issues faced by my peers today than I have heard in the last year. We are so preoccupied with managing our plans that we set aside almost no time to talk and learn from each other."

Step 5: Simplify to redeploy resources
Leaders on the Journey North must continually spring clean, 'zero-basing' all they do on a regular basis to speed things up and redeploy trapped resources. Companies experiencing hyper growth can't afford to have talent and investment trapped where they aren't serving the strategy. A growing company's success depends on its ability to overwhelm its biggest priorities with the right talent and the right resources, on a moment's notice. If the company is losing customers, leadership needs to flood the zone. If innovation is flagging, innovation needs immediate attention. Winning is making sure resources aren't ensnared by complexity.

Step 6: Adapt and invest in Engine 2
Continuous improvement is essential. But what if market shifts require a fundamental change to your business model? We refer to this as the "Engine 1 versus Engine 2" problem. On the one hand, you need to invest ample resources in the engine that got you here. On the other, you must be constantly vigilant to determine when a new engine will be necessary to sustain profitable growth. Striking the right balance means creating a separate Engine 2 team with a separate mission, which will likely create competing agendas. But we have learned that the conflicts are manageable by using a 70:20:10 model: Devote 70 per cent of your time and resources to the company's core business (Engine 1); use 20 per cent to develop businesses closely adjacent to the core and use the remaining 10 per cent to force new, radical thinking with Engine 2.

These six steps are about consciously maintaining the founder's mentality that gives fast-growing, disruptive companies their primary competitive advantage. Some degree of accumulated complexity is an unavoidable part of growing. But it doesn't have to transform the company into a slow-moving bureaucracy. The best leadership teams maintain their speed by refreshing their insurgent mission, embedding it in the organisation, learning from their customers and adapting as necessary. Speed and scale are not incompatible. The Journey North is about achieving both as you stretch toward full potential.

James Allen, senior partner, Bain & Company, London office, co-lead, Global Strategy practice
Dunigan O' Keeffe, partner, Bain & Company, Mumbai office & head, Strategy practice, Asia Pacific
Bhavya Nandkishore, principal, Strategy practice, Bain & Company, New Delhi

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First Published: Mon, December 22 2014. 00:11 IST