The nature and practice of strategy in mid-size businesses (say from $20 million revenue to $500 million) is fundamentally different than in both smaller and larger ones. On one hand this sounds obvious, but the practical application is a bit more nuanced, and not always appreciated in my experience. How can leaders in mid-size businesses right-size their investments in strategy, making sure they’re doing enough to guide the organization without going over-the-top and experiencing diminishing returns?
Of course, mid-sized businesses aren’t born that size – they grow from start-up and small businesses, where “strategy” consists of validating a commercial hypothesis: Can we serve these customers with this offering and generate an acceptable ROI within a specified time frame? It’s not so much an exercise in flying as in getting off the ground. Very focused. Nothing else matters if that core equation doesn’t work. And many businesses don’t get beyond this point, or struggle for an extended period while they experiment to discover a viable business model. That’s why many small businesses stay small.
For mid-sized businesses, strategy builds beyond this point, and has much to do with scaling.
- Commercially, how do we earn repeat business from our early customers and continue to acquire new ones through market expansion, new offerings, inorganic growth opportunities, etc?
- Culturally, how do we add team members and maintain/enhance our key differentiators and values with leaders and contributors who weren’t a part of the early days?
- Organizationally, how do we establish repeatable processes and make smart decisions about insourcing newly important capabilities?
- How does leadership and management scale from a CEO/founder-centric model to an executive-team-driven and cascading model?
The answers to these questions will represent a tremendous amount of change from the past. Guiding the company through this transformational era is the domain of strategy and leadership for mid-sized businesses.
Companies in the midst of this transformation into their fully-formed mid-sized operating patterns will struggle if some leaders resist the change from small-company habits, or are misaligned on the “destination” of the change. But they will also struggle if they try to adopt practices developed for large companies.
Strategy as a business discipline – distinct from military or political strategy – is still a relatively new phenomenon, and from its origins in the early 20th century, it has been oriented primarily toward large corporations, which are very different than mid-sized ones. Big business, along with the newly formed business schools and eventually the large consulting firms, focused the study of strategy on the problems associated with running large organizations in an increasingly global economy.
Many of the frameworks developed by the large consulting firms and business schools – Michael Porter’s Five Forces framework is a classic example – can be helpful when applied to mid-size companies. But they don’t generate a strategic narrative for the organization to move through its mid-size “era” to a more mature and larger organization.
Using human development as an analogy, mid-size businesses are in their teens and twenties, while large businesses are in their thirties and beyond. Focusing on the issues and orientation of mid-life isn’t going to be very helpful – beyond maybe developing a vision for later life – for those who are still figuring out who and what they want to be as an adult.
My experience is that leaders can make their companies grow faster – accelerating through their mid-size business era – by embracing a set of strategic practices that are designed specifically for that purpose and that business environment. Continuing to lead with small business practices will stall growth, while adopting practices designed for large corporations will be inefficient because it will lack specificity. Both of these will lead to cynicism and resistance throughout the organization.
How a mid-size company builds its strategic practices and capabilities, and what it focuses its strategic energy on, is important in its continued growth journey. I’d like to learn more about how your company is intentionally developing this leadership discipline.
Strategy, Creativity, and Leadership 