Boring and Predictable

Would you rather build, operate or invest in a company that is boring and predictable or one that is capable of great heights and equally great lows?

There is no right or wrong answer. It depends on who you are and your operating or investing style, but personally I would pick a boring and predictable business any day. Boring and predictable make a business sustainable over the long run, and being able to play the long game is what builds great organisation.

In my last post, I briefly introduced a system that makes success inevitable in sales organisations. In the aftermath of that post, I have started thinking where else can this system or framework live because while it is not catchy, it certainly makes sense.

In reality, the more I look at it, the more it feels like a simple way to understand any company. If a company operates with this system, chances are they could be a great business to work with or invest in.

With this in mind, I thought to deep dive in each of the four components of this framework.

Talent

I swear, I will write a post only on Talent because that’s the most important thing you should focus on when building a scalable organisation. Heck, if you have talent, which roughly translates to having the right people in the right places in your organisation, it is not that the rest doesn’t matter, but great talent can make it happen.

If you want to understand a company, talent can be two things. Management (including founders), and the rest of the organisation. Getting inside information on the rest of the organisation is pretty difficult, but management can be more accessible. Lately I was researching a public company, typed the name on Spotify, and found a few podcasts with the founder. It is not the same as being in the same room, but can provide insights on the way the founder thinks. Another way to gain insights on talent and culture (see below), is to review LinkedIn and Glassdoor.

Pipeline

Pipeline is how the company is attracting new customers. Depending on the size and stage of the company, Pipeline can be different and can be built in many different ways:

• paid online marketing (search, social, display)

• paid offline marketing

• inbound marketing (SEO, branding)

• sales outreach

• network: referrals, partnerships, affiliates

Pipeline is also a way to build a moat: a brand that people love, a sales outreach machine, a network of partners, a strong online presence are hard to build from scratch. Ideally having a combination of few of the above makes the Pipeline defensible.

Execution

It’s all about Execution. Execution is how an organisation translates an idea into a decision, and a decision into reality. One can have a strong Pipeline but if Execution falters, you are left with nothing. Execution is not just a commercial trait, but it is something that touches several layers of the organisation. From shipping new products, to marketing, sales, customer success, retention.

Execution is not about getting things done, but it is getting things done efficiently. It is about choosing the right set of priorities. But how do you evaluate Execution from the outside?

Consistent financial performance is one of the strongest external signals of execution. Any company can have a great quarter, but a company that delivers predictable results over multiple years is telling something about how they operate. Plenty of metrics one could obsess with, I particularly like “Return on invested capital”. A company with persistently high ROIC is converting every euro of capital into profit efficiently, year after year.

For early stage companies, look at unit economics instead. LTV:CAC ratio and payback period tell you the same thing ROIC tells you about a mature business: does this company know how to create more value than it consumes?

Standard of Excellence

Standards of Excellence is another name for Culture. Culture is what people do when the boss is not in the room.

Every organisation has values. Most have them on a wall, or in a deck. Fewer have them in their decisions, especially when a shortcut is available or times are tough, or nobody is watching. To some extent, the gap between stated values and actual behaviour is an organisation’s culture.

It is also the hardest of the four components to evaluate from the outside, and unfortunately often you discover it when it is too late. Boeing comes to mind. Great company, until the culture broke.

Without waiting for a PR crisis, one can get a glimpse of the culture by looking at how leadership communicates publicly and what they do. Are they consistent with what they say? Do they take responsibility when things go wrong or look for excuses? Do they talk about people or only their product? How do they treat their people when times are tough?

LinkedIn and Glassdoor can also help. Are people staying for years or constantly moving on? Patterns in tenure and reviews tell you more than any single data point.

Finally, what is a company saying no to? What a company publicly associates itself with — the causes it champions, the positions it takes, the things it stays silent on — reveals values that no mission statement ever will.

A company where standards hold consistently doesn’t make the news. It is probably too boring and predictable. Which is exactly why you should look into it.