I spoke recently to the Society of American Military Engineers’ Small Business Conference. My due diligence preparing for that event made me aware of the unbelievable chaos the “shovel ready” economic stimulus package of 2008 created. Full disclosure: I have never been involved with a government contract; I know little of the vernacular prevalent in government work. I have never seen anything like the investment of time, effort, or resources required to figure out that contracting process. If you don’t understand how that buying process works—for example, if you underbid a construction or engineering project—you are doomed for failure.
In that period of “shovel ready” accelerated contracting, hundreds of small companies attempted to bid for government contracts but failed to understand how this customer bought. I’ve long been a strong proponent that relationships go bad with misaligned expectations. In coaching close to 50-60 corporate executives, small- and medium-sized company entrepreneurs, and independent consultants alike, I’ve come to believe that if you don’t understand how your relationships buy – not just products and services, but also information and credibility and repute – you have a recipe for colossal disaster.
Fast-forward a few years. Now we have a number of military branches complaining that those small businesses had no idea how the bidding process works, with sometimes catastrophic results. For example, every one of those contracts requires a surety bond. The stakes are high: when dealing with the federal government, failure can lead to garnished wages, even loss of homes and property of the entrepreneurs.
But worse, a significant number of companies failed to deliver the results contracted for. The ultimate losers were the unsuspecting end users who were the real customers—the people serving in our military branches. Those incredible men and women who defend us were suddenly stuck with the results of infrastructure projects that some budding entrepreneur, some opportunistic business person, could not finish.
The lesson from this sad story is applicable far beyond small businesses seeking military contracts. This is a classic case of too many entrepreneurs with appetites bigger than their stomachs, which is a recipe for ruined repute, relationships, and revenue. Overreaching is the fastest way to destroy what could otherwise be a viable business.
Don’t get me wrong—I’m not advocating “don’t reach.” We should all aim for the stars, but keep our feet on the ground. What will keep you firmly grounded, I submit, is introspection on what your firm does well. When it comes to reaching for new business, especially outside your current realm of relationships, you must ascertain: Is this a smart move? Is the relationship we’re reaching for a good fit for us? If it isn’t, you are better off disengaging early on.
If you do find an opportunity that is a good match for your core competencies and you want to pursue it, then you have passed the first quality gate. The next gate is the gap between your current and aspirational capabilities. Yes, we all have this gap between our core competencies and our growing edges. When you are certain the opportunity is valid—that the potential relationship is worth the time, effort and resources that reaching for it will require—then you need to ascertain how you will manage that gap. Fundamentally, when it comes to broadening your core competencies, have three choices. Do you build it, partner for it, or buy it?
Building an internal capability takes the longest, but gives you the most control. Partnering leads you into what is essentially a professional marriage. Since “Startup + startup = 0,” as I like to say, you will want to partner with firms that have a broader impact than you do. Look for additional capabilities, a broader portfolio of products and services, a healthy commitment to current relationships. Buying capability, likewise, requires due diligence. There is a reason only a third of acquisitions are deemed successful! Too many entrepreneurs go into an acquisition with “happy ears and happy eyes,” and the deal blows up because of misaligned expectations.
I hope I have made clear just how easily overreaching can become a repute, relationship, and revenue killer. Where there is opportunity there is always risk. Go toward opportunity with a focus on understanding how that buying process works, what competencies will be required of your firm, and how you will fill gaps between your current core strengths and those required. With these precautions, you minimize your exposure to risk and maximize your potential for successful new buyer relationships.
- To avoid disaster in reaching into unfamiliar markets, understand how your customers buy products and services, but also information.
- Too many leaders have appetites bigger than their stomachs. Overreaching destroys what could otherwise be a viable business.
- Fill the gaps between your current and aspirational capabilities by building, partnering, or buying the strengths you need.
David Nour has spent the past two decades being a student of business relationships. In the process, he has developed Relationship Economics® – the art and science of becoming more intentional and strategic in the relationships one chooses to invest in. In a global economy that is becoming increasingly disconnected, The Nour Group, Inc. has worked with clients such as Hilton, ThyssenKrupp, Disney, KPMG and over 100 other marquee organizations in driving profitable growth through unique return on their strategic relationships. Nour has pioneered the phenomenon that relationships are the greatest off balance sheet asset any organizations possess, large and small, public and private. He is the author of nine books translated in eight languages, including the best selling Relationship Economics – Revised (Wiley), ConnectAbility (McGraw-Hill), The Entrepreneur’s Guide to Raising Capital (Praeger), Return on Impact (ASAE), and the 2016 forthcoming Co-Create: (St. Martin’s Press), an essential guide showing C-level leaders how to optimize relationships, create market gravity, and greatly increase revenue. Learn more at www.NourGroup.com.