Leading Rapid Growth, Crises and Recovery Business Entrepreneurship (BUS 301) Faculty of Management and Computing The Maldives National University Week 12 Chapter 17
Leading Rapid Growth,
Crises and Recovery
Business Entrepreneurship (BUS 301) Faculty of Management and Computing
The Maldives National University
Week 12
Chapter 17
17-2 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
New Organisational Paradigm
• Flat structure.
• Adaptive/flexible.
• Interlocking circles.
• Integrate with customers.
• Learning and influence.
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Leaders not Managers
• Opportunities focus.
• Allocating resources.
• Encouraging innovation.
• Different set of assumptions.
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Traditional General Management
• Pyramidal/hierarchical.
• Incremental improvement.
• Risk avoidance/embrace
stability.
• Avoid and punish failure.
• Resource allocation,
budget driven.
• Central command and
control.
• Resource optimisation.
• Cost oriented.
• Linear, sequential.
• Local focus.
• Compensate and reward.
• Manage and control.
• Zero defects/error free.
17-5 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
Entrepreneurial Leadership and
Organisation
• Flat, flexible, think/act like
an owner
• Stepwise and disruptive
change
• Fearless, relentless
experimentation
• Specialize in new mistakes
• Opportunity obsessed
• Frontline, customer driven
• Creativity – capital
• Resource frugality and
parsimony
• Systems and nonlinear
• Global perspective
• Create and share the
wealth
• People want to be led, not
managed
• Manage risk, reward and
fit.
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Core Leadership Modes
• Employees
• Sales
• Doing
• Managing
• Leading team leaders
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Core Leadership Modes
• Opportunity overload:
• Choosing from among an abundance of sales or new market opportunity.
• Abundance of capital:
• Evaluating investors as ‘partners’ and the terms of deals with which they were presented.
• Misalignment of cash burn and collection rates:
• Cash burn rates racing ahead of collections.
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Core Leadership Modes
• Decision making:
• Executing functional day-to-day and week-to-week decisions, rather than strategising.
• Expanding facilities and space . . . and surprises:
• Coping with surprises, delays, organisational difficulties and system interruptions spawned by space or facility expansion.
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External Causes for Failure
• Recession.
• Interest rate changes.
• Changes in government policy.
• Inflation.
• The entry of new competition.
• Industry/product obsolescence.
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Internal Causes for Failure
• Inattention to strategic issues:
• Misunderstood market niche.
• Mismanaged relationships with suppliers and customers.
• Diversification into an unrelated business area.
• Mousetrap myopia.
• The big project.
• Lack of contingency planning.
17-20 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
Internal Causes for Failure
• Leadership issues:
• Lack of management skills, experience and know-how.
• Weak finance function.
• Turnover in key management personnel.
• Big-company influence in accounting.
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Internal Causes for Failure
• Poor planning, financial/accounting systems, practices, and controls:
• Poor pricing, overextension of credit, and excessive leverage.
• Lack of cash budgets/projections.
• Poor management reporting.
• Lack of standard costing.
• Poorly understood cost behaviour.
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Non-quantitative Signals of Trouble
• Inability to produce financial statements on time.
• Changes in behaviour of the lead entrepreneur.
• Change in management or advisors, such as directors, accountants or other professional advisors.
• Accountant’s opinion that is qualified and not certified.
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Non-Quantitative Signals of Trouble
• New competition.
• Launching of a ‘big project’.
• Lower research and development expenditures.
• Special write-offs of assets and/or addition of ‘new’ liabilities.
• Reduction of credit line.
17-25 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
Telltale Trends of Organisations in
Trouble
• Ignore outside advice.
• People (including and especially, the entrepreneur) have stopped making decisions and also have stopped answering the phone.
• Nobody in authority has talked to the employees.
• Rumours are flying.
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Telltale Trends of Organisations in
Trouble
• Inventory is out of balance.
• Accounts receivable aging is increasing.
• Customers are becoming afraid of new commitments.
• A general malaise has settled in while a still high-stressed environment exists (an unusual combination).
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Turning Around a Troubled Company
• Diagnosis of the problem:
• Strategic analysis.
• Management analysis.
• The numbers.
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Cash Flow Analysis
• Steps in identifying and quantifying the profitable core of the business:
• Determine available cash.
• Determine where money is going.
• Calculate percent-of-sales ratios for different areas of a business and then analyse trends in costs.
• Reconstruct the business.
• Determine differences.
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Potential Cuts/Improvements
• Most common areas for potential cuts / improvements:
• Working capital management.
• Payroll.
• Overcapacity and underutilised assets.
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Potential Cuts/Improvements
• Systems and procedures.
• Asset plays.
• Creative solutions.
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Organisational Climate
• Six basic dimensions:
• Clarity
• Standards
• Commitment
• Responsibility
• Recognition
• Esprit de corps
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Common Approaches to Successful
Leadership
• E-Leadership:
• Roles, tasks, responsibilities, accountabilities, and appropriate approvals clearly defined.
• Leadership based on expertise, not authority
• Emphasis placed on performing task-oriented roles.
• Consensus Building:
• Emphasis placed on overall goals.
• Emphasis on participation and listening.
17-33 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
Common Approaches to Successful
Leadership
• Communication:
• Information sharing.
• Willingness to alter individual views.
• Encouragement:
• Encouragement of innovation and calculated risk-taking.
17-34 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.
Common Approaches to Successful
Leadership
• Trust:
• Do what they say they are going to do.
• Traits include openness, spontaneity, and straightforwardness.
• Development:
• Develop human capital.
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