In this week's Rule Breaker Investing podcast, Motley Fool co-founder David Gardner is happy to have in studio an author he has admired for years: Les McKeown, whose first book was Predictable Success. After being involved with dozens of start-ups, McKeown developed a clear picture of what worked and what didn't. More to the point, he started noticing that there were certain patterns emerging in these businesses' life cycles.
There are seven universal stages, repeating across nearly every organization that lasts long enough to hit them. In this segment, he explains why the requirements for the fourth stage -- the "predictable success" that you really want to achieve -- almost inevitably plant the seeds for the atherosclerosis that brings you to the "treadmill" stage.
A full transcript follows the video.
This video was recorded on March 21, 2018.
David Gardner: Les, really briefly, what is "predictable success?" What does it feel like?
Les McKeown: I'm sure we'll come back into it, so let's do that really quickly. Essentially, what we're doing is we're bringing systems and processes to bear to manage the complexity that started to threaten us in whitewater. But we're doing it to just the right extent. We're bringing in enough systems and processes to allow that to happen and to coexist with creativity, entrepreneurial spirit, risk-taking; all of the things that helped us grow.
Gardner: Made us what we were.
McKeown: Correct. But, there is a co-equality. We're building the innovation on top of systemic enterprise structure, as opposed to just mavericking ourselves from one extreme to the other. And so, predictable success is that balance of systems and processes on the one hand, and creativity and innovation on the other.
And what happens is -- and essentially we do organizationally wide -- if something was good systems and processes, we brought them in. It was complicated, difficult, painful, but we did it and it did a great thing. It allowed us to scale. Look at this, now. We're a big company. We've done really well. So, if systems and processes are good, let's have some more.
And what happens is we begin, usually, to overemphasize the need for systems and processes. That's what pushes us into the first of the decline stage. So, we're going up the arc, we've hit the capstone, and now we begin to edge into the first decline stage. As you signaled, it's called "treadmill," and I call it that because that's what it feels like. It doesn't feel like a death rattle. It doesn't feel like everything dying. It's just got a little rinse and repeat, rinse and repeat.
Gardner: I have to keep filling out more forms for some reason.
McKeown: More forms. It's all about compliance.
Gardner: What, exactly, is your job title? What group are you part of?
McKeown: It's very limiting. Measure six times to cut once. It's just we're overemphasizing systems and processes, and we're losing sight of what the checklist is there to deliver. Our focus typically begins to drift away from pleasing the customer or client externally to pleasing the system's guru internally.
We begin to worry more about whether we're using the precise Pantone color for our logo than whether our marketing materials are world-class. We're investing more in making sure our website is HTML5 compliant, if that's still a thing, than making sure it's a wonderful experience. A potential new customer has to fill in 13 fields in an online form when all we need is their phone number and their email address.
That's treadmill, and it's recoverable. You can recover from that. And if there is, in the business, what we call a "strong visionary style," the visionaries in the business, which we might get to talk about a little later, they'll put their hand up and they'll stay, "This is crazy. We need to reverse this. Let's just ease up on these systems and processes," and we can spring back or steer back into predictable success.
However, if we stay in treadmill for too long, what happens is we begin to become numb to this overcompliance.