Founder's Mentality Blog
A CEO I spoke with recently told me he’d become so angry that he and his team weren’t dealing with their future issues that he put a sign on an empty chair in his boardroom. It read: Our Future.
In taping it to the chair he told his team, “This is the only way I know to get us to focus on our Engine 2 strategy. It has been months and we still haven’t freed up anyone to lead our Engine 2 initiative. So the sign will stay on the chair until we do, and every meeting I will make the same point: While every one of us is working hard on the present, let’s remind ourselves that no one is working on our future. That chair is empty.”
Here’s a picture of that empty chair:
I love this image. Here’s why:
- Most companies need to build Engine 2. We define Engine 1 as your current core business (see The Twin Engines of All Great Companies). Your Engine 1 business is likely a leader or strong follower (if it weren’t, you wouldn’t be in business). It is profitable and delivers a good return on capital employed, in part because many of the assets required to support Engine 1 are fully amortized. It just has one problem: It isn’t growing and is being disrupted by new insurgents. Engine 2 is the next platform for growth. It is where your customers are going and where insurgent competitors are making hay. But it has lousy economics, especially compared to Engine 1, because you will have to invest a lot to get started.
- And yet, most companies aren’t moving fast enough to build Engine 2. Building the next growth platform is tough. You will have lots of failures. Engine 2 demands new capabilities and talent. And focusing on Engine 2 distracts attention that you still need to give to Engine 1, which is facing slowing growth but still demands your best resources. It is delivering all the profits and you can’t take your eye off the ball.
- Your best talent knows when you’re moving too slowly and will lose faith first. Your best people listen to customers every day and know what your insurgent competitors are offering. Your best people see the new propositions in the marketplace. And your best people will be the first to become convinced you are not taking those propositions seriously, and that you are more worried about protecting your current market position than repositioning the company for the future (see Future Makers vs. Future Takers).
- In other words, your best people know “the chair is empty” and are waiting for you to find out. Nothing saps energy from your employees faster than the recognition that no matter how hard they are working on all of today’s issues, the future is slipping away. No one wants to be in that type of company. That said, people are fair. They recognize that everyone has a different role to play. They will sign up to keep Engine 1 going and to make sure Engine 1 funds the development of Engine 2—but only if they see someone building Engine 2. No one wants to see that chair empty. No one wants to be with a leadership team that simply collects today’s profits and makes no real attempt to reinvest in the future.
So fill the chair and follow the three rules for building Engine 2.
- The team that focuses on Engine 2 can do whatever it takes to make a better future for your customers and employees. This includes direct cannibalization of Engine 1 revenues.
- The team that remains focused on Engine 1 can steal any good ideas from Engine 2. If there are future ideas that can help today’s business, take ‘em and roll ‘em out.
- Mitigate the risks of whatever organizational decision you make. There is no perfect solution for running Engine 1 and Engine 2. There are great arguments for and against keeping Engine 2 as far away from Engine 1 as possible, and vice versa. If you keep the two Engines closely together, recognize there is a real and present danger that the size of, and return on capital employed on, Engine 1 will suck all the oxygen from the room, starving Engine 2 of the air it needs to grow. If you keep Engine 2 far away from Engine 1, recognize there is a real and present danger that it will be in the worst of all start-up worlds. It will not be able to leverage the capabilities or talent of Engine 1, but nor can it act like a real start-up with access to outside investors and VC-like rewards. So sweat the organizational implications of whatever decision you make, but get going on your company’s future and fill that chair.