Business Capacity & Organic Business Growth Framework - Aditya Yadav


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Business Capacity & Organic Business Growth Framework - Aditya Yadav

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Business Capacity & Organic Business Growth Framework - Aditya Yadav

  1. 1. “Running an Agile Fortune 500 Company”Aditya Yadav,*
  2. 2. **A Typical Global Company*Fortune 500/1000*200 Divisions*40 Countries*25000 Employees
  3. 3. @ Acme Inc.*
  4. 4. **Original Question “Our growth is adhoc, how dowe look at Growth? What should be our GrowthStrategy?”*The Correct Question - “Lets discuss one suchModel that links Business Capacity to OrganicBusiness Growth.”
  5. 5. And The Philosophy Behind The Answer*
  6. 6. *
  7. 7. **Business Performance is NOT CONSTANT w/Utilization*Given a specific Capacity the performancedeteriorates w/ Utilization*And the deterioration is not Linear*Golden Rule: The best Strategy in ANYORGANIZATION is To NOT operate anywherenear Capacity
  8. 8. ** Google’s 70:20:10 rule needs to be modified… slightly* It stood for 70% of effort on Current Business Needs, 20% on Related Business Needs and 10%on Unrelated Business Needs* We have discussed Arbitrary Numbers in Business, so this might seem arbitrary, but this is not.This has an empirical basis* Given a work week of 5 days, 8hrs/day = 40 hrs/week* Lets focus 4 days on Current Business Needs, and 1 Day on Related and Unrelated BusinessNeeds* Ofcourse Managers would go: Yes and we need to measure and account for the 5th day… weneed to guide employees and monitor what they are doing… we need to manage and allocatetasks in the Related and Unrelated business needs category… Blah! Blah! Blah!* No! Managers Need To Stay Away. This Rule is a guideline not the Law of God written in stone.We will not Manage the 5th Day because (i) we don’t want to add 60% Administrative Overhead(ii) we don’t want to throttle innovation and creativity* Yeah but now the Rule Becomes 80:10:10* Rule: The biggest policy problem is to SORT OUT THE IDIOTICITY BEHIND THE CONFLICT OFINTEREST and IP POLICIES. I would leave that upto you… to figure that out… That’s a knownimpediment.* Rule: Avoid Administration and Command & Control over the 5th Day
  9. 9. ** If Leadership is summarized as* Change* Learning* Innovation* Growth* Mentoring & Coaching* Then the 5th Day is (i) not a holiday, (ii) out of bounds of Managers (iii) doesn’t requireapprovals of any sort* This is a two pronged Strategy (i) The Organization avoids severe OrganizationalPerformance Deterioration shown in the Capacity Chart Slide. And (ii) It is used forGrowth and other Leadership Activities* This completes the Model of Integration of Management (Status Quo) & Leadership(Growth & Innovation) in the same company* This also implies that the company bills at New Billing Rate = Older Billing Rate * 5/4and that would percolate up in Costing and Pricing of Products & Services to the EndCustomer* Note: R&D Is a Vertical (Organizational Slice) Model. This is a Perforated AcrossOrganization Model. Across Divisions and Functions like HR, Marketing, Finance…
  10. 10. ** Current Business Capacity = C* Free (Utilization) Fraction = F ….e.g. 0.20… 1 of 5 days free* Growth/Opportunity Leverage = L = Growth Divided by FreeCapacity…. E.g. 1.1/0.2 = 5.5 … the max theoreticalpossibility of growing using the free capacity fractionassuming all ideal conditions otherwise.* Scale Leverage Constant = k = f(C) i.e. Leverage from alreadyExisting Scale, Cash, Capacity, Knowledge etc. e.g. 1.052* Time Periods = T years* Therefore Organic Growth = kCFL* Future Capacity = C x ( 1 + kFL ) ^ T* Growing from C = 10,000 to 400,000 = ln 40 / ln(1 +1.052x0.2x5.5) = 6.1 years (assuming period T in years)
  11. 11. ** Consistency of* Culture* Philosophy* Direction* Complexity Reduction* Business Agility* Compared to Inorganic or Adhoc … Knee Jerk Growth…* Also assuming your New Cashflow is Positive and Relatively Stable then your Growth isalready accounted for within Free Capacity. And doesn’t require enormously extraplanning, budget, expense etc. etc. except for Capital Expenditure* Also the model shows that at the scale of 10,000 employees to scale to 40X is possiblein 6.1 years (Theoretically from the model)* Which Negates the Nonsense that Organic Growth Necessarily Impedes Growthjustifying Inorganic Growth As The Only Possibility in anyway.* It also reinforces Iterative & Incremental Execution, Emergent Strategy, Integration ofLeadership and Management within the same organization, It delivers betterOrganizational Quality/Performance/Experience (ref: Capacity Chart)
  12. 12. *Aditya!!!