Episode 149 – A Bulletproof Business – Tom Wheelwright & Ken Gavranovic

Speaker 1:

This is the WealthAbility Show with Tom Wheelwright. Way more money, way less taxes.

Tom Wheelwright:

Today we're going to discover how to build a bulletproof business, even in a hyper changing environment like we're in right now. I'm very grateful to be with Ken Gavranovic today, who is an expert in this. He's written the book Business Breakthrough 3.0 and has a ton of experience. Ken, it is great to have you on the WealthAbility Show.

Ken Gavranovic :

Thanks, Tom. I'm really excited to be here.

Tom Wheelwright:

Tell us a little bit about your background, because I know it's extensive and you're a bit of a business nerd like I am. We'd love to hear about it.

Ken Gavranovic :

Yeah, sounds good. Well, I started off as always be a tech and business nerd. When I was a little kid, I was always interested in technology, but also business problems. I remember one time walking down a hallway, just to date myself a little bit, and there's this line of people lined up for a fax machine. I was like, I looked at it and I said, “That's totally inefficient, and I wrote my first commercial software package that let people fax from their desk.” I've been doing business a long, long time and really just looking for those big trends.

I've been blessed to be able to scale some businesses. I've done a business where you and I are putting our desks together all the way to 500 employees, couple hundred million dollars taking it public on Nasdaq as a CEO. I've driven transformation at Fortune 50 companies, I've public unicorns where you've scaled from 300 to 500 million. In these journeys I've got to work with some of the biggest brands, Disney, Capital One, to up and coming startups when they were like Slack. I've seen clear patterns. There's clear patterns that either hold companies back or really enable them to go to the next level. We wrote Business Breakthrough really to capture the way you can understand what's holding back your business and how you can unleash those and breakthrough to that bigger growth.

Tom Wheelwright:

Let's start with that. What do you see as the things that hold businesses back the most? What would be your top three?

Ken Gavranovic :

That's a good question. For top three… I'd probably say there's probably five areas that you need to work on, but let me think about the top three. The first part I would think is that people don't understand that many of these things are not one-off exercises. One of the top things is a mission, vision value that your company actually lives. A lot of people think that's a one-time exercise. We go get together, we write some words on a board, we put it on the front desk and that's it. When you do that, it really, really holds you back. It can strain your company for a long time because you're not living that culture and when you live the culture that you articulate, you attract the right people. That's probably, I would say, the top example of where people don't think about, “How do we actually activate and live the culture we're defining and the benefits,” from whether it be hiring, firing, promoting, how you interact with customers. It really should be impacting everything across the board. But I would say that's probably the top one that I could think of.

Tom Wheelwright:

All right, so let's talk about values for a little bit, because I know you talk a lot about values and I'm a big fan of the whole idea of values because I think that's what your brand is. Your brand really reflects your values and needs to reflect your values and both your internal brand and your external brand. When you look at those values, what are you looking for? Because they're your values, right? They're not anybody else's values and they're not right or wrong, they're just yours. How do you go about doing that?

Ken Gavranovic :

How do you go about activating? I said the first part is defining the values is sometimes it's a founder and so the founder may have had some values and “This is what I want my company to be about,” a lot of times it starts there. Maybe you've gotten to a much larger organization and now it's “What's the culture that we want for our organization?” I think the first step, going back to activating on that, is take a step back and make sure that you're going to be true to those values. There's many companies that espouse what they would like to be, but not what they really are. I would say the first thing is just even yourself, evaluate yourself, is look at as a business, say, “What is our culture? Is it family-friendly work-life balance or is it a go out and push really, really hard?”

Understand what it is and embrace what your true culture is. Because when you have one culture that you espouse, but you actually live and operate a different one, that's the first thing. I always say, “Hey listen, there's no judgment.” Maybe you run a hard charging organization where everybody's running 65 hours a week. If that's what you want to be, then be that because you'll attract those people. If it's a different organization then be that. That's the first part is be true to what you are and then articulate it.

Then the next part is then have your whole team really think through the lens, “Are we interacting with our customers in a way that's true to those values?” Because again, a lot of these questions that we go back and forth with, “Hey, can I put that pricing plan out,” or “Should I hire that person? They have the technical skills, but they don't quite seem to be a culture fit.” If you're very purposeful, the answer is no, you don't hire that person if they're not a culture fit, period. No, you don't treat your customer that way if that's not what your culture is. Everything needs to be aligned for it, it's almost like the DNA for, the direction for your business.

Tom Wheelwright:

Your values, your vision, your mission, do you see that as the soul of the business?

Ken Gavranovic :

It's funny that you say that. I think we actually even almost talk about it in the business is almost like the soul of your business. That's exactly what I see it as. Because if you think about every single business, what is a business? It's a collection of people that believe. They believe they're going to get a paycheck, they believe in the culture, they believe in the mission, they believe in something. If you think about it, getting that defining mission of, “Here's how we are aligned as a group with that mission, vision, value,” that is the core soul of the whole business. If that's dysfunctional, that's where you're going to see silos in your organization. You're going to see people going in different directions, you'll see churn of some of your best employees. It's really, really critical to get that right.

Tom Wheelwright:

You talk about, “Well, you actually have to live it.” How do you get that as part of your culture, in effect systematize it? Because it seems to me like it's got to be something you do in everything you do. It can't just be something that you do sometimes.

Ken Gavranovic :

That's right. Well we talk about a lot of the book of a lot of different specific because one of the things, there's a lot of times people have ideas. Everybody knows they need to have a mission, vision, value, but how do you actually activate it? How do you actually implement it day to day in your business? We talk about that in a lot of the books. There are a lot of different practices and we call it the business breakthrough process, but it really is incorporated, whether it be all hands for example, “Who's an example of our values?” You're constantly reinforcing it and constantly thinking about all decisions through that filter. We spend a lot more time going into it. Those are the key things is really as you do each decision, “Is that aligned to our values? Is that driving us towards our mission?” If it's not, we need to ask, “Why are we doing that?”

Tom Wheelwright:

All right, so once you've established that and you're really focused on that, then what would be step two?

Ken Gavranovic :

The next one I like to think about is what I call critical thinking frameworks. I don't know if you've heard of those, maybe heard of objective key results or those type of things. I always like to summarize it when I talk to people, especially if it's some of my friends that I work with that are small businesses is I think about it's real simple is are you an outcomes over activity company or an activity over outcomes? If you think about it, “Well what does that really mean,” is when you're thinking about doing initiative, are you measuring specific business outcomes that we're driving towards or are you measuring activities of steps? It's amazing. This is something that happens in Fortune 50 companies to small to medium-sized businesses. A lot of times somebody's really busy doing some things and if you just take a step back, “Does that drive you to your mission vision values? Does that drive you to your outcomes?”

They're stuck in a lot of work that actually is not driving to business outcomes. Another example would be is if you've probably heard about those projects that are $350 million and they're going and year one they're on track and then suddenly right when it's about to get released, suddenly it's totally off track. That's where everybody realized, “Hey, this activity we've been doing actually doesn't accomplish the business outcomes for this project that we launched.” What we talk about is there's different frameworks out there where we tell you how to implement them. I'm a big fan of what's called objective key results, where you get really clear as, “What's the business objective we're trying to do?” Then here are those key results. The way that it makes your teams change is amazing without actually any work on your part.

Tom Wheelwright:

Break that down for us, how to come up with what those measurables are, what you are trying to measure. How do you match that with the activity?

Ken Gavranovic :

Well, if it's okay, I'm going to give you an example just in real life of where I implemented it. There was a company that was, I'll call it a public unicorn. They really hadn't delivered a lot of meaningful products, it was a software company, to their customers. We implemented objective key results. I'll give you a real life example. When people came in and said, “Here's my plan to build software,” historically, success might be we ship the software. When you have an objective key results, “Okay, no. Success… That's an activity, I ship software. What's the business reason we're building this software? What are we trying to accomplish?”

True life examples, somebody came into my office and said, “Hey, we need to build this interface for our customers to access open source data.” I don't want to get too detailed into that. I said, “Great, so what's success?” They said, “We ship it.” I said, “Well that doesn't really help us. Are we trying to drive revenue?” “Well, yeah, we're going to drive revenue.” “Okay, how much revenue are we going to drive?” “We're going to drive $3 million in revenue, we're going to make sure that we get so much data ingested in the system.” We went and changed it from shipping the product to, “We're going to generate this amount of revenue, we're going to do this and in a certain timeframe. We're going to generate this amount of revenue in the first three months of launch.”

By having them think about those objectives and then those key results, “We're going to get $2 million in revenue, we're going to get it done in this amount of time,” the team went off in that example, at first they were going to say success was shipped, came back in and said, “Hey, you know what? There's no way we can hit those business revenues if we don't do these other features,” that they weren't planning to do. It really gets people focused on what's the business objective? Think about things that you and I do, like we do marketing or whatever it is, what are we actually trying to accomplish? We're trying to have conversations with customers. It's amazing how much activity goes on that really doesn't drive any outcomes.

Tom Wheelwright:

How do you evaluate that? For example, do you get granular down to… I like looking at expenses as the purpose of an expense is to create revenue. It's that simple, and it's not creating revenue? We need to not do that activity or have that expense. How do you get that down to the granular though, where you're talking about, “Okay, does this position create revenue or reduce an expense? Does this activity, what does it do?” How do you get that granularity into your system?

Ken Gavranovic :

Great, it's good question. We talk about this in the book, we usually like a quarterly planning process. Again, depending on what size your company is, it might be a monthly planning process, but you think about all the initiatives that you're going to take. You've got this idea to redo your website, you've got this idea to start some new marketing campaign, you're going to build some new software, whatever it is. Okay, great. We've got these ideas. All right, how would we know that idea successful? Well, I guess the first question is, “What are we doing?” The objective is we want to drive more engagement in our website. That's why we're going to build a new website, for example. Okay, great. Then how would we know that we actually drove more engagement? Well, key result might be we're going to get 20% more leads, we're going to get 13% more organic traffic.

We're going to get whatever it might be. But the idea is, “Why am I doing this,” and then “How will I know I was successful in that objective?” We walk through a lot of examples in the book of things that worked, that don't work because it's really key, important to implement it correctly so that you have that granular view. But once you do that, everybody gets super clear because again, in other words, if I'm going to build that website, if I don't think I can drive those numbers, then why actually start with that website update?

Tom Wheelwright:

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How do you get that? I know I keep coming back to this, but to me, you have to build it into the system because you want it to be self-managing and self multiplying, even. How do you actually build that into the system itself?

Ken Gavranovic :

That's great. The operating system of your company, that's really the way that we take it in the book is, “Okay, great, I just told you a bunch of things about how you got to implement it.” Again, the details are in the book, but what you do is you set up a quarterly planning process for your company. If you think about all the different business units, all the different groups, sales, marketing, whatever it is, they all have things they're trying to accomplish for the next quarter. You take those down and you boil them down to “Okay, great, so what are you trying to accomplish? I've got this objective and this key result.” You have a forcing function on a quarterly basis where each of the functions of your business have to articulate what their goals are for the next quarter in that framework.

After you do that, you have a statusing process where everybody gets to see the status, how everybody's tracking against their key results. You see that usually on a weekly or monthly basis. Then you do a quarterly business review after that quarter where you said, “Hey, we set out to do this red, yellow, green, these things we didn't accomplish. These things we did and what did we learn from that?” That really, in the simplest part, that's the way you implement it. That first go around, that question you had is very good is how do you really get good about objective key results?

That's where you want to have really good examples. Once you've got that done, then it becomes a rinse and repeat. Then every quarter you're making your plan, you're reviewing your plan, and you've got interim status points along the way to know that you're on track or off track. That's great if you're a CEO of a company, when you see the things that are going red, that's where you know need to spend some time. You can say, “Hey listen, do you need some help? Is it a resource constraint?” But you know where you need to focus your time. Everything else is running on automatic pilot.

Tom Wheelwright:

Got it. We've been talking about the systems. Let's shift a little bit to the employees because the employees can make or break the system. This is a big challenge we have right now. We have this quiet quitting. We have this, “Do we work from home? Do we work in the office?” How do you blend that? Which the system sounds great, this is great, we are going to measure these results and everything. But then you've got the human side, the human element, which is, “Okay, well we actually have to motivate these people to do this.”

Ken Gavranovic :

That's a great question. Here's the part that's so interesting, I've seen this time and time again is especially if you're a larger organization, what human beings tend to first do is like to take orders from somebody else, but they also don't like it. The boss says, “We got to do this, we'll do that.” I don't know if that was a good idea, but I'm going to do it anyways. That's what really happens. A lot of times in larger organizations, they don't have a sense of ownership in the objectives they're trying to do and they don't think they have any agency in trying to determine how they're going to accomplish those goals. That's where the thing we just talked about, that objective key results becomes very, very powerful is in that quarterly plan that we talked about is it's a bottoms up organization. You might set these key goals of the company, “We want to increase revenue by 20%. We want to do this, we want to do that.”

That's at the top of the leadership. But then you let your teams come up with the objective key results. What's the objective they're doing and what are the key results? If you notice, it doesn't say the tactics of how they're going to accomplish those key results, it's the objective and the key result. When you do that, what you actually are doing is empowering your team to run autonomously because now they can shift, they can go left, they can go right, as long as they're driving toward that objective and trying to hit those key results, you no longer have to micromanage that team member.

That's the part that, going back to one of the things we say is, “We want to build the business that your employees love to come with,” is if your employees have that sense of autonomy. Going back to the first thing we talked about, a culture that they believe in, then we've seen productivity go up by 65%. We've seen great new ideas get implemented because now everybody feels like they're no longer a part of the machine. What they do matters and they have agency into trying to win versus just going through the motions.

Tom Wheelwright:

What I'm hearing is you're not telling them how to get to where you want to get, you just say, “This is where we want to go, and how you get there is up to you.” In their day-to-day activities to have a lot more autonomy and a lot more ownership and responsibility.

Ken Gavranovic :

Yes, and they also have a little bit more pressure, now they've got key results. So it might've been somebody else going back to like, “Hey, I'm super busy, so therefore I'm doing good.” But let's just say it's customer success. Well, your goal might be to grow revenue or retain revenue. Historically, you might be like, “Hey, we're doing a great job. We're talking to customers. The call queue's really low, volume's low,” but if the real objective is we want to grow revenue by 5% and we want to retain revenue at this net retention level, for example, that really makes it a much higher burden for them. They have to, yes, take care of the customer, but they also have to drive these financial goals. At first what happens is people are like, “Wow, I don't know if I like all of this accountability,” but as humans, we all like to feel that what we're doing matters. Once they start to embrace that they've got clear goals that they're measured against, that they had agency in creating, then they get very, very excited and really start moving the needle.

Tom Wheelwright:

You use the word accountability, which I love, of course being an accountant. But my question on accountability is, okay, so we say we're going to hold you accountable. What does that even mean? In other words, if they don't do something, let's say that they say, “Well, here's what we commit to.” They've committed to it. They said, “Yes, we're going to do this,” and then they don't do this. Now what?

Ken Gavranovic :

What's a good question. Think about process-wise is if they're not hitting their key results, then they're going to be statusing at red. Then hopefully, they're thinking about, “How do I course correct? How do I get back to the better thing?” When you first implement key results, people might not have got the right way to do it. I always say the first quarter is going to be rough anyways as people get used to a new process. But then from an accountability perspective, I go back to as a leader, I'm a big believer in leaders versus managers. As a leader, let's say somebody's at the sales group and they just didn't hit their numbers, “Great, what did we learn from it? What are we going to do about it,” is the question. Not like, “You're in trouble, you did something wrong,” because that's how you create a continuous learning organization.

My day job, I'm CEO of a company called Blameless, which is around this fixing software. Again, it's the same kind of idea is if you really want people to fix software in a great way, don't make them feel conscious that they're being blamed. It's all about that continuous learning. I think if you change the culture to say, “Hey, listen, what did we learn from that? How do we go forward?” Then there won't be that sense of like, “Oh, I'm [inaudible], I did something wrong.” Then everybody's going to be risk averse. I would say is typically where you really see the risk averse is when you're measuring activity because then people just want to do the activity. When you measure outcomes and key results, it really gets down to the bottom line and holds people accountable. There always is a chance that you have somebody that's maybe not the right person for that, but that's the person that's not going to say, “Hey, I didn't learn anything.” They're continuously wrong on the things that they're trying to drive.

Tom Wheelwright:

They're not looking at, “Okay, how do we fix this?”

Ken Gavranovic :

Right. “How do we fix this?” Again, not looking for “leadership” to fix it. It's if they need help, they should ask for help. If they don't, they have all the tools to be successful.

Tom Wheelwright:

Got it. It really is a lot about empowering them, but you came back to it's got to be part of your culture that it's “How do we make this better,” not “You did this wrong,” or “You made this mistake.”

Ken Gavranovic :

Right. It's always about learning. One of the philosophies I always say is, “The past is the past. It's already written. There's nothing we can do with it other than learn to make better decisions right now.”

Tom Wheelwright:

Final thing I want to ask you about, because you're a technology guy and we are in the technology hyperspace right now, if you will. How do you deal with that constant change when okay, you establish your culture, this is great, we've got our key measurables, all that stuff, and then we have ChatGPT thrown at us, we have blockchain thrown at us, we have all these different technologies thrown at us. The reality is, to me, it's Lee Iacocca, “Lead, follow or get out of the way.” How do you deal with that and do all that while you're building this culture and looking at your objective key results?

Ken Gavranovic :

Well, it's a great question. I always think about it as if you're really clear on your objectives and your key results, if you have that clarity as an organization, then when new things get thrown at you, it's kind of like a wave hitting you in the ocean. It bounces you back, but you're focused on where you're going. You think about ChatGPT, there's going to be parts of your organization where they could use ChatGPT tomorrow. If you have a great set of objective key results, that's only going to help them achieve their goals faster. They'll embrace the technology that helps them go faster to their goals. The ones that are noise that really don't help, you can ignore those quicker. A lot of things that come in that maybe you shouldn't spend any time on, and there's other things that you should embrace immediately. I think when you have that clear north star of what matters and what's going to move the needle, it really gives people that ability to think real time, “Hey, we should grab that and move on that very quickly.”

Tom Wheelwright:

Awesome. To finish up here, Ken, what would be the top three things that you would say any business owner needs to do in order to build this business that can thrive in our changing environment like this?

Ken Gavranovic :

Got it. If I could, I'm going to go to five just because I think there's really five.

Tom Wheelwright:

Give us five. Five is-

Ken Gavranovic :

Maybe five. Yes.

Tom Wheelwright:

Five is like 60% better than three.

Ken Gavranovic :

I always like three because I know our brains all work perfectly on three, but it really is, it's the first part is that mission, vision, value. Get that framework in there. The next part is really have a company-wide decision-making framework. I shared some of the things and we talk about critical thinking frameworks. The next part is make sure you're measuring and looking at the data regularly. What does the data tell us? Because a lot of times people share their opinions, but the data's pretty clear. Revenue's going up, revenue's going down, margins are going up, margins are going down. Organize your company to drive results. When I say that is, I always say, you get what you organize for. If people that need to work together aren't aligned, maybe that made up the same reporting structure. The final thing I'll say is make sure that your sales process leverages and is cohesive with all of the other growth strategies.

Because a lot of times, sometimes the sales team will go off in a different direction than the core company. Make sure that the sales team and its growth strategy is aligned to how you're operating your business. I think if you do those five things, I've seen companies go from zero to 200 million in two or three years. Obviously many of those are tech companies. But I have a good friend that has six Marco's pizzerias and three daycares that's implemented this framework. Now, it's a $15 million a year business, and he spends probably five hours a week at the business.

Tom Wheelwright:

I love it. All right. It's business breakthrough 3.0. Ken, where could we go to get more information about what you're working on?

Ken Gavranovic :

You can go to my website, kengavranovic.com. K-E-N-G-A-V as in Victor, R-A-N-O-V-I-C. You could pick up the book on Amazon. We've got an audible, actually two weeks ago hit bestseller status, so that was pretty exciting.

Tom Wheelwright:

Nice. Congratulations. That's awesome.

Ken Gavranovic :

Thanks. Tom, I really appreciate it.

Tom Wheelwright:

No, thank you. Just remember, everyone, that what happens is when we really start looking at our business, looking at our systems, looking at our people, I do think it all begins with our, “What is our mission? What is our vision for our company? What are our values,” and making sure that we are doing that on a daily basis. I love this whole idea of let's make sure that we're not micromanaging. We're letting people decide how they're going to do their job. We're just going to help them and they can help themselves come up with what are those critical results that… What are those results that they're really focused on? When that happens, then what we always end up with, of course, is way more money. In the end, we're going to end up with way less tax. Thanks everyone. We'll see you next time.

Ken Gavranovic :

Take care.

Speaker 1:

You've been listening to The WealthAbility Show with Tom Wheelwright. Way more money, way less taxes. To learn more, go to wealthability.com.