184: Structure Your Success in 4 Steps with Patrick Esposito

29
Nov

Patrick Esposito is the CEO and Founder of Initiative Labs. He is also the President and Co-Founder of ACME General Corp, a company focused on driving rapid innovation in the national security space. We break down the four steps in the structure of success framework, how to achieve continuous success in your business, and the benefits of having an agile business process. 

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Structure Your Success in 4 Steps with Patrick Esposito

Our guest is Patrick Esposito, the CEO and founder of Initiative Labs and also the president and co-founder of ACME General Corp, which is focused on supporting, well actually Patrick is focused on supporting founders, owners, and executive leaders of small and medium sized businesses in the creation of sustained success. Patrick, welcome to the show.

Steve, thanks so much for having me. I really appreciate it.

You’re the right person for the right place and the right time. So before we get into how you are, what you’re doing for all these small to medium sized business owners and executives to help them create the sustained success. How do you get into this business and particularly already was running a business called, okay, we’ll get into the name of it later, but the ACME General Corp., how come you, I mean, what made you then found a second business, which is focused on helping these executives? So, what’s your story?

Well, so to your point, I, I tend to do things in groups, right? So my initial foray into small and medium-sized business activities was the creation of a startup, Augusta Systems, that ultimately produced some early Internet of Things middleware, but along the way created an organization, Resilient Technologies, that was ultimately spun off from Augusta Systems with some partners that did something fundamentally different.

So, you know, I find often, as a lot of, you know, I think folks who are entrepreneurial find, sometimes doing more than one thing helps to make sure that you do both things very well. So with Acme General Corp, basically taking the lessons learned from two decades of doing dual use innovation work in and around the national security space, and basically helping government organizations, prime contractors, and small businesses to utilize commercial technologies to meet American national security needs. Related to that though, right, a lot of time spent working with small and medium-sized businesses, some family-owned, some venture-backed, everything in between, including some publicly traded companies.

And what I found was the recipe for creating success and the formula for unfortunately putting it into reverse and ending up in failure mode was not dissimilar regardless of the size, scale, and financial support for that small to medium-sized business that created the vision for the Structure of Success book that’s coming out on October 3rd, 2023 and served to help launch Initiative Labs where basically I do very light-touch advisory work, primarily helping to speak about the concepts and structure of success and then helping executives, founders and leaders to deploy those methodologies, approaches and tools within their own businesses.

So you are definitely doing a lot and I understand that this helps you by doing too much. I mean, I don’t want to say that you’re hyperactive at this, but I know that many entrepreneurs are, so that’s definitely how it works. So Patrick, tell us a little bit about this structure of success framework. So what is this about, and how does it help business owners, entrepreneurs to, you know, raise themselves on this structure, ladder, success ladder?

Right, so just a little background on kind of how we got there, right, with the book and with the framework. Took about two decades of personal experiences and work advising other, you know, leaders of small and medium sized businesses and looked at, you know, again, what were the key elements that I saw driving successful outcomes and what were the things that led us off path.

What I found from those experiences, then I did some research around, right, surveyed a hundred other executive business leaders of successful small and medium-sized organizations and asked them, right, about what were the biggest mistakes they’ve made, what were the things that produced success for them, and how did they get there. What I found was my two decades of experience and anecdotal evidence was supported by this survey-based research that really led to this determination, which we’ll get into later around these eight categories that are really internally focused that help to drive business success.

And in working with another 100 companies that I’ve been advising over this past two decades, created this framework of both approaches to use and tools to use that can allow you to structure very simply, in a very practical way, decisions and implementation activities to drive your business forward. So a lot of what I try to do with founders and leaders in small and medium-sized businesses is have them look at both their personal context, right, for decision making, and their, the additional context that they may want to consider, right?

So, sorry, Patrick. So it can be complex. So there are a lot of elements there. And I’d like to get into this eight decision contexts and approaches. But before we go there, so there is a four step structure, such as framework, which I think listeners could embrace even when they’re driving the car. Yeah. Let’s talk to that.

Okay. Perfect. Absolutely. So you know as you mentioned, we go through this four-step process assessing, deciding, planning for implementation and then ultimately implementation. So for assessing, right, there’s sort of five questions that we often ask. The first one, I think, is the best one, right, which is what problems need solved and what opportunities exist for our business to be more successful. And then we ask a series of follow-on questions, what’s the context for those problems and opportunities?

Assessing for success: Start by asking what problems need solving and what opportunities exist. Click To Tweet

Because sometimes the problem or opportunity we think we see is actually wrapped into a larger or a list of problems and opportunities that we can only really flesh out when we look at that context. Then we look at what do we see with each of those problems or opportunities and how do they impact potentially success or failure of the business? Are there any constraints around addressing the problems or seizing the opportunities? And then what are the options, right, that exist for meeting those opportunities or solving those problems?

And so we kind of create essentially this, you know, I tend to think of them almost as cards, right? Problem and opportunity cards. But then we put through the next sort of stage gate decision-making process, and there’s two levels, right? The first level is, you know, does this problem or opportunity cause a loss of revenue, a loss of profit? Is it, you know, are we seeing a loss of our team members? Is there something else that, you know, is misaligned with our business, right?

Decision-making process: Stage gate decisions involve assessing if a problem or opportunity causes loss or gain. Click To Tweet

And then we say, okay, assuming that we understand that, is the reverse true? Could it increase revenue? Could it increase profit? Could it lead to more stability with our team? And then we ask the third question, is there anything else about this that has merit? And assuming we get yes on one to two of those things, we move it to the next stage gate and say, could we make this opportunity be realized or could we solve this problem in a reasonable period of time with a reasonable amount of resources?

If the answers to those are yes, we then say, should it be one of our top five things we’re working on? If we don’t say it’s one of the top five, but we say it could be done reasonably and in terms of time and resources, we kind of put it in the parking lot, put it on the back burner, but if it’s one of those top five, we usually sink into planning, right? And so we always designate a leader because you need a committee, right, ultimately to drive things, but you need a leader to make sure that they’re actually operating. So we designate a leader, put together a team, we determine what are the key steps that we’re looking at for implementation.

From there, we identify what resources will be required. We nail down the communication strategies, because obviously, anytime you’re going to make a change, you want your team, both your folks who you work with, as well as your clients, right, to be able to understand what changes are happening, why you’re making them and what the benefit is going to be. And then we look at what are reasonable implementation timelines. And once we figure out that plan, we figure out how does that rank in those top five things that we gotta work on, because obviously you can’t work on too many things at once.

That’s right.

I think in threes, right? So once we sort of get those top three, we then say, okay, what’s our stack rank order of implementation? The implementation leader we designate and we empower that leader with a team and the resources, but we also put together a monitoring program. So, you know, obviously any implementation initiative can go off the rails really quickly if you don’t examine how that operation of implementing that activity is occurring.

Prioritize, empower, and monitor. Designate an implementation leader, revisit schedules, and adapt to unforeseen challenges. Click To Tweet

We put together, you know, a revisit the implementation schedule to make sure that we what we planned is actually realistic and that we don’t need to tweak it in some way. And then we put together with that team a mechanism for identifying and managing unforeseen issues and obstacles, constantly adjusting that timeline and those implementation steps. And then basically from the very beginning, we determined what is the final activity that’s required for implementation, full implementation so we can finish this and move on to the next activity we need to undertake.

So you want to know whether you’ve done what you wanted to do or not. This kind of activity really helps you with that. So just to summarize my understanding, so you basically inventory all your problems and opportunities, you assess what is something that is doable, which is economically feasible, so that’s the assessed phase. Then you make a decision. Okay, we are going to, these are going to pass the test. These are not going to pass test. It’s going to be a column kill.

So from all the opportunities, you decide your shortlist of what you could do. And then we prioritize them. What are the top five? What is the number one, two, and three? So we prioritize. And then you make sure you put the resources. The step four is implement. You make a decision, you put the resources behind, you have this project leader to make sure you implement it. And then you make sure that the implementation gets done by designating what is the final step so you can actually measure yourself. So assess, decide, prioritize, and implement. And then if you keep doing that, I can’t see how you would not be successful, right?

Well, to your point, right, it is a continual process, and there’s nothing worse than a continual project that runs forever, right, which is why we have that final implementation guideline, but this process of continuing to examine and re-examine, right, what are the problems and opportunities, and what should we prioritize solving, that is something that is continuous, right, and so, you know, I think most organizations tend to do it in a way that historically folks operated in these annualized programs that don’t work for the way we work and the way the world works today. So it needs to be more timely, more consistent, more continuous. When you’re meeting as a management team or a governance team, you need to make the time to have conversations about the problems and opportunities that are on the horizon and be comfortable with reordering those priorities.

It’s kind of an agile process. It sounds like an agile process for me. I mean, if you’re a software company, you maybe you have one or two big sprints. If you maybe are a more stable or the economy company, maybe you have quarterly sprints.

Yes.

So these OKR setting, drug setting sessions are essentially agile sessions where you reprioritize based on your annual and medium term goals what you want to bite off this quarter.

That’s exactly right.

And anywhere in between. So some companies, five million companies are going to do a monthly, maybe sprint or a monthly agile cadence, which allows them to iterate forward. And I just had this call yesterday to the private equity fund manager that has hired me and some guys that worked with me to coach their companies. And he said, OK, we want this system, but can we have a playbook for the next three years? What are going to be the elements you’re going to implement?

And I said to him that may not be the great idea because you need to have some flexibility in the system so that you can respond to market opportunities, to environment, customers. If you land three more investing companies that you have to close deal, you probably have to wipe the slate clean so that you can focus on closing those M&A deals and you will not be able to do anything else. So you need the flexibility and the agile process helps with that.

Exactly, and to your point, you can certainly create a multi-year plan, but the one certainty is it’s going to change.

Yeah. Right?

Yeah, absolutely. That’s why I tend to tell folks, let’s look at things that we can actually achieve in a reasonable timeline because to your point, new opportunities are going to rise and new problems will occur that are probably going to change what our priorities are six months, a year, two years, or as you said, three to four years from now.

Look at things that we can actually achieve in a reasonable timeline because new opportunities are going to rise and new problems will occur. Click To Tweet

I don’t know who was that general or military expert who, there was a famous quote about the importance of military planning. But then also, as soon as the first shot is sounded in the war, it’s out the window because then you have to respond in real time if whatever happens. Okay, so let’s switch gears here and let’s talk about the key questions that you would need to ask in each phase. So you have the assess, decide, prioritize, implement. So, what kind of questions should you be asking in order to make the right kind of deliberations in these phases?

No, absolutely. So, you know, to your point around the eight decision categories, right, that we examined over time with my work and then surveyed others around their experiences, applying these questions and this framework and the process to those eight decision categories has, to me, produced the most opportunity for success. Now, just because, and we’ll talk about the eight categories here in a minute, just because those are the eight categories that I’ve seen and that tend to, I think, most folks would probably agree those are the primary categories, that doesn’t mean that for your business, all of them are relevant.

That certainly doesn’t mean that that’s an exhaustive list. There may be more, there may be less. And a lot of that depends on how you operate your business, what business you’re in, and frankly, what the structure is of the organization. So a lot of this process is about trusting yourself and your team. To have these conversations, to be able to be open to having frank and candid assessments of what’s right, what’s wrong, and where do we need to go. And when you look at the team, right, that tends to start with two groups.

Most organizations have a management team, right? So, obviously, you’ve got folks you work with who help you to drive the business forward. That is one group that certainly benefits from both asking these questions and also asking the questions of themselves, right? What do we need to change within our management team and the way that we work or its composition to end up at a better place? The same thing occurs with sort of governance and one of the things that I tend to see with small to medium-sized business owners is they tend to cringe when you bring up the phrase governance at times.

And part of that is because they’ve been used to making decisions either just by themselves or with their co-owners, and having other folks involved in looking at what might need to change in a business or making decisions can sometimes feel, I guess, a little alarming, right? But if you look at the reason why public companies or why larger organizations, right, backed by the private equity funds or venture funds have boards, it’s because they’re certainly, and I believe this is true of most individuals and most businesses, we’re not perfect, right?

We don’t have all the answers, and often we get these blinders on, and we can’t really see sometimes the opportunities or the problems that are in front of us. So one of the things that I’ve often found with small and medium-sized business centers is looking at the process of how is your governance team structured and are you comfortable with the idea of, even if you don’t want a full-fledged board of directors, do you want some type of security council, right, composed of either advisors, a formal board of advisors, professional advisors, or even just, you know, informal friends and family types of conversations that can help you work through and look at some of the information that will present itself to you about your business.

And so, when we find that the management team is well-structured and has diversity and experiences and views, and the governance team, right, in some form, whether formal or informal, exists to sort of supplement that management team with the type of experience and talent you may not be able to bring into your business full time, right, into the management team. We tend to see, frankly, better analysis done of both the assessment, decision-making, and the prioritization around planning and implementation.

And then as you go through that journey, right, there’s looking at how the business is operating, and part of that is, where are you going strategically? Is your direction correct, or do you need to make adjustments and pivots? And also, have you created the growth infrastructure to support both where you’re going today and where you may be going tomorrow? And I tend to look at a lot of folks being probably like myself, which is, you wanna create revenue growth, but you also don’t want to chip away at the margin by spending too much.

Create revenue growth, but also don't chip away at the margin by spending too much. Click To Tweet

But when you are a bit cautious on expenses, sometimes you underinvest in infrastructure, right? And you may need to make decisions around tools or around personnel so that you take some of the hats that you’ve been wearing, right, for years, probably too many hats, off. You begin to bring someone in to run the finances, to potentially look at HR, those sort of core infrastructures that generally aren’t doing the revenue generation, but that you need to continue to be that revenue generator, right?

And then as we move forward through that journey, the other four areas that we tend to see creating either the opportunities for success or unfortunately, the problems that arise is making sure you have some type of structure for the owners or investors in the business if there’s going to be changes, right? Because we see conflict that occurs between founders, see conflict that occurs between investors and founders, having a model for how you’re going to unwind or extract so that you can basically not kill the business if you end up with these conflicts.

And on the flip side of that, which is how are you gonna manage the growth that’s inorganic, right? M&A opportunities and potentially exit opportunities, right? How are you going to look at and evaluate that? And the last piece, and I think to your point about, you know, strategy on the battlefield, is looking at two areas that folks generally don’t like to talk about, which is disasters and how you prepare for them, and also secession planning, right? And secession planning can be either generational, right?

Or it could be, you know, I’m looking at moving on from the business, or it could be these emergency succession plans, which is, what happens if unfortunately I’m on a plane and it goes down, or I get hit by a bus? A lot of folks don’t like to have those conversations, but those are conversations that we really do need to have, right, in order to make sure the business is set up for sustained success.

Yeah, and people think that it’s about the future, but it’s also about the present, because if the people around you, they don’t have certainty that the company has a future, they got to want to hedge their bets and they more likely to look for another opportunity or be open to another opportunity, or they just be less excited about working for the business because they don’t see the blue skies above it. And this is a huge opportunity.

And I see a lot of business owners who, when we talk about the vision, they only think about their personal vision. OK, I’m going to retire. I want to sell this business for a year. So our vision is three years. No guess what? This investor doesn’t want to buy a business that has no vision beyond you selling them because that’s the kickoff point for them.

So they want to buy a vision which is well beyond the acquisition and where the people are on board and they are building beyond the founder and they have the succession plans so the company is its own entity and they have something there that makes money for them to launch. So these are really important questions, Patrick. So if people would like to engage with you and learn more about what you do, learn about your book, wanna learn about Initiative Labs, where should they go for the information?

Right, no, great question, Stephen. Thank you very much. So obviously there’s an author website, patrickesposito.com, that’s up where you can learn more about the book and pre-order it from most of your online retailers. It’ll be in stores October 3rd. So feel free to buy it either advance order or from your local bookstore on or about October 3rd, but you can pre-order now. Obviously, Acme General Corp has a website, acmegeneral.com, where you can learn more about what we do with public sector innovation.

And then Initiative Labs, which is sort of the adjunct to the Structure of Success, where we light touch, help executives, founders, and leaders of small and medium-sized businesses to use the framework from the Structure of Success in their business. And when I say light touch, it’s because we don’t wanna be involved in the business for a sustained period. We wanna hand you the playbook that you can run to go execute this on your own.

Because at the end of the day, right, to your point around vision, most entrepreneurs, most small business leaders, they have a clear vision. What we endorse as a plan is to make sure that vision is supplemented by your management team and by folks who have experience, right, on a governance team. And you all, the folks you trust, you should be making the decisions.

Yeah, you can run with it. And the book is titled The Structure of Success?

Yes, absolutely. The Structure of Success, a framework to help build your business better.

Love it. Okay, well, that’s what you need, a framework to build our business better. This is a podcast of Framework, so thank you very much, Patrick Esposito, CEO and founder of Initiative Labs and the co-founder of Acme General Corp. Thanks for coming and sharing your wisdom. And those of you listening, do check out our YouTube channels where you can watch this episode in full. Also, I welcome you to follow Steve Preda Business Growth on LinkedIn, where we produce short videos summarizing the key framework points of each of our episodes. We have over 180 episodes. They’re all going to be there soon. So don’t miss that. And then you can go and watch the whole show, whichever you like. So thank you for listening. Thanks for coming, Patrick. And everyone have a great day. And everyone have a great day.

Thanks so much, Steve.

 

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