Design-First Strategic Growth
Questions all Growth Focused Operators should be asking themselves.
Simon Sinek talks in his book on leadership, “Start With Why” about the story of American auto executives who went to Japan in search of answers to their Japanese competitors’ success.
On the assembly line they observed a very similar process to their own, showing little insight to their differences, that is until the very end. At that point they noted that the Japanese line was missing a worker at the end who hammers the doors into place with rubber mallets. On the US assembly line, a dedicated employee sat at the end of the line and would tap or sometimes pound the door into place to ensure it fit. When the American executives noticed this missing component, they asked the Japanese team why this step was omitted.
The Japanese leaders explained that they made sure that the doors fit on the design level, far before anything was built and fabricated so they didn’t need to fix it at the end of production. Simply implementing a design heavy initial process allowed their doors to fit without an extra worker to hire, ensured a longer life on the door, and effectively made the car more safe in an accident, and ultimately more profitable to the company.
As Americans, we tend to take the, “if it ain’t broke, don’t fix it” approach. In business we fall into reactionary decisions vs. proactively designed initiatives. In expansion efforts this approach is very common and almost always unintentional, but can lead to financial consequences that can take down the entire company. If done well, brands can design their strategic growth in a way that leads to industry leading valuations far above their category.
American brands like Apple, Sweetgreen, Shake Shack and Tesla follow this design-first approach and are great examples of how it paid off on Wall Street. At the Shake Shack IPO the fast-casual burger concept boasted a valuation of $1.6B with only 63 locations. They were able to command a multiple of 100x vs. their avg. category of 6-15x. Tesla once also traded at 100x vs. their competitors GM at 8x and Ford at 14x during the same time frame.
Not everyone can be Apple and Shake Shack, but being a BRAND first, design first company can be synonymous with long term financial gain. What makes it challenging to implement in real estate growth is the strategy. Non-financial metrics don’t show up on a balance sheet or unit level Profit and Loss statements. As an operator focused on sustained growth, it’s critical to ask yourself and your team the following 5 questions:
- Do we have a Strategic Growth Plan driven by the Brand? Or are we allowing real estate opportunities to drive our growth? (This is where most get in trouble)
- As we grow brick and mortar, are we conducting purpose driven analysis, or skipping to a site criteria checklist?
- If we only measure what we care about, are we measuring our Brand in every market and site specific real estate decision?
- Once open, are KPIs in place to help us learn and design toward our success in this location and others?
- Can I articulate how our current Strategic Growth Plan will set us up for maximum valuations at future capital events?
If you answered “NO” to any or all of these questions, you are in the majority, not the minority. As we “innovate or die” getting through COVID, let’s also be intentional about how we grow our brands with design first strategy.
- Ashley Robinson, Founder The Seaker Group