Lately, I’ve set aside some time to invest in myself. I’ve been catching up on reading, networking, and brainstorming, and chatting with some of my entrepreneur friends. My drafts folder is slowly filling up with ideas and thoughts I want to share. My brain is on overdrive, as always. I have mentioned before, one of the best books I read in the past couple of months was Guy Kawasaki’s book “Reality Check”. I liked it, because it fits with my personality – I LOVE it when people tell me how it is. Give me no filters, no BS, just pure unadulterated thoughts and feedback. Guy seems to have mastered that. I may not agree with everything he says, but he has some great points.
So, while reading his “wake up call of a book” for entrepreneurs, I came across a great sentence: ”The purpose of cash cows is to fund new calves”. Yes! Another kick in the behind to liberate an article from my draft folder!
Let us begin! I would like to expand the idea to: “Cash cows inevitably die, and the ones without healthy offspring take the farm down with them.”
Some executives not only dump all their resources on “cash cows”, but also segregate them and poach resources from other units. To justify their actions they use absurd levels of “analysis paralysis” level formulas and theories lacking logic. These actions deprive their organization of larger AND long-term success. What a bunch of shortsighted baloney!
Here are my quick thoughts on how to help organizations increase their ability to succeed short and long-term:
1. Segregate risk, not resources. There are many techniques, including loan collateralization and the creation of intra-organization employee “leasing,” that can be used to mitigate possible risks to the “mothership.” There are numerous successful examples of this in all industries.
2. Share resources openly, but with accountability. Attorneys and accountants can help you understand how to best form a startup (better yet, do your own research, so you don’t get the solution that renders them the highest fee). But, it is up to the founders to instill resource sharing and team mentality within the organization. If one product is creating a great cash flow, the best practice is to siphon off excess resources and redirect them to up-and-coming products and services. Yes, some “superstars” may cry foul, but if they do, then they don’t care if your company is going to be there in a year and will likely be gone the moment a recruiter calls them with a higher offer.
3. Do not let successful projects hoard your best people. I suggest rotating people from the successful projects to the failing ones. It’s important to bring in a fresh perspective to the work and to have everyone know what working on a profitable project feels like. This can also help with employee retention. Yes, dirty work needs to be done, but from time to time, let them see the light!
Hopefully this short list will give you some ideas on how to deal with “cash cow” issues. We don’t need to look far for examples of success. The most notorious example is provided by Apple: the market rewards you for killing an already successful product, motivating your team to not fall asleep on their laurels, and taking a chance to create something even better.
Apolinaras is a business operations leader with 12-year track record of building scalable and capital-efficient operations for technology and professional services companies.