Focus on your mission if you want to dominate
New entrepreneurs are usually desperate for sales and don’t want to turn anyone down. They often don’t see how the new business could add complexity to their operations and increases their overhead and their break-even levels. They don’t understand that doing too many things may cause them to be the best at nothing.
They may have an MBA and taken finance classes where they learned that diversification is good. However, they may not have realized that diversification is good for passive portfolios where the investor has no control over the venture. It is not that great for new entrepreneurs who have limited resources.
They don’t understand that the cost of money for them could be very high and that they should not waste it on peripheral areas.
They may not have thought through their mission.
In the early days of Medtronic, Earl Bakken was repairing medical equipment and doing special projects for physicians. One of them, Dr. C. Walton Lillehei, was using medical devices for the heart, but these devices did not work during power interruptions and risked patients’ lives. So Lillehei asked Bakken to develop a device that would work through power failures. In four weeks, Bakken devised the pacemaker, which was attached to a child’s heart the next day, heralding the dawn of the modern-day electronic medical device industry. The year was 1957. There were no regulators or regulations for such devices.
Initially, as sales grew, so did losses. In 1962, sales were $518,000 and losses grew to $144,000. Bakken, whose company had gone public earlier, was forced to get turnaround capital from a local investment firm that placed two people on Medtronic’s board. These two were experienced business professionals who insisted that Medtronic decide on the kind of company it wanted to become, encapsulate this mission in a written statement, share it with all the employees, and focus the company’s scarce resources on products and markets consistent with this mission.
Medtronic decided to focus on implantable therapeutic technologies (devices) that restored people to meaningful lives. This meant that they would not spend resources in other areas such as diagnostics or laboratory products. Another key requirement of the financiers was to instill corporate discipline by keeping track of all expenses, knowing the return for each dollar spent, and hiring a comptroller who was charged with controlling Medtronic’s costs. This new mission and plan helped Medtronic to focus, bring order and control while keeping its zeal, and to grow its sales and profits. Medtronic started to thrive.
Lessons for Entrepreneurs: There comes a time in every entrepreneurial venture when it needs to focus for controlled growth, but maintain the missionary zeal of the founder. As the number of employees increases, entrepreneurs start to lose touch and the need for control grows. However, without the missionary zeal that entrepreneurial ventures usually have, the entity can become a bureaucracy. To maintain the initial zeal and to successfully transition to a major corporation, write down your mission and stick to it. Change it rarely and with the utmost care and gravity. Changing your mission too frequently can cause confusion, and waste resources and time. Make sure that the employees know the mission so that they use it consistently as a compass to guide their actions and decisions even when they are not in constant contact with you or the leadership team. Medtronic thrived in this transition because its founders understood the need for the transition and were able to maintain the mission and zeal while enhancing focus and controls.