But a man named Bill Rodgers reignited the entrepreneurial flame in Ed one afternoon when the two met at a French cafe. Bill had spent the past five years developing an ingenious product. Though it had been in small-scale production for three years, if the enterprise was to go anywhere, Bill needed outside investment. Seeing a fascinating challenge and an opportunity to use his experience, Ed brought several investors on board, took over as chairman, and hired a longtime associate to manage the business.
Ed was highly optimistic about the new enterprise; for the first time in his life he had money to fuel the company's growth. The furniture business had been a frugal operation, and he'd always had to cut corners. It could have grown faster and farther, Ed was certain, if he'd had adequate capital. Now that he had it, he was going to do it right.
WHEN TOO MUCH PRODUCES TOO LITTLE
Research consistently demonstrates that new businesses often fail because they're underfinanced. That had been Ed's predicament with every company he'd started. If only he'd had more capital....
But every silver lining has a cloud, and every strength has a dark side. Strengths can become weaknesses and turn on you when you least expect it - which is exactly what happened to Ed and Bill. After barely 18 months - during which their company burned through the initial investment as well as a secondary offering - there was just one new location in actual operation. Technical glitches in the product, operational complications, and competitors' reactions all afflicted the ailing enterprise. One year later the company filed for bankruptcy.
WHEN THE PAST INSTRUCTS THE FUTURE
Most people doing a SWOT (Strength, Weakness, Opportunity, Threat) analysis would agree that good financial footing is a strength and insufficiency of financial resources is a weakness. But, as Ed and Bill would attest, abundance can make you fat and complacent.
Instead of bootstrapping their operations, thinking small, and staying trim, Ed and Bill thought and acted BIG. They paid little attention to incrementally growing revenues. With the capital they'd raised, they could roll out a large-scale nationwide expansion. Short-term revenues were unattended to, being much less important than when times were lean and the entrepreneurs were hungry. Besides, the only way to achieve the "hockey-stick" growth rate -- presented in the business plan and hyped to investors -- was to expand as quickly as possible.
Ed and Bill's experience is extraordinary, but companies with copious financial resources often behave the same way. Having plenty, they forget what it was like not to have money. They forget about the hard work, creative energy, and clever strategies that made them successful. They forget about being resourceful and innovative, as they had to be when they were broke. They forget what got them where they are - not the money they had, but the money they didn't have.
DO YOU KNOW YOUR FIENDS FROM YOUR FRIENDS?
Money is a great saboteur of success, but it's not the only one. Every strength has an evil twin, just as every weakness is a potential source of power.
Next time you do a SWOT analysis with your team, spend some time probing the initial conclusions. Challenge the team members to look past the obvious and apply their imaginations. Explore how your company's strengths can be weaknesses and its weaknesses strengths. This will help everyone appreciate your true capabilities and expose your blind spots.
Try our new online SWOT analysis and find out what your team thinks the strengths, weaknesses, opportunities and threats are of your company.
