As business owners, we need to make sure that our business and its impact on the world will continue, even after we’ve moved on to other projects or even retired. But in order to reach this level of growth and legacy, we need to be always ready for change. We need to be ready to adapt.  

 

This is a very special episode of Systematic Excellence Podcast. For this episode, not only did we reach “ongoing adaptation”, the last step of the Business Hierarchy of Needs, but also we invited its creator, Mike Michalowicz, to join us and help us wrap up our series. 

 

By his 35th birthday, Mike had founded and sold two multi-million dollar companies. Then he became a small business angel investor and proceeded to lose his entire fortune, and then he started all over again. He’s driven to find better ways to grow healthy, strong companies, and has written several books such as Clockwork, Fix This Next, Profit First, and more. 

 

If you haven’t listened to the episode yet, which we heavily recommend, we invite you to keep reading to learn about ongoing adaptation, and everything you need to do to reach this point.

 

Strategies to prepare for change and ongoing adaptation

 

Amalie: We have spent the last few weeks going over the Business Hierarchy of Needs, and it’s been helpful for us, but also just being able to provide the audience with actionable information based on this breakdown, to help people look at something and figure out, “what do I need to do next? And what does each stage mean?” 

 

Mike: Visualize this as a chain. So if we had a chain between the two of us, and we’re pulling as hard as we can, the chain will always break at the exact same spot, and the spot’s the weakest link, no matter what we do, it will continue breaking at the weakest link. The mistake is to focus on all the links, and the other one is to make the chain stronger, because it won’t get stronger until the weakest link is resolved. That is a great illustration of what business owners go through. We’re fixing everything, but nothing gets fixed. And the reason is, is we don’t know which is the weakest link. 

So step one is to identify which link is the weakest, once that strengthens, the entire strength of the chain improves. So in our business once we define the weakest link and improve it, it will fill an entire boost permanently for the business. 

And there’s two modes, there’s what’s called maintenance mode and resolution mode. The mistake is to put everything in resolution mode, we’re trying to fix all the links. All the links, all the elements of business must be maintained, we must keep the business going. You can’t say “I know we have a profit problem, I’m going to resolve that and let’s just ignore everything else.”

So in our business, we have all these elements that must be maintained, it just keeps going on automatically, but the second the business starts choking, the other stuff doesn’t matter. Now the resolution is get whatever’s lodging our throat out of our throat, so that we can breathe. Once it’s permanently resolved, we elevate to a higher level of needs. 

The business’ urgent needs is something we will ping pong around it. Actually my own business, with COVID pandemic, we were pursuing higher level stuff, even legacy, but we were very right back to sales. We had to reinvent what we’re selling. And we’re still in the sales level.

 

Amalie: So we brought you on because we wanted to talk about the ongoing adaptation. What does that mean for business? What does it look like? What kind of planning does it take? Obviously like you said, you might go back a few times, but when you reach this level, and you’re starting to think about this ongoing adaptation, what does that mean for a business owner?

 

Mike: The biggest risk is to stick with what’s working into perpetuity, because historically, it worked. You may run into business owners, when you ask them, “why do you do this process?” “Well, because we’ve always done it.” It’s a normal response, but it’s not an appropriate response. Just because something worked in the past does not mean it’ll work in the future. If something continues to work, milk it for all it’s worth, but just like anything else, there is a maturity curve, something comes to life, and it matures over time, and ultimately, it dies out.

 

We have to watch the metrics for our business, the key metrics, and we need to find what they are. But sales is usually a strong indicator, our conversion of prospects and the clients, the profitability, different products and services we have. Watch that on a regular basis. We have a quarterly sit down in our own business. We all sit down and we go over our numbers. If something’s not working, can we reinvent it or do we cut bait and abandon it? So we had some things like public speaking, that isn’t working right now. It’s hard to get on the stage and have a big revenue stream for us to go to stage and deliver a presentation when no one’s coming to events right now. Well, that’s not something we’re going to abandon. We believe that speaking isn’t permanently over, but in the short term, it needs to be reinvented. So we reinvested to do more virtual stuff. We have a lighting set. We have a specialized microphone now for presentations, all this different stuff. So part of our reinvention for the business is what was working before, wasn’t working now. So adaptation requires us to have our thumb on the pulse of the business, when something isn’t working to have the courage to reinvent or cut bait on it and amplify what is working. 

 

Janine: So you have to try things when you’re in adaptation mode. Everything you just spoke about monitoring your metrics to see if it is actually making a difference is important.

 

How to ensure your business stays strong throughout all steps

 

Amalie: It goes both ways, too. Because if you just continue to do the same thing, just because you’ve always done it that way. But it’s not working, you’re still failing, right? So you really have to, whatever changes or adaptations you make, you have to just watch the metrics to see if it’s working, and make a change when a change is required. When there’s a reason, if you just pop up with an idea, ask yourself, “okay, but what’s the reason for it? Is there a difference? When is it going to make an impact? Are people asking for that?” If people are asking for it, give it to them, if you can supply it, and I think COVID is the perfect example of how ongoing adaptation is required. Now, time is going to be some big pandemic. But this is the perfect example of what it means in order to survive, you have to continue to adapt, or you just won’t.

 

Mike: Exactly. It’s the boiling water, you throw a frog in boiling water, it jumps out, if you put it in cold water and turn it up to a boil over time, it doesn’t notice. And that’s the risk so many of us have is that change is not abrupt, it’s very subtle over time, we don’t notice it. There’s people still driving taxi cabs today that say Uber is a fad. Because they went in cold water, and they formed an identity around it. And I think that’s the biggest trigger is once we identify who we are and what our role is, that can become insurmountable when change is necessary. So be very careful about how you position your identity, you may have to change how you see yourself.

 

Amalie: And you have to be willing to change and be willing to admit that maybe what is going on isn’t working right. The first thing is self evaluation, admitting to yourself that you might be wrong, or you might be doing it wrong, or there might be a better way, or there might be a better product or whatever. But there’s so much through this. First being the business owner, evaluating yourself and being able to admit when something is wrong or not working or needs to be changed, because that’s the first step. The people on your team, they can talk about it all the time, but if you’re not listening to them, or you’re not even admitting that there could be a different way, ultimately, you’re still gonna fail because you’re not going to be able to grow beyond that point.

 

Mike: That’s a trigger point. It’s like one of those automatic behaviors like breathing, we worked very diligently for a long period on our order level, the third level up, which is efficiency. But four years ago, it was an all out effort for systemization. And the number one thing was for me to get out of the business, I started implementing vacations, a vacation is not a vacation for the owner, as much as it is a vacation for the business from the owner. And it became this process of trying to empower my colleagues to know that the business was more dependent upon them than it was the owner guy. And while we are focused on sales, we’re back at the sales level, on automatic, that order we’ve worked on for so many, for many years ago, is still playing out, it’s still achieving what it needs to achieve.

 

Janine: What I really like about the business hierarchy of needs in those top levels is it shows the potential that you have, because we work with a lot of people right at that order level, and they want to hit impact. But still this goes back to how they identify themselves. It’s like they aren’t just stuck in their business, they have stuck themselves because they identify themselves in that role and they can’t envision the next stage or where, it’s like they feel lost.

 

Mike: I think for many entrepreneurs, the greatest day of the business is the day before they actually opened the doors. Because we’re dreaming like Casper to change the world. And this impact we’re gonna have, you’re actually thinking about the impact and legacy level. But the day you open the door, it’s like, “we got to survive.” So set the vision, revisit the vision and sometimes when hierarchy points to it, you have to put a lot of work into that vision, again. But for most of us, the sustainability of businesses, usually the first three levels, I call them the “get levels”. Either you’re going to be actively fixing or improving sales, actually fixing or improving profitability, or fixing order wishes efficiently throughout the organization.

 

Amalie: I think a lot of times when you’re putting in new processes and doing the efficiency, it takes you kind of slow down to speed up kind of thing. So when people feel like they’re doing that it feels like failure, but it’s not failure. In order to get these things implemented, it takes time, and anytime you ping pong down to a lower level, it’s not failure, that’s business. That’s life, it’s just the ebbs and flows of it.

 

Personal experience and real life stories from Mike Michalowicz

 

Janine: So we read your bio where you exited to companies, and then when investor lost it all, and now you have multiple companies again, when did the legacy level become clear and intentional?

 

Mike: I think it is a choice we can make as entrepreneurs, we can live at the first three levels, you can just sustain there and then and have a very healthy business. The other two levels really are about the giving phase of a business.

The defining moment for me was losing it all because it was a total reset, not just financially, it was a reset on my ego. I thought success was the more trophies I had, the more houses and cars and stuff that I could show, the more successful I was, I redefined at that point, like, “Oh my God, this success is the legacy that I choose to leave on this planet, to serve humankind.” And that losing my money is the best, biggest blessing ever got. It was the most painful experience. I never want to experience it again, but it redefined me.

The other interesting thing, and here’s something I didn’t share in the book, but it’s really interesting insight. There’s a question that circulates that says, if you had all the money in the world, what would you do?

There’s another question saying, if you have no money in this world, what’s the vocation you thirst for? And when your vocation can match your vision, your dream for yourself, now you have a calling. I always wanted to be an author when I had all the money in the world. Once I had no money, I said, “What do I want my vocation to be to bring sustainability to myself?” I said an author. It was very clear that moment, that was my calling, I got to be an author. It was my dream. It was also my vocation.

 

Amalie: So for business owners that are at the level of the ongoing adaptation, obviously, a lot of it is these abrupt changes that they aren’t expecting, but is there planning that they can do? 

 

Mike: I think the number one thing to do for your business is to get your business to a level where there is no dependency on you. You may even call it a cash ATM. But basically, the idea is that if the business has no dependency on you, there’s a moment that’ll happen where you have a decision to make, you can say, “Well, I’m just gonna sit back and just let the business continue on and generate a lifestyle for me.” Or what I see more commonly, “I’m going to re insert myself in a business in a joyous way where I can do the work I want to do.” But regardless of what you do with your own direction, you become very viable to the market. I think for a lot of entrepreneurs, the retirement plan is to sell my business. And sadly, very few businesses are prepared for that. But if you design a business that has no dependency on you, that’s what acquirers want, is they grow their businesses like “oh, there’s something that I can bring into the fold that doesn’t need the owner.” And therefore it’s a turnkey business, this is a really good viable model. 

 

And that’s how we wrapped up our Business Hierarchy of Needs series with Mike Michalowicz. We really hope this interview has been as helpful to you as it was to us. If you know anyone that’d be interested in listening, please share it with them.

 

We highly recommend you listen to the full episode as it is particularly interesting to all business owners. Click here -> https://systematicexcellenceconsulting.com/podcast/

 

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