Momentum

Isaac Newton's Business Insight

Fast-moving trains, meteorites, tsunamis: there's no denying that objects with momentum are difficult to stop. Jon Ralph from Academy for Chief Executives discusses taking a strategic approach in times of turbulence.

Newton’s second law of motion defined momentum (P) as mass (m) multiplied by velocity (v) or, in everyday speak, the size of an object times its speed. During turbulence, momentum accords stability, the power to stay on course and go the distance.

We are three quarters of the way through 2017, with the aftermath of Brexit and the Trump election contributing to the lack of economic consensus of what the future holds. With no line on the horizon the prudent expectation is of a bumpy ride or, in other words, turbulence.

By their very definition, our businesses are small and medium sized enterprises; under Newton’s second law, if our velocity is slow our momentum is low. And during turbulent times that makes us vulnerable.

In periods of turbulence, there is no point in focusing on what cannot be controlled; like the pilot who responds to the weather by adjusting their course, the strategic business leader focuses on controlling the controllables.

In the light of the economic and political uncertainty of last year, I urged my group of CEOs to focus on increasing their business’ momentum so that they could better weather the anticipated storm. It’s an exercise I encourage every business leader to do.

A useful starting point is the identification of the best indicator of velocity. This may vary according to the business but KPIs such as billing value, cash receipts, gross margins, or order value are a useful solid foundation from which to respond to that old adage, “if you can’t measure it, you can’t manage it.”

Once the measure is determined, plot it over a period that excludes seasonality. Three months is a minimum but twelve months if the business cycle changes through the year. Take an average and use this as the KPI momentum factor. Then give it your focus and understand how it is influenced.

Bringing mass into the equation, applying the chosen KPI to the net asset value of the balance sheet provides a more accurate momentum factor.

Yes, it’s a benchmark rather than an absolute value, but focus on this KPI, maximise momentum and the probability not only of surviving but prospering, no matter what the coming year may bring.

We are still in a period of fluctuating exchange rates, uncertainty surrounds our trading relationships with the rest of the world and that impacts our domestic economy. As business leaders, we cannot control this environment but we must be aware of it and look for the opportunities.

My group of CEOs knows that periods of rapid change create periods of great opportunity. We learn together, sharing ideas and opportunities in a non-competitive and confidential space, to maximise our ability to survive, prosper and realise our visions.

Our world class speaker in December is a futurist and business strategy consultant; they will present the anticipated ‘big picture’ of the next ten years outlining the potential business opportunities that the predicted changes may bring, such as driverless cars.

It has been widely acknowledged that leaders of SMEs have a valuable part to play in shaping and ensuring the prosperity of the UK economy. Peer-to-peer groups like mine offer the experience of camaraderie, support, challenge, and real-life learnings that maximise opportunities for business growth and prosperity and for the individual CEO to develop personally and enjoy the journey. Particularly when the going gets tough.

 

Visit us at one of our breakfast roadshows this Autumn and see what it can do for you and your business.

 

Jon Ralph

Regional Director and Chair

Academy for Chief Executives (West Midlands)

jon.ralph@chiefexecutive.com

 

Appearing in:

Date Location Venue Time
27 September 2017 Stoke Britannia Stadium 08:00-11:00
28 September 2017 Telford RAF Cosford Museum 08:30-11:30
18 October 2017 Dudley Black Country Museum 08:00-11:00
19 October 2017 Worcester Worcester Rugby Club 08:00-11:00
25 October 2017 Liverpool Everton Football Club 08:00-11:00
26 October 2017 Manchester Etihad Stadium 08:00-11:00
14 November 2017 Birmingham Hotel Indigo 08:00-11:00
15 November 2017 Birmingham NEC 08:00-11:00