Speed of change is the new norm in building a business. Agility is critical to growth and even more critical to value-building, sustainable growth. If you are not strategically building your business based on this fact, you are already falling behind. Your company's ability to scale is contingent on four critical success factors. Effectively aligning and leveraging its Intelligence Quotient (IQ), Emotional Quotient (EQ) and Velocity Quotient (VQ) will directly impact your ability to realize a high Profitability Quotient (PQ).
The Economic Vitality model below was developed based on best practices' research comparing growth companies to negative or stagnant-growth companies during economically challenging times from 2001 through 2013. When all four of these quotients are operating at high levels, your organization is in the best possible place for sustainable growth.
1. Intelligence Quotient (IQ): Many businesses start in the IQ quadrant. Think back to when your company first began — it was filling a need or offering a level of competency and expertise that was missing in your industry. Or consider the reason that you are in your role as a CEO — you brought an expertise that was needed in the company. The IQ is the smarts behind the business.
An organization with a high IQ measures its effectiveness through:
- Knowledge and competency to produce your offerings
- Experience and expertise in industry and operations
- Ability to analyze and comprehend business complexities
- Ability to be forward-thinking and strategic
- Competitive intelligence and positioning
- Intellectual property and proprietary holdings
However, IQ alone is not enough. Businesses that only rely on IQ can get stuck, like an introverted genius with no common sense or social skills. Many businesses never get out of the IQ quadrant, specifically because of a lack of proprietary holdings, know-how in strategic thinking, competitive intelligence, and ability to analyze complexities.
2. Emotional Quotient (EQ): The EQ within your business is centered around your team and the company's ability to effectively engage people. This includes your employees, your customers, vendors, outsourcing partners and circles of influence.
An organization with a high EQ embraces its corporate culture as a true asset, measured through:
- Everyone being valued in roles
- Ongoing engagement, interaction, and collaboration
- Emphasis on relationship-building and nurturing
- Formal and informal communication practices
- Loyalty, retention, and longevity
- Vision, mission, purpose, and passion shared by all
The true power of EQ lies in everyone clearly embracing, with passion and purpose, what your organization is striving to do for others, enhancing and solidifying relationships inside and outside the company.
3. Velocity Quotient (VQ): As I mentioned at the start of this column, the new norm is being able to operate at the speed of change. Your business's ability to be agile and adaptive is key in helping you take advantage of opportunities and make decisions.
An organization with a high VQ is measured through:
- Ability to make momentum-building decisions
- Ability to deliver offerings effectively and efficiently
- Ability to respond, take action, anticipate and get things done internally
- Ability to be proactive and forward thinking
VQ also fosters your ability to continuously raise the bar against competitors and your own standards of operation, which in turn helps fuel growth and profits.
4. Profitability Quotient (PQ): Your organization's PQ is directly linked to how effectively you are aligning and empowering your IQ, EQ and VQ. A high PQ means that you have profits you can leverage in four ways on an ongoing basis. An organization with a high profit margin or net profits does not equate to having a high PQ. This is an important distinction that many companies and organizations do not fully comprehend.
An organization with a high PQ allocated profits in four ways:
- Profits being shared
- Profits reinvested into capacity building for growth
- Profits dedicated to value-building initiatives
- Profits reserved for security and risk management
A company with high PQ is also an investor's and banker's dream, confirming the company is building value on its balance sheet as well as in its marketplace. This in turn helps your company continue on a growth trajectory.
5. (IQ + EQ + VQ) x PQ = Economic Vitality: If these four quotients are effectively executed within your organization, sustainable growth will be the end result. If you have high IQ without EQ, you are likely making decisions in a vacuum. While these may be quick decisions and perceived by you as being agile and adaptive, if they are not well informed through others' perspectives and insights, you will miss the mark and profits will suffer. If you have high EQ, and yet counter it with decisions being stuck at management level, with no ownership or autonomy given to your team to take action and make decisions, then no momentum can be built, causing your VQ to be low. You will miss opportunities if management is too controlling or initiatives are getting derailed by analysis paralysis. Low VQ can also disengage EQ, resulting in high turnover and profits being consumed in rehires and putting out fires.
Consider how you need to shift within your organization to enhance your growth strategy. Analyze where you are falling short and then ramp up to put this formula for sustainable growth and economic vitality into practice. Of critical note is how you are allocating your spending around profits allocation. If one of the four areas are being ignored, your organization will be impacted negatively.
SUCCESS STORY
Chobani: From zero to $1 billion
The story behind Chobani Yogurt's first five years of exponential growth illustrates the power of the economic vitality formula. For its first 18 months, Chobani was in an Intelligence Quotient (IQ) mode of operations, gearing up to go to market. Chobani's meager beginnings included founder, Hamdi Ulukaya, the yogurt master on a mission, and Kyle O'Brien, food innovation sales master and "Nomad Yogurt Guy."
Their business IQ was off the charts. Between the two of them and a skeleton crew, they were driven by their Emotional Quotient (EQ), which was a passion and purpose to bring natural goodness to the masses through yogurt. However, their EQ needed to be kicked into high gear once that first "perfect cup of yogurt" was deemed ready to roll onto shelves by Ulukaya. The company had to engage its workforce, as well as the ears and minds of distributors, food brokers and retailers to position this new brand against industry giants.
Empowering Chobani’s Velocity Quotient (VQ) took competitive intelligence, relationship building and bringing information back to the plant for any packaging, branding, promotional, innovation or pricing shifts that needed to occur. The company's ability to be agile, especially when challenges occurred, propelled its numbers to the $1 billion mark in five years.
In April of 2016, founder Ulukaya gave away 10 percent of his stock shares to be distributed among Chobani's workforce of more than 2,000 employees — a perfect example of leveraging his company's Profitability Quotient (PQ), and a very smart EQ business-growth move.
Sherré L. DeMao, CGS, is author of the nationally acclaimed books, 50 Marketing Secrets of Growth Companies in Down Economic Times, www.50marketingsecrets.com, and Me, Myself & Inc., www.memyselfandinc.com, Her column seeks to help business owners build and grow sustainable enterprises and businesses with economic value and preference in the marketplace.