Hold the Innovation! First, Build a Solid Foundation

Build. Unless you live on the dark side of the moon, you've undoubtedly heard top athletes talking about the keys to their success. I'm often struck by the breadth of their focus these days. They aren't just practicing their sport and maybe pumping a little iron: They're concerned about nutrition, strength, speed, flexibility, cardio, rest, hydration, etc., and most of them have a sports psychologist, too. They know that while most of those areas won't make them great, slacking in any one of them can prevent them from being great.

Firm owners need to think the same way. I'm sure you're familiar with the six areas that support business growth: management, client service, human capital, operations, finance, and sales and marketing. Yet many owners fail to grasp that deficiencies in any one of these areas can derail their efforts to grow. You can have the best marketing in the world, but if your client service is weak, you'll have low client retention. You can have the best employees, but bad management will drive down productivity.

Similarly, you can come up with brilliant innovations that will transform your business, but weak operations, the wrong employees or unstable finances can prevent you from implementing them. The solution is to build a business that is strong in each of these areas so that when you and your team come up with great ideas, you can successfully make them happen.

Sustain. Once we get owner-advisors on board with transforming their firms to support innovation, this is another area where they often fall down. When you get each of the six business areas to the point where they can support innovation and growth, you need to keep them there. That means you can't just rely on the people who are currently doing those jobs. As your firm transforms, they might end up doing something else, which means someone new may have to fill those roles. To make these transitions seamless, you need systems that work, so that a new person can step in and know exactly what needs to be done and how to do it.

Furthermore, while these systems need to be enduring (that is, doable over the long haul without a superhuman effort), they also need to be flexible, so that employees can solve even unusual problems that will come up. At Kaleido, we have a graphic that shows us the status of a firm's key processes (from very weak to outstanding) in each of the six business areas at a given point in time so we can track a firm's progress in implementing these processes. This helps focus efforts where they are needed most.

Innovate. Once a firm has empowered its employees to contribute, solidified all six foundational business areas and created processes to ensure they run smoothly, it's ready to support innovation. Now the firm has a fighting chance of successfully implementing some of those great ideas that the owners and employees come up with. This transformation won't happen overnight, which means you may have a backlog of ideas that you want to get in the works. It's important to resist the temptation to do everything at once (read: start by implementing one new idea at a time). You don't want to undermine your transformed firm by overloading those new systems you've put in place. So, start slowly with your best idea and see how it goes. Be careful to monitor the impact that each new project has on each part of the firm—even the best preparation is bound to need tweaks here and there.

Remember, keeping the firm on track is a lot easier than getting it back on track. Be sure to keep the lines of communication open; the success of any innovation depends on execution, so listen carefully to the folks who are actually implementing your ideas.

Over the years, we've come to realize that the success of any advisory firm depends on innovation. To grow an advisory firm to the next level almost always requires new strategies and tactics that are quite different from those that have worked in the past. But to achieve innovation, firms need to build a strong foundation, so that those new strategies have a chance to succeed.