Without effective discipline around decision making we can end up making decisions we later might call dumb. To avoid this one of the tools we use is the sandbox. Where we play.

Our sandbox is where we have proven that we can win and earn the right to be a viable option for our customers.  And the principle helps us to keep sand in the box…

What we sell, Who we sell it to and where we sell it.

Like any principle creates focus and guardrails for our thinking and decisions.

When going outside of these guardrails, we need to do it with extreme caution and this takes a lot of humility at times – especially when a business is doing really well.

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EPISODE TRANSCRIPT

 

Brad (00:00:13) – Hi there. Welcome to the Growth Whisperers, where everything that we talk about is building enduring great companies. Companies that last, companies that you actually enjoy working in and the team enjoys working in where we make a good profit and we’re doing the best work that we can, living rewarding lives. My name is Brad Giles , and today, as always, joined by my co-host Kevin Lawrence in Vancouver, Canada. Kevin, hello. How are things today?

Kevin (00:00:41) – Things are great. I like what you said, it’s kinda like the dream, maybe , ideally, you know, you know, with this, you’re, you’re building a company and you feel like you’re living a dream, a notable amount of the time until you hit, hit the inevitable rush. Rough patches. Awesome.

Brad (00:00:57) – Yeah. Yeah. Uh, I, funny you should say that. Uh, I met with a leader today this morning, uh, and he said, Brad, it’s like, I’ve been, it’s, it’s like all of a sudden I’m just going to work every day. I’m just hanging out with all my best mates and just doing amazing work. It’s so good.

Kevin (00:01:20) – And that is, people don’t realize that’s what it’s supposed to be. There’s supposed to be tension and things like that, but you’re supposed to be spending time with people you enjoy working with. We had a, a retreat last week down in the US for one of the companies I work with. We had, we worked incredibly hard, solved major stuff, and we had an awesome time together.

Brad (00:01:43) – Yeah.

Kevin (00:01:43) – You talk to some people, that’s not their experience. Um, unfortunately,

Brad (00:01:48) – And that’s like, we talk about core values and behaviors, and we talk about all of the bits and people and bits and pieces and the way that people are focused. And it all comes back to l like that, that’s a, a sense of the output. So it’s good. It

Kevin (00:02:04) – Is. And you gotta make a bunch of tough decisions to get there.

Brad (00:02:07) – Mm.

Kevin (00:02:07) – Okay. No matter what, if you don’t make the tough decisions, it’s like a garden that you don’t pull the weeds, it becomes a mess

Brad (00:02:14) – And it becomes harder to bring back to a good state. So with all of that, what, uh, what’s sort of a word or phrase that might be on your mind today?

Kevin (00:02:24) – Mm-hmm.  today. It’s connection and, um, and connection. Rooted connection is, you know, getting to know people. And with this company I was with last week in the US and worked with ’em for a while, I’d say this about a lot of people are people. They’re awesome people. And, but, but we spent, uh, we had a whole bunch of time together the night before and we had a whole bunch of times having passionate discussions and, you know, the, the CEO is the master of questions and asking us different questions where people are opening up and sharing and getting to know each other way beyond work, like deeply understanding each other personally, and building an incredible connection before we started the first tiny bit of work. And it just makes everything else easier. So connection, the power of it, and it feels great too. Like, it’s fun, it’s wonderful to get to know accomplished people.

Brad (00:03:18) – Mm-hmm. Mine would be run to the fire in the work that we do. Oftentimes we can see little things pop up in our interactions with people. Uh, and there’s, I think it comes from the, the professional fire men, fire women, the people who mm-hmm. ,

Kevin (00:03:34) – Yeah.

Brad (00:03:34) – Put out fires. Uh, are you running to the fire or are you standing still or you’re ru or are you walking away from the fire? Well, I had a situation on Friday where, uh, one of the executives had mentioned something twice during our annual workshop, um, and our annual strategy workshop. And you could see it was eating him up. And I just said, okay, let’s stop and let’s go into this. Why is this an issue? Took us off course for 45 minutes, which doesn’t sound like much, but he’s a lot when you’ve got a lot to do over two days. Um, but he was so appreciative, he said, like, it was just, it was just getting me stuck. Um, so yeah, sometimes us as coaches or us as leaders, we need to run to the fire and sort out those problems as they pop up.

Kevin (00:04:26) – Yep. Yep. Until the, and before they become massive things that engulf a whole forest or a whole city. Beautiful. Wonderful. Well, let’s jump into today mm-hmm.  today we’re not talking about running from fires and we’re not talking about connection and we’re not talking about a players, actually, we’re talking about something normally different. Actually, you know, you could use some of what we’re talking about today to put out a fire. Um, but we’re, today we’re talking about sand and in particular stuff, sand in a sandbox, which is really, um, a metaphor for where we do business, right? It’s kind of putting the rails around a sandbox. You know, back when I was in school, there were, there was, you know, pieces of wood that framed the sandbox to keep the sand in the box. And, and for us as leaders and executives in our strategic planning, we normally have a, a, a section called the sandbox, which is really defining what we sell, who we sell it to, and where we sell it. It’s kind of like our marketplace and the place that we’re playing you almost to take the metaphor of kids. So today we’re talking about the sandbox and, and first of all why it’s important, and then two, what happens when people get really excited about stuff that’s outside the sandbox and they want to take some of the sand and go somewhere else.

Brad (00:05:51) – Yeah. It’s a, it’s two parts. We spoke for quite a long time about how do we make this effective? And it wasn’t just what is the sandbox, because we can set the sandbox and say what we sell, who we sell it to and where we sell it. But what then happens is there will always be executives or, uh, good old creative CEOs who will, who will say, uh, okay, if, but we’ve gotta try this cuz it’s such an exciting opportunity.

Kevin (00:06:19) – What do you do?

Brad (00:06:20) – That’s the case.

Kevin (00:06:22) – There’s a lot of that. And the idea in business, you know, you know, roads, roadways have lines painted on them and there’s this framework of stay in your lane, right? There’s another saying in some cultures, which is stick to your knitting.

Brad (00:06:36) – Yep.

Kevin (00:06:37) – Right? And another one is stay in, keep the sand in the sandbox. Metaphors all for the same thing, but with many of the very experienced CEOs or really strategically smart ones, they know, stay in your lane, stay in your sandbox, stick to your knitting, stick to what you’re good at. And, and, and they’ve done that because as companies scale, all these new ideas and fragments tend to distract the leaders from the things that matter most. Mm-hmm. So, but there is times to move from it. So that’s what we’re getting down to. And sandbox is a great principle of a principle of, uh, that used in business to help us make better decisions so that our creativity can be channeled to high value points or points that are proven and we know we can win versus, you know, what we get excited about and, you know, our idea of the day mm-hmm. . So our kind of, our point of this is one, know your sandbox,

Kevin (00:07:36) – Who you sell, what two, and where you sell it. Like to really be crystal clear on that. And then when you wanna go outside of it, just know that it’s actually a, you’re violating a core principle. It’s like, believe it or not, it’s a high risk decision because you’re going from being a master person on a pogo stick, a little bouncy pogo stick that, you know, we had as kids to, you’re riding a unicycle, it doesn’t look like it, but you are notably changing. And odds are you’re creating a notable risk and potentially opportunity for a business. So when you change a principle or go against one of your core principles, it just needs to be taken really seriously and rigorously debated.

Brad (00:08:24) – Because if we don’t do that, we chase the opportunities that present themselves. Yeah. And like many of the other tools that we use to build these strong guardrails around us, such as the hedgehog or the smack recipe, or even to a lesser degree, our values, all of these tools that we put into place help us to make the decisions that are gonna give us the right impact, the right return on mm-hmm.  invested capital that we spoke about a few episodes ago, uh, and is gonna help us to execute our strategy more effectively. And that’s, so let’s,

Kevin (00:09:05) – Yeah. So let’s give an example. So I have had many, many clients. I remember one client I worked with, uh, that was in a branded retail and we sold a whole bunch of other people’s products. And the team’s like, we sell so much of other people’s products, we should just make our own. It can’t be that hard.

Kevin (00:09:27) – And I know, and the, and the c e o wasn’t in a room. I’m like, this is not gonna fly. The c e o is a big believer in the sandbox principle. Stick to what you’re good at. We are retailers, we are not brands that create products. We’re good at building the location online, in, in person where people will want to buy from and creating a buyer’s experience. We are not product creators. And they got ex anyway, long story short, they went off and started doing some stuff and, and you know, the story is generally about the same, is that it’s high risk. And they, and they went and did a whole bunch of stuff and we got stuck with a lot of bad inventory we couldn’t sell. And, and, and again, it’s not that, it’s not saying don’t try things, just know that there’s a reason why we we stick to it. So that’s the doing a different product. Um, another one in that same country. Hang

Brad (00:10:23) – On, hang on. I’ve got a, that story about a re it’s like you’re rating this story that’s in my head back to me. We had a, uh, we’ve got a retailer that we work with. They had an opportunity to bring on a new brand, uh, exciting. And they had the opportunity for full country distributorship, but the only way, uh, and, and that meant much higher margins, which is very attractive to a retailer.

Kevin (00:10:49) – Sure. Of course.

Brad (00:10:50) – The only way that the manufacturer would do that deal is if they also, uh, uh, led a wholesale charge. So this is a retailer with all of their core competencies Yeah. Around, around owning, uh, stores, selling directly b2c.

Kevin (00:11:08) – Got it. They didn’t

Brad (00:11:09) – Know nothing. They didn’t the, the, they didn’t know nothing about wholesaling and b2, b2b. Did I say B2B before I meant b2c. They didn’t know anything about B2B and how to sell to other retailers and they, it was a disaster. It was messy. That’s

Kevin (00:11:25) – Cause the retailers trying to get into the wholesale trade.

Brad (00:11:28) – Yeah. And it was so it was outside of their sandbox, but they were so enamored with the deal to begin with, um, that they took it on and they did a crappy job of it. Now the good thing but is that in retail, the middle man is collapsing. So it’s not only in this environment, uh, it’s a, the key

Kevin (00:11:48) – With that story is taken on the distribution. National retailer could be high risk unless it’s a brand they know already sells well in the country. Yeah. If they already know it sells well then that’s not risky and it fits into their existing strategy getting into wholesale. We’re not saying that getting into wholesale is a bad idea. No, we’re just saying you don’t know anything about it. Is there a way you can do a test? Is there a way you can build capability? Is there a way you can joint venture to learn? So for example, uh, one company that I work with that’s, um, uh, in the real estate development business, they do a certain type of product. They build and sell a certain type of product. They know like the back of their hand. They’ve done it so many times, it’s not funny. They know everything to know about it in their region.

Kevin (00:12:37) – They’re considering a different type of product, a different type of building that they’re gonna consider building That is, there’s a lot of things that are different, although from, from a a layman’s perspective, they wouldn’t think that it is. But what they’re saying is, okay, we’re going out into something new. We are gonna then go joint venture with someone so we can learn, we will make less money and we will learn and do it a few times as we build our capability and then we’ll do it on our own as, as a, as an alternative. But I wanna give you another example. Go ahead.

Brad (00:13:11) – It’s like they’re earning the right Yes. To Yes. To, to uh, expand their sandbox.

Kevin (00:13:19) – Correct. And sometimes you can do it through acquisitions that can be dangerous cuz there’s a whole other set of variables at play. But d knowing, acknowledging that you’re stepping outside the sandbox and doing it consciously. So another, um, retail, I got one,

Brad (00:13:34) – Oh, sorry. Told me the Yeah, okay.

Kevin (00:13:36) – Other retail one, just to finish the retail theme. And the simple thing is, is that they, um, in another part of the world and then they expand it into another comp country rapidly and enthusiastically. Uh, and many, many millions of dollars later they had to retreat because the dynamics in the country were so much different. They underestimated, it looked like sand over there and they figured it was gonna behave the same, but it behaved so differently they had to retreat and close almost all the stores.

Brad (00:14:07) – Yeah. Yeah. And that makes me think about episode 84 that we did, which is the seven common strategy mistakes from Michael Porter. One of our most popular episodes incidentally, Uhhuh . But that speaks to one of those strategy mistakes that are made. You know, all of these podcasts that are, we, we, we, we talk about so many different subjects during these podcasts. So much of it is born of pain. And for me, getting outside of one’s sandbox is, uh, something that I learned in a quite painful manner. So, uh, going back about 20 years ago in my firm, we, uh, had hired an advisory firm. Um, this was before coaches were really established in the way that we do it, um, strategic coaching. Uh, and so we had this firm and they, they decided to ask us, uh, let’s meet with your customers and they’ll ask us about the things that they would trust us with, uh, so that we could look to expand our market.

Brad (00:15:23) – Now we are already growing it 80% per year, so we didn’t really, and we didn’t own a hundred percent of our market, we didn’t own more than 10% of our market. Okay. So there’s no reason for us to step into different areas. But we went with their advice and then we ran a session with our major clients all in the room. And what came out of that is that we would trust you with, uh, uh, moving into this other market, which was at the time computers and telephone systems. And so we took that on board and with our, you know, head full of steam and energy and ego and all of the other stuff, and no discipline in the sense of a sandbox. Uh, we started up a new division, a new area, a new company, um, that was supposed to be complimentary to what we were doing, but we didn’t earn the right to do that. It was so different Yeah. From what we were doing. So yeah, it, my point is this is these lessons that we’re sharing are often born of pain. And yes, that was a dumbs dumb decision on our part because we,

Kevin (00:16:29) – Moving outta your sandbox is a high risk decision and often leads to pain. And it doesn’t look like it. It’s like you’re stepping outta the sandbox into acidic waters and you don’t even, or acidic sand and you don’t even know it. Yeah.

Brad (00:16:42) – You

Kevin (00:16:43) – Know, and that’s, and that’s the hard thing about this is that especially in, so an example of another client that worked with, they had incredible momentum now, and I’ve got another client in the same situation right now. And, and we had sort of the be careful you’re stepping outside of your sandbox conversation last week. And it was almost like it was a warning because when companies are doing so well, we have so much confidence and momentum, which is wonderful. We have that belief and it’s incredibly powerful in the sandbox. So this client unfortunately had incredible, incredible momentum within Canada in their sandbox. And they were setting records, and I don’t wanna give the details, but they were setting records internally and even within, uh, the market that they were operating in, like, it was the poster trial of success. And it was just spectacular growth was spectacular.

Kevin(00:17:37) – Profits were spectacular, everything was amazing. And then they decided to take that amazing momentum and trans transfer it into the US and then did a big bold opening in the us. And a long story short, in their excitement and their confidence from winning and winning and winning, they, they, they forgot that this thing called the border is a different sandbox. And even though it’s the same business, and not only did they not, um, did the market uptake was it slower than they expected because they had no momentum there, but they also didn’t have strong enough people and it hurt them dearly and wiped out their profits for a few years. And it was a very profitable business. It was, it was incredibly painful. And you know, they’re working it through, but it’s unfortunate because if they had done it with eyes wide open and you know, they would have to have really, um, humbled themselves before they did it and forget about the Canadian momentum going into the US as an example. Yeah. And so it’s not, we’re not saying don’t do it, but just realize it doesn’t look like high risk when it really is. And there’s a, you gotta be really smart about it.

Brad (00:18:48) – Yeah. I had another client and they expanded across the country, but if they would’ve done it 10 years ago, they would’ve definitely failed. And they acknowledged that. So what we’re trying to get to here is that leadership teams, CEOs are often very creative people mm-hmm. . And they can’t help but want to try new ideas and grow. Yeah. And then the second part of that is that there’s always opportunities that present themselves when our eyes are open to them. There’s always opportunities out there mm-hmm. , but, um, they can many times or often be outside where we can really win, um, where the boundary is that helps us win more often. So there are three key points that we’ve identified or maybe questions that we should ask. If you are in the situation where an idea comes up and it’s outside of our sandbox to define, it’s again, what we sell, who we sell it to and where we sell it.

Brad (00:19:55) – So an idea pops up, okay, we want to expand across the border, across the country, start selling this new product, whatever it is. If you’re confronted with that situation, either within yourself or within your team, these are the three questions that we’re encouraging you to consider. So the first one is, have we earned the right to expand outside the sandbox? And that’s what I said about that company expanded across the country before. So they had earned the right, they’d built their competencies to a point where they could handle, uh, remote office and they could profitably establish a new O office in another location because they’d done it locally. And it’s,

Kevin (00:20:37) – And it’s not just theoretically having it, it’s proving that you have the competencies. It’s not just hiring someone who has that skillset. It’s, they’ve actually been there and done that. And you can easily replicate that in your business.

Brad (00:20:50) – Yeah. And if you said, have we earned the right to a leadership team? The bravado and the confidence and the ego say yes, would always say yes. Yeah. But what’s the facts versus opinions? Right. So what’s the facts around the, what’s the

Kevin (00:21:05) – Tests we’ve done to validate it? How do we know?

Brad (00:21:08) – How do we know if

Kevin (00:21:09) – It’s if, if it’s a real high risk thing? Yes.

Brad (00:21:11) – All right, so question number one, have we earned the right to expand out, expand outside the sandbox? Number two, do we need to expand outside the sandbox at this time? I remember in, uh, again, going back probably 15 years ago, someone asked me, because I was, had a head full of steam, and they said to me, uh, when I asked them, I said, oh, so we’re, we are thinking, how can we expand across the country to a new city? And they said, why do you need to, what’s your market share here? What’s your profitability? Would you not be better off working to improve your profitability here and get, gain more market share here by way of strategy effectively? So do we actually need to expand outside the sandbox at this point? Can we just get more out of what we’ve got here or grow within our market?

Brad (00:22:07) – Remember what we sell, who we sell it to and where we sell it? And then number three is, oh, and I love this one. I’ve gotta tell you, what are we willing to give up to accomplish this? What is the trade off? Okay, so we’re gonna get a new product that’s outside of our sandbox or a new geography or a new customer. So what’s the trade off? Because everything in life is about trade offs. If we’re gonna spend money to expand across the country, what’s that gonna do? And, and, and what are the parts of the business that we are going to be sacrificing or not investing in? Last week I had a workshop with a team and I said to them, okay, this new exciting idea that you’re talking about, let’s just zoom out. We’re gonna spend 2 million on strategy in the next 12 months, for example, or executing our strategy. Okay. And that was just a random number if we didn’t have that documented. But if we’re gonna spend that, is it better spending that money where we’re really confident we can win? Or on this other idea, let’s say that’s outside of our sandbox.

Kevin (00:23:21) – Yeah. And those, and those, um, all those three. So can we, do we, are, are we proven that we can, should we actually, do we need to, or are we, is it that we’re lacking discipline or we’d rather be creative and do something else? Uh, are three, is it, what are we gonna give up to accomplish this? Because all businesses have scarce resources and, and that is humans as well as cash. And the humans are normally the bigger risks, not the money. Cuz you need people to focus on it. Mm-hmm. So I’ll give an example of someone who’s done it, right? So, um, uh, one of the best strategies for moving outside of your sandbox is to follow customer demand. So I’ve got a client that’s successfully gone from the US and moving into Europe, but their biggest customer is pulling them there. Their customer’s like, look, if you come here, we’re gonna, you know, give you this much business, a notable amount of business.

Kevin (00:24:19) – So they’ve got a customer in existing demand, they have a great relationship with, they can go there and build their base off their base, then they can expand. So there are strategies, like following a customer is a great strategy. Um, you know, bullets versus cannibals and Jim Collins like doing tests, like doing little micro tests, joint ventures can be strategies. There’s all kinds of different ways to do it. Um, there’s lots of ways to do it successfully. The key thing is you gotta respect it knowing that you’re stepping out and you need to do it eyes wide open versus with confidence and bravado, which tends to get us into trouble,

Brad (00:24:57) – Doesn’t, it just, doesn’t it just, what a great, what a great episode. Sandbox is such a simple concept, what we sell, who we sell it to and where we sell it. But if you’re coming up with an idea, use this method. And one last quick point, I always like to, uh, use a silly extreme to reiterate this point. For example, uh, Kevin in your firm, you are talking about, uh, what, uh, what if instead what if we were to start selling alcohol in Bali? Now that’s, that’s extreme. That’s extreme on two of those three points. Number one, you’ve got no, I, uh, no competencies around selling products because your firm is a service firm. Certainly nothing around alcohol. And you don’t know the barley market whatsoever. So, so using an extreme to illustrate, uh, that we need to stick to our knitting to your earlier point. Good.

Kevin (00:25:59) – Yeah. And where, and those ones are a bit easier. The, the hard one is when someone’s in services and they think they could naturally extend into software mm-hmm. Or they could naturally extend into a product they sell with their services now. And that’s where it gets dicey is where it’s a a seems innocent and it seems like not that much of a stretch.

Brad (00:26:22) – Yes, indeed. But

Kevin (00:26:22) – That’s the, that’s the challenge and that’s why we have pr again, principles are guides. We have core values as a principle to guide behaviors. Sandbox is a principle to guide where we put our creativity in terms of what we’re selling into.

Brad (00:26:36) – All right. Awesome. So

Kevin (00:26:37) – Thanks for listening. This has been the Growth Whispers with Brad and Kevin, uh, Brad down in Perth, Australia, Kevin in Vancouver, Canada. Uh, if you haven’t subscribed, just subscribe wherever you listen and please give it a rating. Also, if you have ideas for the show, please suggest those questions, ideas, whenever it happens to me. The video is always on YouTube, just the growth whispers and search for that. You’ll find it. Uh, both Brad and I have a weekly newsletter with just some of our best thinking and ideas and resources that we find. Um, and you can get ahold of Brad and get his newsletter at evolutionpartners.com.au. And for my firm, Lawrence and co, uh, same thing. Get ahold of me or my team, uh, lawrenceandco.com. Hope you have an awesome week.