“EOS” or the Entrepreneurial Operating System is a business management and leadership framework developed by Gino Wickman and discussed in his best-selling book, Traction. It has been implemented in tens of thousands of companies - from small startups to companies with tens, hundreds, or thousands of employees. As a comprehensive system, it addresses the six key components common to every business.
The companies implementing EOS examine their vision, structure, and every person in every role. They work to measure the business and set targets. They optimize fundamental processes and use new methods to interact with peers and the people that work for them. Companies learn to handle the challenges and seize opportunities of the business along the way.
Change is hard and expensive. Especially today, as we face the challenges of our public health crisis and the impact on the economy and our companies, we must be prudent with our investments. We must measure the return on those investments and the time spent implementing them. In this post, we will examine the value of EOS and how it affects three things:
The Valuation of the Business
Your company is unique. Each of you will find different answers to the value proposition of EOS. It is not for everyone. Some companies will find a return of tens or hundreds of times their investment. Others should not implement EOS at all. How will you measure the value of implementing EOS?
If you are an entrepreneur or business owner, you know the numbers. Most businesses fail. It varies by business sector, but generally, 50% fail in the first five years and 70% fail within ten years.
The reasons vary. An article on SuccessHarbor gives their top 50 list of why businesses fail. Some factors on the list EOS can’t help. Do you have a viable product that connects with customer’s needs in the market? If not, a framework can’t fix that. Do you have adequate working capital? EOS might be able to help you quantify how much you need, but it won’t raise the money for you.
The article states the top three reasons why businesses fail are: Lack of Planning, Leadership Failure, and No Differentiation. All of these factors are specific conversations in the first three days of EOS.
When we have the leaders in the room on the first day of EOS, our first topic is “Hitting the Ceiling.” Companies and their leaders do not grow in a straight line. They grow until they get stopped by something. It looks like the ceiling at the time. Once they face that test, one of three things happens; they fail, they flatline and don’t grow past that situation, or they breakthrough. EOS teaches specific management tools used to break through the ceiling. What is the value of that transition to the next level?
Risk is a pass/fail test. Pass and stay out of the 50% or 70% failure group. Yet you might be able to quantify success because as Rick Pitino said well, “Success is not a lucky break, success is a choice.” The gains from passing the “risk” test will be measured as operational benefits and in the increase in the valuation of your business.
Learn more about why businesses fail: SuccessHarbor - 50 Reasons Why Some Businesses Fail While Others Succeed
Entrepreneur.com - 10 Reasons Why 7 Out of 10 Businesses Fail Within 10 Years