Competition and the Theory of Relativity

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Screen Shot 2016-06-15 at 9.31.44 AMYou have to keep your firm moving if you hope to stay ahead of the competition, and if you want your firm to age gracefully.

If you’ve ever spent any time at the beach, you may have noticed two distinct characters. One is the tanned, 50-year-old blonde basking in the sun on her lounge chair. Her leather-like skin makes her look 20 years older than she really is. Contrast that with the 50-year-old surfer, effortlessly maneuvering his longboard on the rolling waves. He’s nearly indistinguishable from the other surfers 20 years his junior.

Albert Einstein thought about this. Well, not about this beach scene. But he did discuss the relationship between fast- and slow-moving objects in his Special Theory of Relativity.

So what does this have to do with the AEC industry, you ask? I’m one of those people who is always searching for a way to connect the dots, and I found that Einstein’s Special Theory of Relativity provides another way of explaining the difference between fast-growth entrepreneurial firms and slow-growth small businesses.

In a previous TZL article, I recommended reading obscure books few others read as a way to broaden your river of knowledge in leadership and business concepts. The current book on my nightstand is Stephen Hawking’s A Brief History of Time. Released in 1988, Hawking’s book does a great job of explaining the space-time concept of Einstein’s theory that we can use to understand how some firms out-compete other firms in our industry.

In very simplistic terms, Einstein’s theory suggests that objects in motion, and traveling at very high speeds relative to slow-moving observers, will age more slowly than the static observers.

Imagine two successful engineers, Andrew and Ben. They begin working at the same design firm straight out of college and at age 40 each decides to leave the company to establish his own firm.

Andrew begins building his business by reaching out to his past clients and grows at the industry average of 5 percent per year. Ben decides to take another path and competes for projects beyond his firm’s current capacity. His strategy pays off and he’s able to grow at the rate of 20% each year.

By the time Andrew and Ben turn 50, Ben has increased his firm’s revenue four-fold relative to Andrew’s firm. Both have likely worked a similar number of hours each week, but it’s also likely that Ben’s work hours were more productive with a flurry of activity. Not the 186,000 miles per second speed of light kind of flurry, but it sure felt that way to Ben. I’m sure Andrew was busy, as well, as he enthusiastically prepared project proposals with the non-inspiring lead in: “We provide innovative solutions to give you a competitive advantage.” It’s no wonder Andrew’s is a slow-growth firm.

Einstein’s Special Theory of Relativity states that when two bodies later converge, the slower-moving body will have aged considerably relative to the fast-moving body. Indeed, when Andrew and Ben meet again at Zweig Group’s Hot Firm and AEC Industry Awards Conference 10 years later, there’s a distinct difference between the two firm owners.

Both are now age 60, but look at the work years remaining. Andrew has only a few years left to increase the value of his firm before he reaches normal retirement age. At this 20-year point, the revenue at Andrew’s firm is the same as Ben’s firm at the 5-year point. In other words, Andrew’s slow-growth firm will have aged 20 years to Ben’s fast-growth firm’s 5 years. To me, that sounds exactly as Einstein predicted when he published his theory over one hundred years ago!

With a much higher firm valuation, Ben is in the driver’s seat and can command a better price for his firm when he decides to sell. That would afford him the opportunity to move to a place where it’s always sunny and warm and he can hit the surf every morning. Andrew, on the other hand, will have to decide between working late into life or retiring and selling his firm at a much reduced price relative to Ben’s firm.

What can you do to slow your firm’s aging process?

  • Move! Keep your firm in motion, and as car aficionado Mark Zweig says: “Don’t let up on the gas!” Slowing down to bask in the glow of last year’s successes accelerates the aging process by forcing you to work harder to catch up with the fast-growth competition.
  • Develop a growth plan and stick to it. Don’t get too comfortable with the status quo. Push yourself and your firm beyond the “business as usual” mentality. View every decision your firm makes from the lens of: “Will this contribute to the growth of our firm?” If it doesn’t contribute to your growth, it could be slowing you down and causing you to age faster.
  • Stay engaged. Continue to improve the skills of your principals, project managers, and team members by ensuring they’re educated and trained in the latest concepts and techniques. Attending conferences to stay abreast of the current issues in the industry will keep your eyes fresh.
  • Constantly read to keep your mind active. It doesn’t matter whether you’re reading a newspaper or a physics book. Reading exercises the synapses in your brain and, according to one study, can rewire your brain and transform you into a continuous learner. Create a “Recommended Reading List” for your firm.

Which path is your firm on? Are the decisions you’re making today designed to keep your firm young, vibrant, and competitive, or is your firm simply lying on the beach growing old?

Bill Murphey is Zweig Group’s director of education. Contact him at bmurphey@zweiggroup.com.

This article is from issue 1149 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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