The Endurance Mindset
For Emerging Consumer Brands
The emergence of COVID in 2020 required what was for many leaders an unprecedented emergency response— companies sprinted to shore up resources, respond to significant shifts in consumer behavior and transition teams to work-from-home with an open end date. Since then, volatility has remained unusually high. What started as a global pandemic has since created supply chain disruptions, labor disruptions, continued swings in purchase behavior, perhaps permanent transformations in how we work as teams and ultimately inflation. Valuations compressed as the stock market attempted to price in an unknown level of short term risk. Unrelated but exacerbating, Apple’s privacy IOS materially deteriorated the quality of most direct-to-consumer growth models and Russia went to war with Ukraine. As companies respond to what feels like a never-ending stream of crises, fatigue and burn out are omnipresent in discussions with our teams.
What has become clear is that we are no longer running a sprint relay, we are running an ultra-marathon on varied terrain, and accordingly, to continue the analogy, we must shift our “coaching and training protocols” to prepare for the actual race we are running. This paradigm shift towards what we have started to call the “endurance mindset” has characterized our efforts as value-add thought-partners over the last many months. Our goal in instilling the following 5 endurance principles is to improve the emotional and operational quality, resiliency and efficiency of both our businesses and our teams.
Principle 1: Rely on your training; keep pace with your metrics
Winning endurance athletes train against specific pacing goals to ensure that on race day they are both physically prepared to deliver on goals (durability) and mentally able to stay engaged and focused (resiliency) even as the race becomes tedious. The opportunity in the current business environment, in which Founders are often faced with the unknown, is to ensure KPIs either incorporate or are flexible enough to incorporate the anticipated variability of the terrain in order to remain relevant, achievable and therefore valuable.
This starts with identifying and implementing clear stack ranked priorities to expedite decision making and protect long term outcomes amidst great short-term volatility and uncertainty. For example, at one of our companies, service levels at key retailers — critical for long term success and expansion — were explicitly prioritized as “senior” to gross profit, giving our team the clarity, permission, and autonomy to aggressively pursue strong in-stock positions at key accounts, even, if necessary, at the expense of gross margin. This was supported by a belief that strong customer service creates compounding, structural benefits that can be leveraged as a competitive advantage in our sales strategy against our own goals and our competitors, whereas gross margin pressure was universal, addressable, and reversible. Over the course of the last 12 months, the alignment around priorities and which metrics really mattered (and which were less relevant) for long term success, allowed the team to navigate varied terrain ambitiously versus tentatively.
Principle 2: Reduce adrenaline by focusing on and resourcing what’s in your control
Teams that continue to operate in a primarily reactive vs. proactive manner run the risk of developing symptoms of adrenal fatigue from an overworked nervous system — namely chronic exhaustion and lack of motivation. Conversely, it is empowering and regenerative to focus teams on deliverables within their control.
For example, to reduce “supply chain firefighting” — we worked with several companies to rebuild their planning tools and timelines to absorb more uncertainty. Through measures such as increasing inventory positions, locking key ingredient costs with future contracts, evaluating price elasticity, and implementing strategic price increases that both protected margin and, potentially, improved our competitive positioning, we strengthened the downside protections and reduced mental strain on our Founders. We also acknowledged — as a board — the reality that supply chain management has increased in complexity and authorized additional investment in enhanced human resources dedicated to specific pain points such as freight management. We worked with our lenders to help finance an elongated working capital cycle to minimize dilution from rising costs. The shift in effort from emergency-response activities to pro-active rebuilding of the supply chain against a “new normal” resulted in not only cultural enhancements but also improvements in moat, competitive positioning and business resiliency.
Principle 3: Protect your potential by staying both efficient and well-resourced
Elite athletes monitor their hydration, body temperature and blood sugar to ensure poor resource preservation or management is not a driver of underperformance. Peak performance is nearly impossible if you are starved or bloated. Similarly, in businesses (especially during periods of sustained crisis), it’s critical to develop the right balance of financial, human and intellectual resources.
Harbinger has a strong perspective on what kind of resources support optimal outcomes in our sector (early stage consumer): We believe durable, resilient consumer businesses always benefit by operating in a capital efficient way even if access to capital is easy and /or valuations are at an all-time high (neither of which are true right now!). Our Total Available Markets (“TAM”) and / or exit valuations require this level of discipline. The ability to stay lean but not starved is dependent on an executive’s ability and success in levering up its financial resources with human and intellectual capital. Put simply, the right team looking at the right insights and rallying around fewer, bigger ideas can likely grow faster with less capital. Companies that get too lean on financial resources AND don’t acknowledge experience gaps AND lack intimacy with their consumer start to exhibit enormous gaps between effort and outcomes — they are working REALLY REALLY hard but experiencing diminishing returns for their increasing efforts. In our brands, we work closely with our CEOs to find the right balance of equity capital, debt capital, human capital and intellectual capital to (yes) minimalize dilution but more importantly build stamina that supports sustainable acceleration even on the uphill.
Principle 4: Be selective and look for the right opportunities to accelerate past your competition
Surpassing a competitor is a use of energy (resources) and should be done strategically and purposefully — in both a race and in business.
Harbinger believes in a targeted, aggressive approach to picking off competition based on an intimate understanding of (a) where your business is sourcing volume and (b) where your value proposition has a distinct advantage. Specificity allows you to target messaging and audiences to improve conversion , whether the sale is B2C or B2B.
This targeted approach requires cross-functional collaboration between sales and marketing, where sales strategies like retail pitches or prospecting campaigns align spend and messaging against both identified areas of weakness (e.g. bidding on competitors branded search terms deemed as vulnerable or weak) or relative strength (e.g. ads served to a competitor’s consumer highlighting an insight-driven, material purchase driver unique to your brand).
The benefit of specificity is both financial (more efficient competitive strategy) and cultural (teams love to rally around a named enemy where you can track wins).
Principle 5: Keep your eyes on the horizon
Finally, on varied terrain, keeping eyes on the horizon improves speed and reduces fatigue. It lets a runner settle into a rhythm and maintain perspective. For companies, a multi-year plan can have a similar effect; we appreciate, however, it takes years for young brands to move from operating one day at a time, to operating against an annual plan, to operating against a multi-year plan. With our businesses, wherever they are in the journey, our goal is to help deepen consumer insights, improve brand positioning, optimize organizations, identify “white space” and develop insight-driven, high-potential innovation pipelines. As these pieces come into place — people, process, insights, planning and execution, we see that multi-year vision start to crystalize and inevitably growth acceleration follows.
I’ll finish with a qualifier: Good training improves outcomes — increases mental and physical stamina— but it will never remove the “pain” experienced by an endurance athlete on race day. By definition, winners leverage their training to ultimately push themselves beyond what most would consider natural limits. Running a company — especially a start up like the brands we work with — is incredibly hard. So its with respect and humility that we share these ideas, while acknowledging they won’t make the journey easy — maybe not even easier — but (hopefully) will positively and materially impact end results.
