(Un)knowledge is a blessing

Before I embarked on the Adizes Leadership Program, I met interesting people and divided the company literature into two phases; “Living” – those who exist and do business and “dead” – that is, those who have failed or those who do not exist. Now that I think about it – and it’s good that I didn’t think about it because not thinking and ignorance is a blessing.

Many good things happen out of ignorance. My beautiful bright smile, for example, came from ignorance (and the work of my dentist), because if I had known what was waiting for me when I started brushing my teeth – I would never have decided to do it. My family and the two beautiful children I love the most came about as a result of ignorance – because if I had known what awaited me in marriage, I would never have married”. In the end, many successful companies arose out of ignorance and many founders probably would not have embarked on the adventure if they had known in advance all the challenges that awaited them along the way. As paradoxical as it sounds – for the establishment, birth of a company and its initial development, ignorance is often more necessary and desirable than knowledge. This is probably the reason why you will rarely meet a professor from the faculty or a doctor of science who is a successful entrepreneur. A lot of knowledge sometimes limits a person because we become aware of all the challenges, dangers, risks and other factors that stand in the way of entrepreneurship. And that can be discouraging.

When I founded -took over the management of my company – I had completed my management studies, but in reality I knew very little about the transport business. If I had known then what I know now – I would not have been where I am because I would not have gotten here. On the other hand, if I hadn’t supplemented, upgraded and enriched my knowledge in the meantime – I wouldn’t be able to be where I am again. It turns out that I ( the company I run) are where I am, both because of ignorance and because of knowledge. How’s that?

My business started with one truck. It was an old model of MAN truck, worth 15,000.00 eur. My parents had a company and a surplus of space that I used for my office. I brought my laptop from home, found a table and a chair somewhere in the corner of my parents’ warehouse. I hired a man who already kept the books of our family company as an accountant, and I did not pay any compensation for that. I regularly used the resources of the parent company (storage space, forklift), not including them in the cost of doing business. I had a contracted job from BiH to Slovakia and back, once a week, for 2,000 euros. I calculated that all direct costs of that transport (driver, fuel, toll, customs papers…) were 1,250.00 eur, where I concluded that my salary was 750.00 eur. I multiplied that by 4 weeks a month and got the amount of 3,000.00 euros, which was significantly better than the salary I had as the head of procurement at my mother’s brother’s company and went into business. And really – if the truck came back from the road after I paid all the costs, there would be 750.00 euros left. I learned in school that I should include depreciation as well as maintenance and repair costs in the calculation, but how do I know what will break down on the truck in the future and how much it will be worth after 3 years? Since the vehicle was older, I realized that any repairs should not exceed the amount of 2,500.00 euros. This would mean that in the event of such a breakdown in a future month, I will still be left with 500.00 euros in that month. I realized that with this money I could get through the month and carefreely continued my business, praying to God along the way that the month in which the breakdown would occur would come as late as possible or preferably never. According to the good old rule that luck accompanies the brave, that truck never broke down. If my knowledge of management had not grown in the meantime – I would still be calculating the cost of kilometers with the assumption that there will be no breakdowns.

I had no idea that in the calculation of the cost of a kilometer of my truck I should include the cost of the phone, depreciation of fixed assets, reservation for unpaid income (at that time I had no contracted jobs and that someone told me that in a situation when I struggle to find work and earn income, I need to calculate the cost of uncollected income that I do not have at all – I would tell him he is a fool), that I have to provide 1% of the driver’s working days for sick leave, that in the cost price I have to include a fee to highlight the company, operating system licensing, printing paper, postage cost etc.

And it’s good that I had no idea.

Because, if I had known all that and distributed all those costs to one truck that I had at the time, I would have realized that the transport of 2,000.00 euros would not pay off and that would be the end of my business. As I developed my business, I developed my knowledge in parallel. By the time I became aware of all the above costs – I already had five vehicles and when I allocated fixed costs to them it was no longer as scary as when I did it when there was one vehicle. Of course, fixed operating costs remained unchanged or grew very little with the increase in the number of vehicles. This trend has continued.

As I expanded my business, I became more and more familiar with my business and became more aware of the costs that I had previously promoted and were there – but as the number of vehicles expanded in parallel, my bargaining position with suppliers grew and I got better conditions and my calculation remained unchanged. Just when I realize that I need to include a reservation for future breakdowns in the cost of a kilometer, I include the cost of invoicing (which includes the salary of the person working on invoicing, depreciation of his computer, printer, paper, toner, envelope, postage stamp, chair he sits on , the desk he works at, the binder he buys…), at the same time I would agree on better fuel or insurance or maintenance conditions and my cost per kilometer would remain unchanged.

De facto, ignorance often allows for the initial growth of a firm because by miscalculating costs you get a calculation that is not realistic. It is the basis for the formation of the price, which is usually attractive to customers because it is low, which results in an increase in the volume of business, which further leads to the expansion of the vehicle fleet and better conditions for suppliers. Then your real business cost becomes the one you calculated because the uncalculated costs are offset by the savings you make in purchasing through fleet growth. That is why ignorance is sometimes a blessing.

 

Today, when I think about the life stages of a company – it seems perfectly logical to me. Just as it is logical to me that through a person’s life cycle there are changes in behavior, thinking and acting, so it is logical to me that the same thing happens in companies. Like a child who urinates first in his underpants, then in a tutu, and finally in the toilet as he should, so in the development of companies the patterns of behavior and mechanisms of action change (ie they should change. That they do not change is the reason that companies fail) and what was once normal and desirable suddenly becomes foreign and undesirable.

When all this is so logical and clear – then why do companies have problems with “growing up” and moving to different stages of life? Why don’t companies as well as human beings mature over time and become naturally smarter, more efficient, more rational, better, more organized? Probably because, unlike a man who is forced to do so by the natural flow of time (because, whether he wanted to or not, he must physically grow from a child to a man), for a company to grow (that is, the transition from the Go-Go phase to Adolescence) – or change. No matter how much the founders wanted and hoped for it, no company will professionalize and move into Adolescence on its own, naturally. No company will organize itself.

The transition from the Go-Go phase to Adolescence is a key moment for the long-term survival of any company. This is also the biggest challenge for any founder. The transition from Go-Go to Adolescence, in my opinion, can only happen with the founder. The founder is the one who has to translate the company over that imaginary bridge. In the Go-Go phase, regardless of the financial results, from the organizational aspect, the company is too fragile and too sensitive to be left to someone else, especially an external one. The strength of such a company is most often people, and people are often irrational and emotional. People also don’t like change. And without change it is not possible to go from phase to phase.

For a long time, I thought that aversion to change and “don’t wave” policy was unique to the people of the Balkans. But I was wrong. This human trait is the same in New York, Mumbai, Tel Aviv and Sarajevo because it is in our nature. Let us remember Newton’s First Law: Everybody tends to remain in a state of rest or rectilinear motion unless it is acted upon by a force that forces it to change its state. And there he is.

Because of Newton, people don’t want to change and companies can’t change on their own 😊 because the people in them tend to maintain the status quo – because it’s in human nature.

In order for a company to change and move from Go-Go to Adolescence – the people in the company need to change. In order for the people in the company to change – the founder must also be ready to change. The life path of each company is directly related to the human and managerial maturation of its founder. My mother used to say that some people never grow up, a song says that some birds never fly, and I say that some founders never mature, and the companies of “immature” founders become their hostage, remaining trapped in the Founder’s trap until death. And death inevitably comes, because Go-Go cannot last forever.

Then why don’t the founders realize that a firm can’t be in Go-Go forever and take it to Adolescence?

Because that path is very difficult, painful, thorny even for the most prepared. The only real time to move from Go-Go to Adolescence is when things are going well. That’s why it’s hard – because it’s hard to change something that’s good. It is known that the winning horse does not change, and no bread is sought over the bread. A founder who wants to translate a company into Adolescence must be willing to sacrifice. He must be prepared to endure short-term consequences for the sake of long-term benefits. He must see the bigger picture and be ready to recognize that sometimes you have to change the winning horse and replace it with a younger and more promising one, even if it means he won’t win the first half of the year, but will win in the next 5 years.

Growing up and professionalizing the company is a thorny path. As in the saying “no pain – no gain”, so this path cannot pass without losses. One of the big problems of the transition from Go-Go to Adolescence is that productivity, effectiveness, revenue, and profitability most often fall in the short term so that they can grow in the long run. Faced with this phenomenon, founders who are not truly ready for change at this stage are easily swayed faster by better going back to the old. Due to the natural tendency towards a state of rest or rectilinear motion, most employees are also not happy. This is further demotivating.

The founder is waging a special personal struggle. For him, growing up means a complete change in work habits and job descriptions. Growing up also requires personal change. As Newton has already defined – a change of state does not happen by itself – and neither does it. The transition from one personality type to another is perhaps the most challenging of all challenges that cannot happen without hard work on oneself and enriching knowledge and expanding the mind. In addition, God needs to be on your side, because a click in the head often requires some inexplicable stimulus and a “twist” that almost never comes from books, but simply happens by itself.

Decision-making is decentralized and, if he really wants to make a professional company, the founder must give up part of the responsibility and accept that the company can no longer be a “one man show”. He must be prepared to tell his friend who sells tires that he no longer decides about it.

The transition to Adolescence inevitably results in slower decision making (but significantly more effective and efficient). Some customers leave because they can’t get used to the new work system that requires them to change and adapt as well. What additionally hurts is that most often customers and suppliers with whom we are emotionally closest leave because of emotions they cannot think rationally. It is very likely that your friend who sells tires will not want to work with you (regardless of if he could be the most favorable) because he will be offended when you tell him that future procurement will be done according to the 3 offer system and that from now on he must send an offer to in procurement and that you, as the founder / owner, no longer have anything to do with it. A friend who has so far ordered transports orally will also get angry on his mobile phone when you tell him that he should send it by email in the future – and not to you. The transition to Adolescence also carries one extra weight. With the professionalization of a company, it becomes more serious and aware of all possible risks and factors that affect or may affect its business. Cost management and their allocation are significantly improved and you get a realistic picture of all the costs of your business. And there is one problem – which is especially pronounced in the entrepreneurial Balkans. Understand that you are doing business surrounded by competition that bases its business on a calculation that is not realistic.

Because they are still in the phase when ignorance is a blessing. And that is the crux of the problem. After the company enters Adolescence – its success begins to depend on the environment. A professional firm can hardly survive in a non-professional environment. In the Balkans, this is especially pronounced because in the absence of legal mechanisms, companies operate here for 4-5 years after they die. I am sure that at least 30% of Balkan companies are unprofitable without even knowing it. They actually failed – only no one told them.

In the transport industry in which I am also – the big players have realized that it is not worth having your own vehicles. Why? Because hiring small subcontractors who will never reach Adolescence and who do not deal with the real costs of doing business is cheaper than having their own vehicles. Their selling price per kilometer based on an unrealistic calculation is cheaper than the cost price per kilometer based on a realistic calculation. In the long run – those subcontractors who have a misconception about costs will of course fail, but in the meantime new ones will be born who will need time to fail. And so it goes round and round.

It’s a little hard when you go all the way to Adolescence, you change as a person, you motivate colleagues to change, you lose a couple of dear people along the way and then the conclusion is that you may be in the wrong business. Ignorance is a blessing to succeed, but knowledge is a blessing to keep a business going. Throughout the awareness process, you realize that you are facing a change in the way you did business and that a new business model must be found. Let’s move on.

Emin Efendira, Management of Mega-trans doo

Final Essay Adizes SEE Leadership Program IX Generation

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