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BY KARL GREENSHIELDS, HEAD OF GROWTH

Leverage Regret: Where could you be doing things better, with leverage?

In our last newsletter we shared our favourite Tweet from the month, this one by @George_mack. We love it, it perfectly explains the conversations we have each day at Steer73, so we thought we would delve a little deeper into the topic.

Forms of leverage

Leverage has become a hot topic in the startup world. Unsurprising for a group that, by definition, are trying to do things more effectively, more efficiently and at greater scale than anyone has achieved before.

But leverage is also at the heart of much successful business growth and improvement.

Entrepreneur, investor and philosopher Naval Ravikant (@Naval) describes three primary forms of leverage:

People

The oldest form of leverage, it has been used for thousands of years and is still heavily utilised today. The traditional answer when a business needed to grow was to add more staff.

However, it is an imperfect form of leverage, it requires permission (from those working for you), it involves significant management of diverse human needs and emotions, it can be unpredictable and it can be relatively slow and costly to scale.

We have heard from numerous sources that “human capital is like the buggiest code ever”.

  • Human capital is like the buggiest code ever

Capital

Perhaps the dominant form of leverage over the past century, one that many have used to get extremely wealthy. Every time a decision is made, it can essentially be amplified with money. It scales very well. However, you first need to get your hands on the capital, it can be complex to manage and often, once sunk, it’s gone, you can’t repurpose or reallocate it.

Technology/Code

“Code is probably the most powerful form of leverage” – Naval Ravikant

We agree. It is incredibly scalable with little to no incremental cost, it does not require permission and it is predictable.

Good technology can increase the effectiveness and efficiency of a system by many orders of magnitude, it can be adjusted and iterated on and, once built, can take comparatively minor upkeep.

The projects with the greatest potential for a high return on investment are usually those that utilise technology.

Where could you employ greater leverage?

At Steer73, we spend our days thinking about how to apply code-based leverage to business problems. In almost all organisations we speak with there is scope for leverage regret, the topic of the tweet. We speak to $1bn+ businesses that are still using paper-based ordering, we talk to multinational companies that still need digital customer interactions.

Where could there be leverage regret in your business? What processes could be made more efficient, more effective and more profitable, with technology?