Sunday, August 6, 2017

Deciding to Go



[Editor’s Note: The decision to become an extraordinary company is not coincidence or happenstance. Rather it is a conscious choice. Shouldn’t you be great at what you do? Shouldn’t you decide to become the company your customers can’t live without?   –dpm] 

Author and speaker Joe Calloway opens many of his presentations with a story from the movie Apollo 13: “The movie opens with a gathering of astronauts to watch Neal Armstrong who is about to become the first human being to walk on the moon. As we hear Armstrong’s immortal words, ‘One small step for man; one giant leap for mankind,’ the mood becomes quiet, even reverential. …Shortly after the broadcast, the party breaks up and everyone goes their separate ways, Jim Lovell, who is played by Tom Hanks, is alone with his wife, Marilyn in their backyard. Looking up at the moon, Lovell says, ‘From now on, we live in a world where man has walked on the moon. It’s not a miracle. We just decided to go.”

Calloway makes the point that the first step that great companies make is the deliberate decision to pursue greatness. Many organizations talk about change. Sometimes companies will orchestrate management retreats, spending two or three days at some resort developing great ideas in a sea of flip chart paper and white boards. Six months later, everyone wonders, “What happened to those great ideas we had.”

Strategic Planning without a “Decision to GO” is a waste of time

Decide to go… or go home. Strategic planning without a “decision to go” is a waste of time. You might think it peculiar that a company like ours would make such a statement. After all, The Mead Consulting Group helps companies develop and execute strategy. But, after more than 35 years helping companies, we have learned that it is the commitment to ACTION that determines success. “Deciding to go” is the biggest differentiator among companies.

What many people don’t know (or probably are too young to remember) is that when President John F. Kennedy made the statement in May 1961 that the U.S. would put a man on the moon by the end of the decade, it was simply not another political speech. He rallied support in all sectors of government and the country. He helped us all see that this was a major commitment that was worthy of our time, resources, and commitment. He helped us “decide to go.” You might say that President Kennedy created what Jim Collins (“Good to Great”) calls a BHAG – a Big Hairy Audacious Goal.

Processes Institutionalize commitment

Motivating the populace was just the start. We needed processes and plans to achieve such a feat. After all, at the time of Kennedy’s statement, the U.S. space program had not even managed to orbit the earth. To speak of going to the moon struck some as an impossible task. It would have been an impossible task if significant changes were not put in place. NASA and the other key organizations worked together to put organizations, plans, people, and processes in place.

Research shows that not a day went by that at President Kennedy did not inquire about some facet of this commitment – notes to the Vice President about funding from Congress, encouraging commitment to math and science education, speeches to keep the issue in front of the American people – making us all feel proud to play a part in this journey.

Along the way, it became OUR goal. It was the processes and daily commitment of many people – at all levels - that made it work. Kennedy was alive for only the first 1000 days of the journey. During that time he helped us make this BHAG ours. Then we took it the rest of the way.

Become the best at what you do

Organizations define themselves – set their own limits. Leadership helps paint the picture for greatness. It is too easy for small and mid-size companies to say that “we’re only a small company” or “we sell undifferentiated, unglamorous products.” With that attitude, why bother getting out of bed in the morning. A mentor of mine once told me, “There are no boring jobs, only boring people.” What he meant was that people need to be inspired. If you have an undifferentiated product or service, whose fault is that? Do something to transform the customer experience. 

Develop a big goal. Then go make it happen. The successful companies are focused on the daily details to accomplish that big goal. Everyone wants to be part of something great.

Become the best at what you do – whatever it is. Make the Decision to Go!
___________________________________

 The Mead Consulting Group has been helping clients develop and execute Strategic Growth& Execution plans for many years. Check out our website for descriptions of some client success stories. 

Monday, July 24, 2017

The Need for Focus


[Editor's Note: Over the years, our firm, The Mead Consulting Group, has been asked to evaluate or "validate" a company's strategic plan and its planning process. What we have found is that the processes for companies in the lower middle market vary widely and some are counterproductive. There are some common issues that are listed in this article. Do you recognize any of them?   - dpm]

Too many strategies and initiatives
Often we see plans that have numerous strategies and initiatives. In one $60M revenue company, there were 17 major initiatives and strategies - so many that all of them couldn't be listed on an 11x14 sheet. When we asked the senior managers to list the top 3 priorities, we got a different answer from each of the managers. An organization can't tackle that many priorities at once. Not surprisingly, this organization had a history of not completing projects. 

Shiny Rocks - moving quickly from one idea to another                              
Sometimes the CEO has one great idea after another and overwhelms the team by abandoning one strategy or initiative to move to another. In these companies, strategies are never fully executed. There becomes a tendency for employees to just duck their heads down and wait for the current "new project" to blow over. There is little commitment to the "strategy du jour." These companies have flurries of activity, yet few accomplishments.  

No "what we are not going to do now" list
As important to narrow the focus of a company's strategic priorities, it is important to develop of list of things that the organization won't do. This is the most difficult task for companies. No one wants to move worthy projects or initiatives to this list. However, if an organization is to accomplish the top priorities, the others must be tabled - at least for the current cycle.  

No agreement on the priorities  
In some organizations, the plans are developed but there is no agreement among key functions and managers about the priorities. These organizations fail to mobilize to necessary resources to execute well.
Developing strategies that the organization cannot execute well
Many organizations develop strategies that either the market won't accept, or that the company does not have - nor can get - the resources or talent required to execute. I tell a story (somewhat tongue in cheek) about a mythical meeting at Kmart where some manager recommends a strategy to emulate the Nordstrom model. No matter how much money is spent, there is no way the market will accept Kmart adopting a Nordstrom model.

The Power of three.  
We believe that for lower middle market companies, there should be no more than three major strategies undertaken in a planning cycle. We find that when companies execute two of these strategies well, they will be very successful.

The Mead Consulting Group has been helping clients develop and execute Strategic Growth& Execution plans for many years. Check out our website for descriptions of some client success stories.




Monday, July 10, 2017

Determining the best strategy for each product or line of business

[Editor's Note: Several of you have asked me to discuss the Portfolio Management Matrix approach to product lines or businesses. Hope you find it useful.             -DPM]

As organizations grow, and markets, businesses, and products become mature, new products are launched, new lines of business are introduced. The complexion of the competitive landscape changes.
Consider a few questions before you embark on strategic planning:
1. Should you treat all of your business lines or product lines the same?
2. Should you have the same expectations for growth of revenue, profit, and cash flow?
3. Should investment be the same? Staffing? Marketing?
4. Should measurements and objectives be the same?
Manage your business units and product lines like a portfolio - they are all at different stages of maturity, different competitive positions in the market, have different needs, and require different approaches. We advocate a "portfolio management matrix" approach to planning.  
After completing an evaluation of each product or business line's position in the market, position it on the matrix In Figure 1 (Below). The matrix denotes economic attractiveness on one axis and competitive strength on the other. How attractive economically is the market to the Company relative to its strategic objectives. What is the strength of the Company's position relative to the market and the performance of competitors. Be honest. We have encountered some management teams that resist the recognition that a product line or division is mature or aging and or that it no longer has competitive superiority.

Business A (in red on the below matrix) - this business is in a very strong competitive position (able to take some actions without fear of competitive response) with high economic attractiveness. In this position, the company should maximize its investment, protect and enhance its competitive position, grow with the market, maintain technology, and seek to dominate the market, but be careful to not cash in too soon.
Business B, on the other hand has a weak competitive position with weak economics. This business should be harvested rapidly (exit or divest) with an emphasis on maximizing cash flow by reducing costs and assets.
Each position of the matrix has its own strategic implications with specific options.

Figure 1. Portfolio Management Matrix

  
High Economic Attractiveness 

Selective Growth 


& Profits
     ___________          
Selective Investment


Growth & Market Position                       
_____________

Selective Investment in Advance of Market


Growth
 
 
 __________         
                                          


Invest at  market rates


Business A
Medium Economic Attractiveness 
 
Profits & Cash Flow
  ___________
Selective Harvest
Profits

_____________ 

Maintain Investment
 

Growth & Profits 

____________  
Selective Investment
Low Economic Attractiveness 
 

Cash Flow
___________
Fast Harvest


Business B
 
Cash Flow
___________
Slow Harvest
Profits & Cash Flow    
 ___________
Invest at Maintenance Levels

Low Strength


Medium Strength
 

High Strength
                                              Competitive Strength
 

Some rules of the road for using the Portfolio Management Matrix
 
  • Keep positions on the matrix generic. Some organizations and models have names for the various positions on the matrix. Keep them generic. Don't label them with "cute" or descriptive phrases such as "high flyer", "dog" or "loser." Your management team will treat them accordingly. After all, who wants to be associated with a "loser."
  • Be Disciplined - Don't over or under invest with businesses or products. Companies in mature industries tend to smother "newbies" and demand profitability too soon. Likewise, growth companies can be impatient with slow-growth businesses or products.
  • Develop Role players
    Cash generators fund growth opportunities. Embryonic and growth businesses or products are the future of the overall company. Every business/product has a role to play in the healthy ecosystem of the portfolio.
Many of our clients are starting now on the strategic planning process for 2018 and beyond. The key to success today is develop flexible approaches to strategic planning and update quarterly with market events as the year progresses. If you would like to discuss how Mead Consulting might help your company begin the process of adding value and moving your company to the next level of performance, please contact us.   
Best regards,
Dave Mead

Monday, June 12, 2017

Who is responsible for profit in your company?


 Who is responsible for profit in your company?

They say it’s lonely at the top. For many CEO’s it can be very lonely when it comes to responsibility for profit. At a recent presentation for a group of CEOs, I asked the question, “Who is responsible for profit in your company?” The answers were not surprising. While several said it was the CEO, CFO, or the senior leadership team, the overwhelming majority responded that everyone in their company is responsible for profit. While the CEOs believed this, when we begin working with companies this is one of the questions we ask a cross-section of employees. We rarely get a consistent answer.

“Everyone is responsible for making a profit.” Is that really true? We all like for our co-workers to be thinking about profit, but are the pieces in place to support this grand idea?

  • Profit Must Be Clearly Defined, Visible, and Understood

Can employees clearly see how profit is generated? In many organizations, profit is the “mysterious” remainder of the monthly aggregation of revenues less the aggregation of costs and is not known until after the month is over…too late for co-workers to do anything about it. How can we expect them to affect something that seems too complex for any mere mortal to understand?

  •           Is the Company Organized for Profit Management?
Decisions need to be made close enough to the customer to impact profit on a daily basis.

  •           Metrics
Are you measuring and reporting against profit at an individual customer or individual product level on a relatively frequent basis? These metrics need to be visible to the entire company? At least the pieces they can affect!

  •           Are Compensation and Rewards Aligned with Net Profit?
There’s an old expression: “You get what you pay for!” In the world of compensation it is very true. If you are compensating the sales and marketing departments for revenue generation and operations for achieving AVERAGE product cost, the expected outcomes may surprise you. Even though revenues may increase, being on the incorrect extreme of those average costs can cause you to have very poor results. Compensation plans need to directly reflect the achievement of NET PROFIT PER CUSTOMER.

THE RESULTS CAN BE COMPELLING
One client company that now has a clear view of customer profitability and an employee group reorganized around responsibility for profit has seen dramatic change. In the first full quarter of implementation, this wholesale distributor saw customer net profit margins grow by FIVE PERCENTAGE POINTS in the targeted customer groups.
On an annual base business of $10 million, that’s a $500,000 increase in net profit; at $70 million in annual revenue, that could be a $3.5 million increase in net profit.

The Mead Consulting Group has a proven process that helps clients to develop customer profitability analysis to focus on the customers that drive increased revenue growth while reducing the impact of unprofitable customers. You can see an overview on our website. Contact us for a free consultation.