Tuesday, October 30, 2012

Failure to launch: 7 reasons business strategies don't succeed

Superior execution is one of the strengths of the Colorado success stories we have been profiling over the past few months. Yet, these companies are the exceptions, as almost 65% of all strategies fail to reach expectations. Why do so many business strategies fail? Barriers to successful planning and execution develop in all companies over time. In fact, some of the very things that help a company succeed at early levels can prevent them from succeeding at the next level. The key is to address these challenges so that the path to execution is uncluttered. Below are seven reasons company strategies fail to deliver desired results.

1. No clear definition of success
Fuzzy goals lead to fuzzy outcomes. While it seems obvious, many organizations simply don’t articulate the specific goal of a business strategy. If the goal of your customer intimacy strategy is to form deeper customer relationships, that’s fuzzy. If the goal is to increase customer retention by 10 percent and increase annual revenue per customer by $10,000 and net profit by $1,000, that’s clear. Here, forming deeper customer relationships is simply the mechanism to achieve the goal.

2. Too many goals
When everything is a priority, nothing gets accomplished. Many so-called strategic plans have too many goals, objectives, success drivers, strategies, initiatives and so on. Worse, it’s not clear how these various appendages are linked. Is it any surprise these plans sit on shelves and collect dust? Choose to do fewer things, but do them much better.

3. Metrics and Alignment - Either no metrics or vague metrics
Many plans are simply a brainstormed list of things to get done by unspecified people at indeterminate times. A plan with specifics outlines who will do what by when. It takes into account the sequencing and timing of tasks, activities and resources. Make certain that the goals of everyone in the organization are aligned to the few key objectives.

4. Visibility - Progress isn’t measured and managed
Ever notice how plans placed in the spotlight flourish while those left in the dark shrivel? Any plan worth executing is worth tracking. A monthly meeting with a tight agenda can quickly determine what actions have been taken; what progress has been made; what will be accomplished over the next month and by whom, and what, if any, challenges have emerged. This builds commitment, accountability and confidence in the process.

5. You lack the right people
Some of those nice people who work for you may not be the right people to get the job done. That statement makes you uncomfortable, doesn’t it? Many have been loyal, are committed to the culture, and may be friends and family. However, if you are truly committed to winning, or achieving success - however you define it - then at some point you have to take a long, hard, honest look at the capabilities of your people. Point them in the right direction, support them, develop them - give them a fair chance to succeed. But if they can’t get it done, then your responsibility is to get people who can.

6. Flexibility - Failure to update the plan to stay real
Reserve the right to do what makes sense. Plans are based on assumptions that can change over time. If they do change, then the plan may need to change. A “recalibration” meeting every 8 to 12 weeks is a good forum to test your assumptions and determine which, if any, have changed. The meeting may result in either a revalidation or redesign of the plan. It ensures the plan stays real and relevant.

7. Reaction to Failure - Failure is met with indifference or an inquisition
Is your team serious about its definition of success? Your response to failure sends a clear message about your commitment to winning. Just as importantly, it sends a message about your credibility. Do you ignore a failed initiative and move on to the next big thing (which conveys that you really weren’t that committed and you shouldn’t be taken seriously)? Do you look for scapegoats (which communicates that you don’t take personal responsibility and can’t be trusted)? Or do you first look in the mirror, take responsibility, then publicly commit to getting it right, and effectively engage your people to make it happen? Your choice speaks volumes about who you are as a leader.

Tuesday, October 16, 2012

Colorado success stories: Mesa Labs -- Success in small niche markets

Colorado success stories: Mesa Labs
Company finds success in small niche markets

By David P. Mead

Editor's note: This is another in the 2012 series of Colorado company success stories as told by CEOs and business owners.
Mesa Laboratories www.mesalabs.com is a public company that designs, manufactures and sells electronic instrumentation and disposable products for quality control applications in healthcare, industrial, pharmaceutical, and food processing markets. The company is headquartered in Lakewood Colorado and was established in 1982, founded by Luke Schmieder, who is company Chairman. John Sullivan, CEO, joined the company in 2004 and has spearheaded the company’s growth strategy.

Despite operating in highly competitive markets with larger companies, Mesa has found a way to thrive through highly selective acquisitions and organic growth. Mesa is an extremely profitable company with 60-65% gross margins, 30-35% Operating income and approximately 20%net income.  Revenue growth rate (CAGR) has been 20% over the past 6 years. The company has grown from about 45 to over 200 employees during this time.

Mead: How do you compete?
John Sullivan: We look for small markets and niches where we can enjoy a strong market position and good growth but have limited competition because of a relatively small market size. We have four major product areas: DataTrace Data Loggers (for tracking temperature mainly), Medical Meters (for dialysis QC), Biological Indicators (for sterilization QC), and Bios Flow Meters (for gas flow QC).

Mead: What have been your biggest challenges?
Sullivan: When I joined in 2004, the company, while very profitable, had seen little growth in recent years. We had to adjust the culture to become more growth –oriented. We improved our distribution, moved from manufacturer reps to a direct sales model, invested in new product development, and added some new talent. We also improved our marketing and invested in our website and electronic lead generation.
The other big challenge was to find the right acquisitions. We have made five acquisitions in the last six years. About half of our growth over the past five years has come from acquisitions. We only acquire companies that can be accretive to our earnings per share in the first year. That means only looking at companies where we can achieve 25% or more in operating income. We also look for companies that have a leading or dominant position in a small niche market.

Mead: Your approach to M&A is easier said than done? Is that like looking for the needle in the haystack?
Sullivan: I spend a considerable amount of my time looking for acquisition candidates, screening companies that we identify through trade shows and company lists. We then contact the company to see if they are interested in selling. Since many business owners are approaching retirement, many of them are open to the discussion. We also look at small product lines within large companies that may not be large enough to warrant their attention. We are patient when it comes to acquisitions, believing that it is far more important to make the right acquisition that fits rather than being more impulsive.

Mead: Has the path always been smooth?
Sullivan: Remarkably it has been fairly smooth – other than in the 2009-10 recession. Some of our products, such as the data loggers (DataTrace) range from $20K to $100K so they are capital expenditures. Our customers, feeling the economic pinch, cut back on CapEx and the DataTrace line was impacted. However, the Biological Indicators product line was fine and continued to grow right through the recession.  Overall our company revenue was flat over six quarters, and we had to take some action to reduce expenses, but overall, Mesa weathered the recession relatively well.

Mead: Mesa has been a public company since 1984. What are the challenges being a small public company?
Sullivan: First, we have to be cognizant of EPS (earnings per share) growth and adjust our strategy to meet that growth expectation. Sometimes that may cause us to focus a little more short-term. It’s also expensive. Now that our market cap is at around $160 Million, we are subject to a SOX (Sarbanes-Oxley) audit and we have had to invest quite a lot in recent years to ensure SOX compliance. But there are also positives in that being public provides stock options for employees and stock can be used for acquisitions.

Mead:  How do global factors influence your growth?
Sullivan: Increasing regulation in the U.S. and the world is a positive for Mesa’s products, since our products are focused on quality control applications in regulated markets. Since between 35-40% of our sales are outside the U.S., the health of the global economy is also a continuous concern.
Mead: What are the keys to your growth over the next few years?
Sullivan: We need to continue to focus on our organic and acquisition growth strategies. On the organic side, that means to continue to focus on growing markets, improving distribution through growing the direct sales force and the distributor base, and focusing on electronic marketing. We also need to continue to invest in R&D. Our acquisition growth strategy has to continue to be selective, investing in companies in niche, growing, regulation-driven markets like healthcare with high tech, high value, high margin products.
Additionally, we need to be certain that we position Mesa to be successful at a greater size. That means having the right people, policies, and infrastructure in place to support our growth.