Winning During the Slog: Part 1 - The Long, Slow, Hard Economic Slog

(from Issues for Growth Vol.19, No.13)

In October 2008, when we first presented a possible scenario for the recovery – a long extended period of very slow growth - a long, gray period http://davemead.blogspot.com/2009/10/can-you-realistically-wait-until_08.html, many of you questioned whether my typically optimistic personality had taken a cruel twist. Like most everyone else, I searched daily for the traditional signs that the recovery was on the way. But as time progressed it has become apparent that my worst fears are being realized. We can no longer ignore the fact that we are in for a “long, hard economic slog.”

Webster defines slog as “hard persistent work” or “to plod perseveringly against difficulty.” One business owner recently told me it was like running as fast as you can, but not getting anywhere. It’s frustrating; it’s scary; it’s fatiguing. For many, it can be demoralizing. We see some business owners ready to throw in the towel.

Will this period break the spirit of American capitalism? Will years of rejection and lack of success reverse that fundamental optimistic notion that innovation, hard work, determination, and perseverance will ultimately win out?

I do NOT believe that.

In fact, there may be greater opportunity today than ever before - if you know where to look. One thing is for sure – the old ways of dealing with a recession and recovery will not work. New ideas, new business models, innovative products and services will ultimately win the day. For the next several editions of Issues for Growth, we will be focusing on the ways that companies – and individuals – are winning in the long slow slog.

The Long, Slow, Hard Economic Slog. In this September 10^th Opinion in the Wall Street Journal, Nobel Laureate Economist Vernon Smith and Steven Gjerstad suggest that we are indeed in for a long slog.

“Our study of all the postwar recessions and the Great Depression leads to the following empirical proposition: If there is no recovery in housing expenditures, confirmed by a recovery in consumer durable goods expenditures, then there is no economic recovery.”

They summarize their study and findings with this: “The average increase in new residential construction in the first year following the previous 10 postwar recessions has been 26.3%. The largest increase in residential construction followed the 1981-82 recession, when it increased 75.5% as monetary policy was relaxed. In the past year, residential construction has increased 6.3%. This is the slowest rebound in residential construction in any sustained recovery from a postwar recession. No currently debated policy will likely change this situation, as the market is saturated with foreclosed houses and homeowners suffer from $771 billion in negative equity. This fact needs to be confronted: We are almost surely in for a long slog.” Click here for the full article.

What are your thoughts?

Which Do You Have – a Lifestyle Business or an Equity Value Business? It’s Important to Know the Difference

(from Issues for Growth Vol.19, No. 12)

In speaking to a group of business owners recently about defining their business vision, I suggested that they be clear about whether they want an "equity value business" or a "lifestyle business", because the way they approach building a business must be very different depending on how they will define success.

The Lifestyle Business. The term “lifestyle entrepreneur” was coined in 1987 by William Wetzel, a director emeritus of the Center for Venture Research at the University of New Hampshire. Mr. Wetzel was using it then to describe ventures unlikely to generate economic returns robust enough to interest outside investors. In financial jargon, “there's no upside potential for creating wealth," he explains.

"Lifestyle ventures are usually ventures that are run by people who like being their own bosses," Wetzel says. "But they're in it for the income as well. Indeed, lifestyle entrepreneurs offer a different...view of success than those who are mainly focused on longer-term wealth accumulation.

Lifestyle businesses are businesses that are set up and run by their founders primarily with the aim of sustaining a particular level of income and little more; or to provide a foundation from which to enjoy a particular lifestyle. Some types of enterprises are more accessible than others to the would-be lifestyle business person. Those requiring extensive capital are difficult to launch and sustain on a lifestyle basis; others such as small “creative” businesses are more practical for sole practitioners or small groups such as husband-and-wife teams.

Lifestyle businesses typically have limited scalability and potential for growth. In conventional business terms, lifestyle businesses typically have limited scalability and potential for growth because such growth would impair the lifestyle for which their owner-managers set them up. However, a lifestyle business can and do win awards and provide satisfaction to its owners and customers. These are firms that depend heavily on founder skills, personality, energy, and contacts. Often their founders create them to exercise personal talent or skills, achieve a flexible schedule, work with other family members, remain in a desired geographic area, or simply to express themselves. But without the founder’s deep personal involvement, such businesses are likely to, well, founder. Professional investors therefore rarely get involved with lifestyle businesses. A lifestyle business is also one that can allow the owner to call his/her own shots and to move at his/her own pace. It’s a business that fits his/her current way of living rather than dictating how things ought to be done. For millions of people, these sorts of small ventures are an excellent way to “do what you love.”

The Equity or Value Business. Equity can be defined as: A company's assets, less its liabilities, which are the property of the owner or shareholders. Popularly, equities are stocks and shares which do not pay interest at fixed rates but pay dividends based on the company's performance. The value of equities tends to rise over the long term, but in the short term they are a risk investment because prices can fall as well as rise.

An equity or value business is one where the owner intends to build real assets with a grow-able, tangible value that can be bought and sold - either as shares or the entire business. Success would be defined as the increase in value of the business over time. These businesses by definition will be built to succeed without the presence of the owner(s). In many cases, current lifestyle of the founder/owner is sacrificed in order to build significant long term value. In equity value businesses, owners focus more on building value as seen by potential buyers: sustained improvements in revenue/EBITDA, strong management team that can operate and grow the business without the owner’s constant involvement,

By contrast, a lifestyle business is one where the entrepreneur seeks to generate an "adequate" income while living where s/he wants, doing what s/he loves, or having the flexibility to be around when the kids or grandkids come home from school or take long weekends in the winter to go skiing. Success would be defined as an increase in satisfaction with one's life over time.

It’s imperative to decide which one you are. These are very different scenarios. "Equity value or lifestyle" is one of those fundamental decisions you should make early in your company’s history. If you're contemplating going into business with a partner, determine if you both would answer the same way. So why is it important to decide? Businesses that do not have a clear understanding of the type of business they want – and are prepared to be suffer inferior returns. Going down a path that straddles both lifestyle and equity value camps is sure to generate both lower current cash (compensation for the owners) as well as lower growth and value potential (lower equity value). Be honest with yourself about your appetite for risk, your need for autonomy, your desire for current compensation.

In the end, neither is good or bad. It's just, which one is for you?

Don’t Be Held Back By Past Success: The Greatest Challenge Can be in Finding that SECOND Strategic Success

[Note: We first published this in September 2000 – Issues for Growth Vol.11, No.9]

The business is profitable. It still generates cash. There seems to be no end to new ideas and plans to invest the cash and grow the company. But ideas seem to almost never get evaluated, or if evaluated, never are seriously considered. The company continues to focus on the familiar strategy, with the founder maintaining, “This is what got us here.” Many small and midsize businesses can be held back by past success. Their early strategies are so powerful and deeply ingrained in the fabric of the company that change is all but impossible.

Yet most of us acknowledge that continuous change and improvement is critical for survival. Tests to the status quo can come from varied, unpredictable, and often unimaginable sources. The life cycle of a good product and sound strategy has become shorter, as technology and communications gains have encouraged competition from new industries and different countries. As the product life cycle shrinks, dependence on a “familiar” strategy can be hazardous to your business’ wellbeing.

Continuous rebuilding of strategic direction is not only healthy, but important to company growth. Where once a change in strategic direction occurred every generation or two, the pace of change now requires a new direction every five years…much faster in technology industries. Yet we find that “strategic renewal” is rare in closely-held entrepreneurial companies. The reason can often be traced to the source of their success.

The business strategy which ultimately emerges from the entrepreneurial survival phase is the product of many years of trial and error. The successes and failures of personal interaction with customers, products and markets forge the confident and unshakable strategic view of the founder. Entrepreneurs with highly creative and successful strategies are often so charismatic and strong-willed that few managers would have the self-confidence to challenge by fighting for fundamental change. Admiration and respect for the accomplishments of the founder can also discourage open disagreement. After all, if the strategy could be improved, wouldn’t the founder have already done so?

There is another reason that strategic change is difficult in successful entrepreneurial organizations. The founder surrounds himself or herself with people who believe in the founder. These people tend to view the world in the same way. This homogeneous group is reinforced through hiring, training, and leadership. The similarities are further strengthened by a shared company culture. This singleness of purpose helps greatly as the founder’s initial strategy fosters rapid growth, and consistent delivery of products and services is essential. These people are the implementers of the founder’s vision. However, when a fundamental change to strategic direction is necessary, these same implementers are not likely to contribute a creative perspective. They are more likely to review the reasons for past success than they are to visualize a different future.

In short, the founder’s creative strategic insight and charismatic organizational leadership will typically create blinders to the urgent need for fundamental change. When everyone shares the same perspectives and experiences, we have a very vulnerable business – even if it is successful today.

Studies of the strategies of entrepreneurial companies confirm this. The founder invents a great business concept. New strategies, however, rarely emerge until a new generation of leaders emerges. If talented potential successors eagerly advance their new strategies before they are in control, painful, destructive conflict often results.

As the founder, what can you do to avoid the pitfalls of strategic stagnation? Consider the following suggestions:

· Share the credit for past successes. Describe them to the organization as group insight rather than as “my strategy”. Stress that change is critical to survival. Express frequent concerns about competitive threats to the current ways of doing business. Do not let anyone become comfortable with the status quo.

· Celebrate the diversity of opinion in the organization. Look for ways to recruit new people with different backgrounds and experiences into the company. Even consider hiring people outside your industry.

· Make strategic planning everyone’s responsibility. Encourage everyone to challenge current strategic assumptions. In management meetings, ask everyone to identify the critical assumptions for continued success. Ask your outside board of advisors, or outside board of directors to question your intended sources for future growth.

· Be open to new ideas. Be “non-defensive” in your thinking. Encourage “non-linear” thinking and “what if” questions. Avoid justification of past actions or quick responses such as “we tried it before and it didn’t work.”

· Don’t accept a poor economy as an excuse! Too much credit is given to strategies that succeed in a good economy, but cannot hold up during a poor economy. Don’t accept a poor economy as an excuse. Make your company and its management stand on its feet regardless of the economic climate.

The greatest challenge for an entrepreneur to create the second strategic success. The critical review of the reasons for past success is a vital part of the process. If the founder and leader of the organization will demonstratively lead the challenge to his or her own aging strategic insights, new ideas and perspectives will be encouraged and the company will profit from consideration of a greater number of strategic alternatives.

Execution- Failure to Launch: Reasons Company Strategies Don't Succeed

[In 2008, I heard a presentation by Michael Canic of Bridgeway Leadership who discussed the reasons that strategies fail. He quoted statistics that over 65% of all strategies fail to reach expectations. Why do so many business strategies fail? Below are some key reasons. Knowing the barriers to successful planning and execution is the first step. Clients that follow our recommendations have been significantly outperformed the competition. We like to say, “A good plan, well executed, beats a great plan, poorly executed, every time.” Contact us if you would like more information.

For another article on the importance of execution, see Harvard Business Review (July-August 2010), “The Execution Trap: The most brilliant strategy in the world won’t do you any good if you can’t deliver” -DPM ]

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, deeper customer relationships may be 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 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 quarterly “recalibration” meeting 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.

In a recent offering of Issues for Growth, we discussed the organization’s “deciding to go” as a critical point in a company’s journey from “also ran” to “great.” Where does your organization stand? Mead Consulting Group’s process begins with the identification of the barriers and obstacles to successful planning and execution. These “barriers” develop in ALL companies over time. In fact, some of the very things that help a company succeed at early levels will prevent them from succeeding at the next level. The key is to address these barriers so that the path is uncluttered.

Check out our newly designed website

at

www.meadconsultinggroup.com

Execution: Keys to Making It Happen

(from Issues for Growth Vol. 19, No. 10)

At an initial strategic planning kick-off session for a client company, the senior vice president of marketing spoke up: “I’ve been through these strategic planning processes before at other companies. Over the course of three months, our management team spent several days together, we put together a fantastic looking plan, then it sat on the shelf and it was never looked at again.”

I looked the seasoned executive in the eye and offered this challenge: “It’s obvious to me that your CEO and management team at those companies may never have been truly committed to executing the strategic plan in the first place.”

“Oh, but we were!” he replied. “We just never converted the great strategic dialogue and consensus into strategic actions. Then we got so buried in our day-to-day duties that we never took the time to focus on executing the plan.”

A good plan well executed is better than an excellent plan poorly executed.
The point is clear. To receive value for the time and money invested in strategic planning, you must employ a well-defined continuous process, execute strategic actions and routinely update and refresh your plan. In addition, you must encourage your organization to become a RapidAdapt company.

Seven key checkpoints
The key to securing this value is a CEO and executive team disciplined enough to ensure that the organization stays focused on plan execution. Value exists in the strategic process of analyzing current strategic direction and determining future strategic focus. However, this value is greatly reduced without commitment and focus to implement the plan.

Seven key checkpoints can ensure that you place adequate focus on strategic plan execution during the planning and development process.

1. CEO commitment from the outset
The first checkpoint: determine whether the CEO and management team are truly committed not only to developing the strategic plan, but also focusing resources on executing the strategic plan. Commitment to execution is particularly challenging for entrepreneurial-minded CEOs of closely held companies who tend to be very opportunistic. These CEOs often view the strategic plan process as limiting their ability to “jump at good opportunities.” In other cases, significant company-based barriers and issues may exist that must be resolved before the CEO and management team can focus on strategic plan development and execution. Regardless, it’s critical at the outset that the organization challenge itself to ensure that it is truly committed to strategic plan execution and follow-through.

2. Overcome the Barriers to Planning and Execution
Every organization has barriers that are built over time that prevent or limit their success with strategic planning and execution. These barriers include such things as a history of unreasonable objectives and unachievable goals, too many strategies, lack of management depth, lack of delegation and accountability, etc. (See the Mead Group eLetter - Issues for Growth Vol. 19, No. 9 “Are Your Strategic Planning Efforts Doomed To Failure Before You Start?” http://davemead.blogspot.com/2010/08/are-your-strategic-planning-efforts.html. Unless these barriers are overcome BEFORE an organization proceeds, it will be disappointed with the results.

3. Fewer, but better-defined strategies
Many CEO’s want to take on more than the organization can absorb. Remember, a few key strategies well-executed are better than many initiatives that overwhelm your organization. This is a tough job for the CEO. It’s easy to identify many strategies or initiatives that the organization should pursue. It’s difficult to prioritize the three or four most important ones and remove the others from the company’s plate.

4. Validate your plans with the market
Just because you decide on a sexy new strategy does not necessarily mean that your company can be successful implementing it. It is important that you understand how customers and prospects perceive your company and that you have an honest appraisal of your strengths, weaknesses, and core competencies. Suppose the strategic planning team at Kmart were to decide to that they needed to adopt a strategy to become a high price/high service retailer like Nordstrom. Do you really think the market would accept that from Kmart?

5. Translating strategic direction to strategic action plans
Before preparing to facilitate the strategic planning process, strategic planners often ask CEOs to produce a copy of their most recent strategic plan. Usually, a direct correlation exists between how long it took the CEO to find the document and whether the strategic plan included clearly defined strategic action steps.
Many strategic plans assess the current company situation, market, industry and competitive environment. These plans may also provide a clear strategic framework for the company. However, they often fall short in translating defined strategic direction into strategic actions. Without clear strategic actions that identify who’s responsible, deadlines, strategic plan execution and follow-through, it will be difficult, if not impossible, to achieve your goals.

6. Implementing a process for strategic plan follow-up and execution
More sophisticated organizations may implement integrated strategic execution
processes. For example, the “Balanced Scorecard Approach” builds the strategic plan around key business success drivers. It links measurable corporate and business unit goals and related strategies with the performance management system. And it builds regular plan execution reporting into the process. However, many companies don’t have the resources to develop and implement an integrated approach. If you fall into this group, consider the following options:

· Hold quarterly planning update sessions to review status against plan.

· At key manager or board meetings, create a standard agenda item that requires some discussion/review of the strategic plan.

· Report and update employees on major elements of the strategic plan. A commitment to employee communication will keep execution of strategic initiatives top-of-mind with the management team.

· Assign a key member of the planning team to help the CEO keep execution of strategic initiatives foremost on the management team’s “desktop.”

· Create opportunities through strategic assessment tools that force the organization to periodically review results and performance against key strategic objectives (e.g., benchmarking, customer satisfaction surveys, etc.).

· Readjust. Expand what’s working. Adjust what’s not. Be quick to identify the strategies and actions that are getting results and to abandon those that are not working.

· Create a culture that “rapidly adapts.” These companies have a defined process that encourages managers and employees to move quickly to embrace change, new processes, new methods, new models.

7. Allow sufficient time for the process
Successful companies begin the process in June and July for the January 1st new fiscal year. It takes time to overcome barriers to success, identify the best key strategies, develop clear and detailed action plans, assign accountability, gain organization buy-in, and integrate into next year’s budget and business plan.

A valuable asset to any organization
A continual strategic planning process can be tremendously valuable to any organization. However, its ultimate value is significantly reduced if there’s a lack of commitment and focus on implementing the plan. Make certain that you can execute your plans in order to get the real benefits.

One Year Later Revisited - "Can you realistically wait until the economy comes back?"

Almost a year ago (October 8, 2009) I made a post on this blog, titled, "Can You Realistically Wait Until the Economy Comes Back?" which discussed the possibility of a long protracted period of slow growth. Now, a year later, it appears that there may be more truth in this "long, slow slog" than many would have kliked to admit. So I ask the question again: Can you realistically wait until the economy comes back? What if the predictions are true of those who say that it could be 2015 or later before we see a full recovery.

We believe that many businesses must change in some very fundamental ways. There are things that can be done to recast your business. Over the coming weeks, we'll share a number of the steps that our clients are taking to reposition their businesses to gain competitive advantage.

What are you doing to change your prodcut mix, your service mix? How has your business or delivery model changed? Share your ideas!

Are Your Strategic Planning Efforts Doomed to Failure Before You Start?

(from Issues for Growth Vol. 19, No. 9)

In recent weeks more economists are now predicting an extended period of slow growth. Slow growth does not mean the end of opportunities. It does, however, mean that the margin for error can be less. False starts may mean quarters or even years of the penalty of lost opportunity. Organizations must be prepared to be well-aligned and execute well. Successful organizations in this new market will be those that can adapt quickly to changes in the market. How agile is your organization? – DPM

Are Your Strategic Planning Efforts Doomed To Failure Before You Start?

It’s time to begin to get your plans in place. Before you have that deep sigh of resignation, ask yourself a few questions.

· Does your company’s planning process ever yield real results?

· Do you go through a long, tedious process year after year that you and your managers dread?

· Are there barriers in your organization that now protect the status quo and prevent you from moving forward?

Perhaps the approach is flawed!

Years of either poor planning or no planning have created unintended consequences for many organizations. These organizations unintentionally have created barriers that prevent them from developing a meaningful plan. It could be because of a history of unreasonable expectations and unachievable goals, a history of abandoned projects, or a lack of internal knowledge and understanding about customers, competitors, and the market.

Barriers to Planning Success

· History of only partially developing plans
· History of unreasonable expectations and unachievable goals
· Lack of internal understanding about customers , competitors, and the market

In addition to barriers to planning, company teams have a lack of confidence and skepticism about their ability to execute plans. This could come from a company history of abandoning projects, a history of unclear objectives and metrics, too many strategies and plans, a history of poor communication, a history of poor delegation and leadership, gaps in management capability, or a lack of true accountability.

Barriers to Execution Success

· Gaps in management depth
· History of abandoning projects
· History of lack of openness and poor communications
· History of poor delegation and leadership development
· Lack of true accountability

Organizations that have barriers to planning and execution have one characteristic in common: there is little or no connection between the plans they create and management behavior around execution. Most management teams quickly get swept away with the urgency of the day-to-day business and the plan is forgotten.

So what can you do to change this counterproductive cycle? Try a better approach!

Before you start

· Examine past strategic planning and execution efforts

· Identify the organizational barriers to success – Develop plans to fix these barriers

· Use a new approach to strategic planning

· Less is more – Better to have three strategies with great focus than seven with poor focus

· Realistic and achievable – Unachievable goals end in frustration and abandonment

· Validate plans with the market – make certain you understand how customers and competitors will react to your plans

· Break into small bites with near-term actions – build momentum by getting some early

successes

- Create 90-day action plans, recheck, and re-evaluate

· Clear and Understandable – to everyone in the organization

· Communicate, Communicate, Communicate

· Metrics – develop quantifiable measurements of progress

· Track the progress– regular monitoring and adjustment

· Adjust and Recalibrate


Understanding the barriers to planning and execution are critical. Companies that have addressed the barriers are amazed at how much more their management teams are engaged and how the process energizes the entire organization. CEOs of companies with years of poor planning and execution history find that their organizations are far more capable than they ever imagined of achieving superior results.