Wayne Wilson on Companies in Transition

Planning pitfalls for the unwary

Developing effective and executable strategic plans is hard, especially if one of the goals is to bring about significant organizational change.

In a recent article, Why Strategic Plans Fail, Shamis and Nisberg list some of the factors which can cause your great sounding plan to slide off the road into the ditch. They include:

• Change is always hard
• Change threatens those invested in the status quo
• Insufficient buy-in during plan development
• Organizational "short term-ism"
• Founder resistance to change
• Lack of concrete goals and accountability

Truly effective strategic planning requires:

• Clear executive sponsorship
• Evidence-based analyses
• Broad organizational participation and buy in
• Executable strategies with clear implementation plans and accountability
• Extensive alternative scenario planning to prepare for changing circumstances

And remember the old saying often attributed to Dwight Eisenhower: "Plans are worthless, but planning is everything."

 

Slow economic growth - the "new normal"?

A few sobering thoughts from economist Marc Levinson:

"What some economists now call “secular stagnation” might better be termed “ordinary performance.” Most of the time, in most economies, incomes increase slowly, and living standards rise bit by bit. The extraordinary experience of the Golden Age [the quarter-century from 1948 to 1973] left us with the unfortunate legacy of unrealistic expectations about our governments’ ability to deliver jobs, pay raises and steady growth."

- Marc Levinson, Why the Economy Doesn't Roar Anymore, WSJ

The Economist | Buttonwood: Trust busting

The dangerous contradiction between economic reality and political rhetoric

http://www.economist.com/news/finance-and-economics/21707193-dangerous-contradiction-between-economic-reality-and-political-rhetoric-trust?frsc=dg%7Cc

Are you looking for "unicorns" in all the right places?

"Not to be confused with unicorn companies—startups valued at $1 billion or more—“unicorn” employees... are staff who possess a unique set of qualities that make them extremely rare and valuable. Like actual unicorns, they’re hard to find, but once hired, offer up enormous benefits in the workplace."

- Ryan Holmes, CEO at Hootsuite

Read Ryan's article on LinkedIn.

Do you have sales prospects or just "suspects"?

Is your sales pipeline filled with qualified prospects or just "suspects"?

A recent article in Investment News describes the poor usage most financial advisors make of their customer relationship management (CRM) software. According to the study, nine out of ten advisers have a CRM system but only 38% formally tracked their sales leads. Developing, tracking and converting leads into sales is the Holy Grail of CRM. The poor usage statistics are likely typical of many other businesses who have invested in a CRM system.

Start with the definitions. Here are some illustrative definitions and sales process steps every sales organization should be identifying and tracking through a CRM system:

• Lead - an individual or organization who could become a client or customer
• Warm Lead - a Lead obtain through a warm source: a referral, seminar or other specific response to your marketing outreach
• Prospect/qualified lead - A Lead which has been vetted as needing and being able to afford your product or service
• Proposal opportunity - The prospect is soliciting proposals or is receptive to your making a sales pitch
• Pitch - The prospect's needs have been identified, quantified, and confirmed and support your proposal
• Close - The prospect has agreed to your proposal, terms, and price

A CRM software system is only as good as the sales process and data tracking compliance it was designed to support.

Sales leaders, the software will not do your job for you.

Global Political Uncertainty Weighs on Growth Outlook - WSJ

"From U.S. elections to Britain’s exit from the European Union to China’s shaky overhaul, top economic officials around the world are growing increasingly anxious about politics maiming global growth by propelling antitrade sentiment, suppressing investment and fueling market volatility."

http://www.wsj.com/articles/global-political-uncertainty-weighs-on-growth-outlook-1476033836?mod=itp&mod=djemITP_h

Brexit: a "test case for deglobalization"?

"...Britain outside the European Union will be less competitive. It will henceforth have to consume less and export more of what it makes. A lower currency and higher interest rates will bring that about....Brexit is thus turning out to be a useful test case for deglobalization."

-Greg Ip, in the WSJ

As the news media has recently reported, the case for Britain heading for a "hard" Brexit is growing. Whether the outcome of such a path will be good or bad for Britain in the long-run does not eliminate the need for companies doing business overseas to continually evaluate the political and economic risks emanating from each of the countries in which they do business.

The rules for business success are changing. Best to get prepared by:

• remaining vigilant for the trail signs of impending change
• improving operational and financial flexibility
• preparing to seize the new opportunities which volatility inevitably brings

The Economist | Schumpeter: Risky business

"Companies need to recognize that many developed countries are becoming high-risk markets that do not compensate for those risks by delivering higher returns."

http://www.economist.com/news/business/21707264-managers-need-watch-political-risk-developed-markets-well-emerging-ones-risky?frsc=dg%7Cc

The "network effect" Is a key driver of prosperity

Technology companies have for years demonstrated the economic multiplier effect of increasing numbers of users in a given network: the larger the number of users, the greater the benefit to individual users. Facebook and other social networks are prime examples.

Cities have similarly been the centers of economic and intellectual development throughout history because they bring together people, resources, and ideas which leverage each other to create more economic value than is possible in smaller, more isolated areas. Young people leave the farm and go  to the city for a reason: better jobs and greater opportunity. 

Thomas Sowell's Wealth, Poverty and Politics builds on extensive international empirical research to demonstrate his thesis that it is the confluence of many factors including geography, demography, and knowledge (their network effect) which drives increasing prosperity while isolation and other forms of separation frequently result in lower prosperity or poverty. 

Sowell's work does not bode well for the economic  futures of Brexiteers and other nationalist political movements.

A pretence of knowledge

Many areas of the modern world - including politics , business, and economics - suffer from the same malady: a pretence of knowledge.

We claim knowledge to justify our decisions, actions and opinions when in reality we are often "making it up  as we go along." Assumptions (often undisclosed) take the place of empirical evidence, rationalization masquerades as theory, and unspoken biases underpin our "thoughtful opinions."

Occasionally, a truth teller emerges to call his fellow travelers to account. Such is Paul Romer, chief economist at the World Bank, who has recently begun castigating his fellow macroeconomists for what might be termed their wooly thinking. (The Economist, 9/24/16)

Sound decision making requires clarity about what we know and what we don't know, what the risks are and how much risk we are willing to take, and what we might do next when our plans inevitably fail to pan out the way we had hoped. 

Do Wealthy People Like Trump Have Easier IRS Audits? Maybe/maybe not

While focused primarily on high income taxpayers, Wood's advice is applicable to many taxpayers facing an IRS audit.

http://www.forbes.com/sites/robertwood/2016/10/04/do-wealthy-people-like-trump-have-easier-irs-audits/#222891e821ce

As always, seek professional advice for your particular circumstances.

GRIT makes the difference

“There is an unfortunate myth that success is mainly determined by something called ‘ability.’ But research indicates that our best measures of these qualities are unreliable predictors of performance in academics or employment. Psychologist Angela Lee Duckworth says that what really matters is a quality she calls ‘grit’ — an abiding commitment to work hard toward long-range goals and to persevere through the setbacks that come along the way. [emphasis added] One aspect of grit that I think is particularly important is the willingness to take a stand when circumstances demand it. Such circumstances may not be all that frequent, but in every life, there will be crucial moments when having the courage to stand up for what you believe will be immensely important.”

- Janet L. Yellen, Federal Reserve chairwoman, at New York University Commencement

Doing is everything

"What we think, or what we know, or what we believe is, in the end, of little consequence. The only consequence is what we do."
-- John Ruskin,
   British art critic, writer and philanthropist

You are never too old

You are never too old to set another goal or to dream a new dream."

--C.S. Lewis,

  Irish writer and theologian

Driving high achievement

High achievement always takes place in the framework of high expectation."

-- Charles Kettering,
    American inventor

Board service: finding your niche

Board service can be professionally, intellectually, and sometimes financially rewarding. Over the ten years I have served on public company boards, people have often asked me, how did you get / find a public company board to join? But that's really the wrong question.  

The better question is what do you have to contribute and who can benefit from your skills and experience. The "who do you know?" of years past has become "what do you know?" as well as "who do you know?"

Today's boards are frequently selecting new directors based on assessments of the skills and experience existing directors believe the board needs to add to perform effectively.

For example, Citigroup recently added two new directors to strengthen the board's technology and financial oversight functions. ARIAD just announced the addition of a prominent clinical research scientist, and Hologic recently recruited the former chairman and CEO of a leading biomedical testing company. And chemistry, or fit, will always be an important consideration when recruiting a new director.

So what are boards looking for these days?

A recent article published on the Harvard Business Review Blog Network listed the following top three commonly missing skill sets based on a global survey of more than 1,000 corporate directors:

1. Technology
2. HR-Talent management
3. International-Global

suggesting a greater focus of director recruiting in these areas going forward.

They would join three other prized skill sets still sought by boards:

• Industry knowledge
• Strategy
• Financial-audit

Director candidates offering two or more of these attibutes will be highly sought after.

Leadership Lessons from Gettysburg

"A leader must communicate, inspire, execute today's plan while thinking about tomorrow's and all the while considering how to better himself or herself. All of this collected wisdom must then be passed on, so that there are leaders in place for the future."

- Ed Ruggero, "Battled Tested Leadership: What Gettysburg Can Teach Today's Financial Executives," Financial Executive, July/August 2013

 

Ruggero offers fascinating insights about what really happened at the Battle of Gettysburg. Today's business leaders seldom experience the catalyzing fire of life and death struggles on the battlefield, but we can all learn from the experiences and mistakes of the leaders tested in those fires.

Roggero's leadership lessons:

• Support decisive leaders

• Coach according to the needs of the team member

• Teach creativity and support it with resources
  

• Practice making compelling business cases with your team
  

• Inspire and engage your team
  

Focusing on the things that matter

"...researchers broadly agree that four major points have a big impact on making people happy:

• Control over what you're doing.
• Progress in what you're pursuing.
• Connections to other people.
• Having purpose and meaning.

That's it."

- How to Be Happier With Your Money [regardless of the amount]

 

Holiday periods are often a time for reflection as well as relaxation. Freed temporarily from the daily schedule, these are times when we can think about what we're doing, why we're doing it, and even whether to keep doing it.

We have a finite amount of time, and for the most part, we are the ones who decide how we spend it.

Are you consciously choosing your path or are you just being carried along?

Do what's hard: Go the extra mile

"There’s hardly anyone going the extra mile, I’d say go that extra mile—it’s never crowded.”—Sarah Parmenter

Amazingly, success is often defined by the simplest things - not the easiest but the simplest. Parmenter is really talking about perserverance - that trait we've all heard about and had drummed into us until we've stopped listening. Ceasing to listen doesn't make it any less true.

Whether it's landing a job, launching a business, or winning a new account, success eventually comes to those who:

• Want it the most
• Try the hardest
• Keep going when everyone else has dropped out

Where do you want to go today?

Moving to rolling forecasts

“The biggest problem with most traditional budgets is that they’re based on a bunch of assumptions....  Assumptions about what the economy’s going to do, assumptions about future competitive actions, future customer actions, governmental actions, regulation, currency movement, a whole series of things, the vast majority of which are outside the control of the organisation.

“And when those assumptions turn out to be wrong, the plans based on them pretty much are wrong, too.”

- Steve Player quoted in Boot the budget? Why rolling forecasts might make more sense

I have been advocating for six-quarter or eight-quarter rolling budgets for years - mostly falling on deaf ears. "It's too hard." "It takes too much time." "We would be doing budgets all the time, and we barely survive budget season now." These are some of the typical responses I hear.

When business is steady and operations straightforward, budgeting is a wonderful thing (well not quite). But when markets are choppy, sales volatile, or financing sources skimpy or non-existent, annual budgets can become boat anchors if managers continue spending resources based on their "budgets."

For many companies, planned annual revenue growth has become hard to achieve, often due to factors beyond their control. Some companies are relying on semi-annual "re-forecasts." For others, those re-forecasts have become quarterly events. Rolling forecasts have frequently become necessary just to survive.

Better to be nimble by adopting more flexible budgeting/forecasting processes while training your managers to understand that spending budgets are preliminary guidelines, not authorizations to write checks.

Each significant expenditure or new personnel hire should be scrutinized to ensure that the expected activity is likely to generate a business result consistent with the company's current business plans and market expectations.

And don't forget that your compensation plans need to be aligned with the volatile operating environment. If bonuses are based solely on annual business plans which are never met, employee morale will suffer. Owners, CEOs, and board of directors have a tricky task in developing motivational incentive plans while remaining responsive to the current public hue and cry for "pay-for-performance" compensation programs.

Create better business results through coaching

"Coach your staff. Coaching consists of: highly structured, personalized guidance on professional growth; narrative-based advice using stories, analogies and tangible examples; helping staff expand their professional networks; identifying work challenges; and teaching new skills. Coaching is more effective than classroom training, mentoring or leadership-development programs."

- Finance Leaders Bemoan Talent Shortage, cfo.com

Much of my consulting and business success over the years has been based on coaching clients and team members on the key attributes necessary to build success and generate business results. New research, as noted above, highlights some of the key attributes necessary for building high performance teams.

One of the attributes described is coaching for success. We all need coaching. Few people come to a company, project, or task with all of the skills and experience necessary to perform at the highest levels. We should instead seek to recruit and hire intelligent, energetic, inquisitive people who are coachable.

The ability to coach is also an essential skill for those who would lead organizations successfully. Although some people may be natural coaches, most people are not. But coaching, like most skills, is something which can be learned. There are coaches for that as well.

Congress "finally" passes fiscal cliff act

Congress passes fiscal cliff act

 

By Paul Bonner and Alistair M. Nevius

January 1, 2013

"Pulling back from the “fiscal cliff” at the 13th hour, Congress on Tuesday preserved most of the George W. Bush-era tax cuts and extended many other lapsed tax provisions."

Continue reading at the Journal of Accountancy for a summary of the bill's tax law changes.

*******

Read commentary from Bob Bixby, the Executive Director of the Concord Coalition at - http://tinyurl.com/b98btzd

The End Is Always Coming

There is a natural human tendency to assume that the way things are is the way they will always be, and by corollary, that they must have always been that way. One might say that our perspective is a bit narrow, even akin cosmically to the life span of the fruit fly (which is about 30 days).

"Disruption is inevitable."

Having only recently become facile with the current generation of smartphones, I was startled today by an article on Business Insider about the coming obsolescence of smartphones - The End Of The Smartphone Era Is Coming. The author's (Nicholas Carlson) conclusion was partly premised on previews of coming technology attractions from Google and Microsoft but more so on the fundamental premise that "disruption is inevitable."

While I agree with the premise, the difficulty is that all disruptions do not occur on the same timescale. Smartphones may well be obsolete in a few years time, but the fundamental achitecture of the nation's telephone system has been in place for many decades. And the alternating current system of electricity generation and distribution has been with us for over a century.

The trick then is being sensitive to the likely timescale of change in your particular industry, technology or business. Unfortunately, the longer an incumbent technology has been in place (think publishing and recorded music), the more difficult will be the adaptation to disruptive change for its practitioners.

The end is always coming - it's just a matter of time. Or as John Maynard Keynes once said, "In the long run, we are all dead."[1]

_______________

[1] en.wikiquote.org/wiki/John_Maynard_Keynes

Are you creating value or destroying it?

Business owner/CEOs intent on creating value for their shareholders often engage in a variety of “value-enhancing” strategies. Some of those strategies involve being in the right place at the right time; some of them work; some of them don’t; and some of them are just plain death defying for their businesses.

In a recent article, Marty Wolf, president of Martin Wolf Securities, pointed out several of these value destroying techniques, which are unfortunately all too common:

1. Opportunistic acquisitions

2. Growth for the sake of growth

3. Weak balance sheets

4. Convoluted ownership structures

5. Missing the window for a liquidity event

Is your business at risk because of one of these?

Read Marty’s article.

Cash will always be king, queen, and crown prince

Financial accounting and reporting have become far too complicated and opaque, which is one of the reasons the Financial Accounting Foundation (FAF, the overseer of the FASB or Financial Accounting Standards Board) has approved the formation of a new Private Companies Council to set differences in U.S. generally accepted accounting principles (U.S. GAAP), where appropriate, for privately held companies.

Today's financial accounting often places too much importance on fleeting, point-in-time determinations of "fair value" which may have little or nothing to do with the ultimate realization of, or ability to pay out cash.

There are really only three questions about an asset that matter:

1. Can it be converted to cash?
2. When can / will it be converted to cash?
3. How much cash will there be when the dust settles?

The same can be said for liabilities or obligations:

1. Will cash be required?
2. How much? And
3. When?

Owner/CEOs could benefit from a tighter management focus on their sources and uses of cash: what do I need cash for and where will it come from?

Business is based on relationships, not referrals

My best leads and assignments come from people who already know me and my work. Sound familiar? That's because people want to do business with people they know or who are referred to them by people whom they know and trust.

Why is that?

There are probably numerous reasons, but these three come to mind:

1. Separating the wheat from the chafe -

The world is full of lots of people selling lots of things - some good, some not so good, and some really bad. Figuring out which one you're dealing with often takes a lot of work. Trusted introductions reduce the time and effort required. If you make it too hard for customers to assess the quality of your product or service, many of them will simply pass you by in favor of someone else.

2. Quality assurance -

Trusted introductions also tend to raise the average quality of the work received. No one wants to look bad to their current clients, colleagues, or friends. As a result, professionals who rely on trusted introductions will more likely go the extra mile to ensure that you, the prospect or customer, come away with a positive experience from the encounter regardless of whether you choose to purchase their product or service.

3. Life is too short to put up with stuff you don't want to, if you don't have to, for very long^TM -

Gatekeepers and spam filters are designed to winnow the hordes of those seeking your attention to those you choose. And that's before consideration of all the people lining up to sell you something through social media! Trust is so important. When I finally develop that relationship of trust with someone, I am loath to make a change to someone I don't yet know, let alone trust. Your clients and customers are the same way.

Positioning, like timing, is everything

Positioning is the other side of the timing coin. If timing is critical to success, then being in the right Place at the right time is equally important.

Take the recent New York Knicks phenomenon Jeremy Lin. He's smart, but he played basketball at Harvard, was not drafted by any NBA team, had been cut by two other NBA teams and was at risk of being cut by the Knicks when the confluence of Knicks player injuries and absences created an opportunity for Lin to show what he could do. He was in the right place at the right time.

So how do you position yourself to be in the right place?

Some of it is frequently attributed to luck, but if you subscribe to the belief of many that you create your own luck, then positioning becomes everything.

One of the greatest marketing books ever written, Positioning: The Battle for Your Mind, is all about how to position your product or service for success.

• Who are the potential customers?
• Where are they?
• What are there needs?
• How do you ensure that your prospective customers can find your product or service when the need arises?

Positioning is a classic still very much worth reading and re-reading.

The best of times; the worst of times

        "It was the best of times, it was the worst of times,

         it was the age of wisdom, it was the age of foolishness..."

            - Charles Dickens

In many ways, our own times mimic those described by Charles Dickens in A Tale of Two Cities.

Technological, medical, and other advances accelerate all around us while economies, financial markets and governments rise and fall, and weave and dodge with increasing volatility.

Some of our present angst likely results from our tendency for selective memory - we tend to remember the good things or times, while conveniently forgetting the bad. 

Lest we forget, paraphrasing the title of Robert Heinlein's famous novel, the world is a harsh mistress.

While we often cannot control our destiny, we can control how we respond to that destiny. We are responsible for our own actions.

Vision and sacrifice - two sides of the same coin

In the current presidential contest, the pundits have often referred to a particular candidate's vision or lack thereof. President Obama has a vision although many people may not like it. Governor Romney often seems to have none or at least none that he is willing to share clearly.

The real question has to do with the other side of the coin: the sacrifices that must be made to achieve a particular vision.

Mr. Obama has been clear. His vision encompasses a European style big government empowered to address all the basic needs of its citizens. Unlike the Republican candidates, he is at least partially willing to talk about the sacrifices which must be made to achieve his vision - more and higher taxes.

Initially, Mr. Obama claims that only the rich must pay more (an easier message to deliver to the middle class). But he too is disingenuous. A European-style welfare state will require everyone to pay more in taxes - a lot more.

Visions require sacrifice.

Remember John Kennedy on America's defense of freedom: "ask not what your country can do for you; ask what you can do for your country."

And Ronald Reagan's "shining city on a hill" was backed up by the Star Wars defense initiative used to defeat the old Soviet Union - we beat them by out spending them.

Unfortunately, in politics, the sacrifices are often intended to be born by someone other than the visionary and those to whom he/she is appealing.

Does your product or service "spell relief"?

Remember the old television commercials for Rolaids? The tag line was "Rolaids spells relief." The man or woman in the ad had a real problem - serious heartburn pain, which could be alleviated by eating some Rolaids. And with 10's of millions of heartburn sufferers, the makers of Rolaids had a large market opportunity.

Some time ago, I pitched what I thought would be a hot new web-based service. One of the people whom I believed would be a natural user and booster of the service failed to see the value. His response? "Sounds like a hammer in search of a nail." I had an idea in search of a market rather than a real market opportunity.

The success of Rolaids illustrates some important principles about product and service development:

1. Utilize market research to uncover unmet customers needs, i.e. real problems which cause real pain and therefore need real solutions (which people will pay for).

2. Determine the size of the market opportunity. How else can you determine whether the costs of developing the product or service will be justified by the likely sales?

3. Focus your efforts on problems which have large market opportunities. That's where the profits are.

4. Be disciplined. Finding large market opportunities takes some work. Don't settle for the first Idea that comes along. Look for the real winners.

Taking social media seriously

Since we last wrote about social media for business, the social media universe has exploded. According to USAToday¹, there are now:

• 800 million users on Facebook
• 150 million on LinkedIn
• 100 million on twitter, and
• 15 million using location service FourSquare

Who would have thought it?!

With legions of businesses of all sizes plowing time and money into social media, every business owner/CEO needs to think about what social media means to his or her business - both threats and opportunities.

Advertising ROI models have been emerging but each company still must determine how social media fits into its business model. FourSquare may be great for Starbucks but it's not likely to do much for a professional services firm where blogs and active discussion sites remain important thought-leadership building tools.

On the other side, social media has the ability to become a large (useless) time sink if committed to indiscriminately. Unless you're Jeremy Lin, it still takes time to build a following.

Consider your:

• Business model
• Marketing plan
• Available marketing tools
• Social media's place/niches among those tools
• If you decide to use social media in your marketing mix, which platform(s) are appropriate?
• What approaches to use?
• Who will do it?
• How much will it cost?
• What results should be expected?

The same principles used for other major business initiatives should be applied to social media:

• Plan
• Execute
• Monitor
• Evaluate
• Revise

_____________

¹ USA Today, February 17, 2012, p 3B

Leadership for the “new normal”

In his new book, Great by Choice, Jim Collins describes some of the leadership characteristics necessary for companies to survive and thrive in the extreme environments of the “new normal.”

Collins believes that the “unbroken rising prosperity” of the last 50 years was probably an aberration, and that we are now returning to a period of turbulence, uncertainty, and chaos which have characterized most of history.

Collins’ leadership qualities include:

• the “20-Mile March approach” - this is about establishing and maintaining a daily/weekly/monthly/annual performance standard which the organization commits to achieving continuously. Be it “zero manufacturing defects” or generating 20% return on equity every year, the goal is to establish a performance discipline which paces the organization for continuous success while also avoiding risky over extensions. Stretch in tough times while holding back in good times - steady wins the race.

• productive paranoia - this is about channeling the fear which arises in a scary world. One way to do this is to maintain a “conservative financial position” - clean balance sheets with very little debt while holding lots of cash for emergencies and opportunities. Many companies have recently been accused of hoarding cash. More likely, they are adapting to the higher levels of uncertainty of the “new normal.”

• empirical creativity - Direct marketers spend a lot of time testing mailing pieces before committing large sums of money to a campaign. The same principle should apply to all large initiatives and expenditures. Make sure the evidence is on your side before placing those big bets. Big gains require big bets, but all big bets do not result in big gains. Do the math and homework first.

Getting a return on “luck”

We all hope to “get lucky.” Right? But what do we mean by “get lucky” and how does one benefit from “being lucky”?

Jim Collins, author of Good to Great and Great by Choice, says that the causes of luck could be “randomness or complexity or anything in between.” He defines a “luck event” as any event that meets three tests ¹:

• it happens outside of your doing
• it has a potentially significant consequence - maybe good, maybe bad
• it is unpredictable

But the real key to getting a “return on luck” is what you do when a lucky event occurs:

• Does it cause you to change your plans?
• Do you grab it? or
• Do you run away from it?

According to Collins, great companies are not any luckier than other companies; the great companies just do a better job of capitalizing on the luck that comes their way.

_________

¹ FinancialExecutive, January/February 2012, p. 31

David Petraeus on strategic leadership

A new book about General David Petraeus’ year as commander of NATO forces in Afghanistan [1] describes at one point four tasks which all strategic leaders - be they military, political, or business - must undertake if they are to be successful.

• First, “get the big ideas right”
• Second, communicate “those big ideas”
• Third, oversee “the implementation of those big ideas”, and
• Fourth, capture the “best practices and lessons” and use them to refine the ideas and process.

There is no magic here, but rather a virtuous circle of continuous improvement if the process is implemented correctly.

“Big ideas” are really about key themes - vision, mission, goals - and the strategies that the leader must develop and employ to move his/her thematic agenda forward. In business turnaround situations, these ideas usually involve an assessment of an organization’s capabilities and the market opportunities available to it coupled with a short list of carefully thought out strategies for actually making something out of the combination.

“Communicating the big ideas” often must begin even before the strategies have been formulated because the leader needs the insights, skills, and efforts of others in the organization to ensure that the hoped-for “big ideas” will actually work (a virtuous circle within a virtuous circle if you will).

None of this matters if the "big ideas" are not implemented. Choosing the right lieutenants, communicating with and through them constantly, setting a proper example, demonstrating your commitment to the “big ideas” through  the decisions you make - all of these are important to laying the groundwork for other associates down the line to actually carry out the work of transformation which they will only undertake once they are convinced that the leader is serious about his/her agenda.

And finally, capturing, distilling, communicating and re-enforcing “lessons learned” enables this process to repeat itself with increasing levels of productivity and effectiveness because successful turnarounds invariably require multiple cycles through this process to generate truly successful performance improvement.

If it were easy, organizations wouldn't need strategic leaders.

____________

[1] Paula Broadwell and Vernon Loeb. All In: The Education of General David Petraeus at amazon.com.

Defining entrepreneurs

According to a new book [1] by John Byrne, successful entrepreneurs have three defining characteristics:

• First – Entrepreneurs see opportunities where others see problems. Great examples include Reed Hastings at Netflix and Jeff Bezos at Amazon.com. Their experience suggests that your reality (and therefore your opportunity for success) is a function of how you view the world, not just some objective reality uninfluenced by the people in it.

• Second – Entrepreneurs understand and live with risk and failure. Success often comes only after multiple risk taking and failures. But all risks are not created equal: successful entrepreneurs have an uncanny ability to size up the risks they are taking in a way that affords them a greater than normal opportunity for reward. They take on calculated risks with outsized opportunities for success. Yes, they often fail, but when they win, they win BIG.

• Third – Entrepreneurs want to control their own destiny. They do not particularly like working in teams, and they rarely like taking orders from others. They are independent, rebels. They see the world differently, and they readily take on high stakes efforts to literally change the world. Think Steve Jobs, Larry Ellison, Bill Gates.

In many ways, true entrepreneurs self-select. They are born with certain characteristics and pre-dispositions that drive them to strike out on their own when confronted with difficulty and adversity. But all entrepreneurs are not created equal, and there are varying degrees of entrepreneurial drive.

Owner/CEOs have a wonderful opportunity to mentor the next generation of entrepreneurs, as well as grow their own businesses, by vigilantly seeking out young entrepreneurial associates and giving them room to grow and show what they can do.

---

[1] World Changers: 25 Entrepreneurs Who Changed Business As We Knew It. By John Byrne. Portfolio; at  Amazon.com.

Leadership is about “followship”

Sally Jenkins column in the Washington Post about the Denver Broncos’ Tim Tebow calls out some critical elements of true leadership. According to psychologist Robert Hogan, leadership is really about the qualities of the would-be leader that will cause would-be followers to want to follow them.

Followers want four things from their leaders:

• Integrity,
• Confidence,
• Decision-making, and
• Clarity.

Followers don’t want:

• Irritability,
• Moodiness,
• Untrustworthiness,
• Indec­i­sive­­­ness,
• Needless micro-management, and
• Excessive authority.

How do you stack up against this list?

Read the article.

When failure is not failure

“A failure is not always a mistake, it may simply be the best one can do under the circumstances. The real mistake is to stop trying." -- B.F. Skinner, American psychologist, inventor and author

Failure is often the one thing people try to avoid – sometimes to their detriment. But should they? I prefer to think of failures in three varieties:

• “Bet the ranch” failures – generally to be avoided, they should only be undertaken in dire circumstances and with the full knowledge of owners or boards of directors. In the recent financial crisis many financial firms were “betting the ranch” without knowing or explicitly acknowledging the gravity of the business risks being undertaken.

• Costly failures – these business failures occur frequently and systemically have much in common with the first group: all of the risks of a given course of action have often not been properly recognized, evaluated, and/or communicated to the relevant owners or boards. Anticipating risks and planning for their mitigation is an integral part of minimizing costly failures.

• Learning failures – these are or should be the most common and should be encouraged in most organizations. Sometimes, we simply cannot know what will work until we try something. A great example of encouraging “learning failure” risk taking occurs in direct marketing where the mantra is “test, test, test” before rolling out a major marketing campaign. The goal is to incur lots of small failures while working out the campaign details before risking large amounts of money.

Maybe we should change the conversation – instead of “try and fail”, let’s call it “test, test, test.”

Intelligence versus judgment

“Intelligence is nice, but good judgment is better. Beware of smart managers who have limited vision.” – Bill Starling, CEO of Synecor and Managing Director of Synergy Life Science Partners

Bill has it right. Good judgment, like timing, is everything. You can be the smartest person in the world, but if you don’t know what to do with those smarts, you won’t accomplish much for yourself or anyone else.

A recent article in the New York Times about young lawyers makes the case that many law schools have become too academically oriented; they don’t train their students to become practical lawyers who can actually do anything useful for clients.

Effective management also requires smart people who have acquired some base of knowledge and who have developed skill at applying that knowledge to real-world situations. Many large companies have formal management training programs specifically geared to bridging that transition from academic learning to practical application. They are apprenticeships by another name.

How can owner/CEOs of smaller companies bridge this training gap?

Many small/medium-sized companies simply hire experienced people from large companies. This is a time-honored way to gain experienced people.

In the current soft labor market, consider hiring the smartest people you can find and train them on-the-job. Look for energetic self-starters who are attracted to your particular type of business and give them early responsibility in bite-sized chunks.

Keep in mind that people tend to learn more from their mistakes than from their successes. Just don’t let them risk more than you can afford for them to lose.

Truth or Consequences

“Convictions are more dangerous enemies of truth than lies.”

– Friedrich Nietzsche

Our politicians in Washington today are playing truth or consequences: “accept my truth or suffer the consequences” – raise/don't raise the debt ceiling or the country will collapse; cut spending/spend more or the country will collapse; raise/hold the line on taxes or the country will collapse. You get the picture.

Both politics and business involve the art of compromise; there is no place in either for zealots. What business owners, and all Americans want, is a plan for moving forward that is fair to all without gouging one group or leaving others destitute. American citizens, and shareholders, want results, not rhetoric; progress on the issues, not promises; “we are all in this together” convergence, not continuous conflict.

Let’s keep moving.

Moms Rule

Every once in a while I come across a new article, book or blog that jumps out at me with "Hey, I'm different! You might want to take a closer look."

This morning's pleasant surprise was The Mogul Mom, a blog founded by Heather Allard and written by a team of contributors for Moms running a home business while raising kids. Too often, we forget that the world would eventually come to a stop if there weren't some moms raising kids. On the other hand, I'm the father of two professionally trained daughters, and I want them to have every opportunity possible to have everything they want.

The best part about The Mogul Mom is that many of the articles and tips are applicable to any type of business, not just home-based businesses run by stay-at-home moms. Here are two examples with refreshing twists on old topics:

7.5 Tips To A Better Testimonial

5 Steps To A Landing Page That Converts Like Crazy

And this one was the best - 3 Life Lessons I Learned From My 3 Parents

Life is short - take in everything you can!

What world are we living in?

Thomas Friedman's column in Sunday's New York Times (Serious in Singapore) describes the nimbleness of Singapore's people in responding to a changing world. Their mantra: What world are we living in and what do we have to do to thrive?

As a tiny city-state, lacking natural resources, in a volatile part of the world, Singapore has developed a culture and economy based on rapid adaptation.

What are some of the lessons here for owner/CEOs?

1. Focus on the world as it is, not as we would like it to be.

2. The world is large and we are small; learn to move quickly.

3. Success comes from being nimble and hustling.

4. Training and education are the foundation.

5. No amount of wishing is going to make reality different from what it is.

Singapore's success is a great example of figuring out what you have and making the most of it.

The yin and yang of social media

Everyone below the age of xx (pick a number) is raving about some form of social media these days. Twitter is big and facebook is massive, supposedly, and they are going to change the world.

In today's Lost in a digital world, Seth Godin talks about how easy it is to hide. We think we're networking, building relationships, developing business, etc., but if we lose all human contact, all we're doing is hiding.

Owner/CEOs know that businesses are built by building relationships. And building those relationships requires a certain minimum amount of face to face contact. A lot can be accomplished from a distance electronically once you've established that eyeball-to-eyeball substantive contact.

Deal making is a great example. Teams can strategize by conference call and email, but due diligence requires your team to be on the ground touring facilities and talking to people face to face. And while document exchanges and haggling over contract language have been greatly facilitated by email and electronic document rooms, hard negotiations on difficult subjects almost always require physical meetings.

Web-based retail and internet marketing might at first appear to be different. Just look at the success of amazon.com and other online businesses. But amazon's business development officers are likely not meeting with publishers on facebook. They're in New York, or wherever, pitching them in person.

Once all the hype dies down, social media will be like all the great, but now mundane, business tools which came before (think telegraph, telephone, email - you get the idea).

By all means, experiment, test, and incorporate social media tools in your business wherever they make sense. But don't get carried away. You still have to sell stuff and make a profit to create real long-term value.

Hiring the right people - Part 2

Betsy Harper over at Sales and Marketing Search recently offered some additional insights about this process of hiring the right people by getting behind "the label" (resume) to understand what the candidate really has to offer your company:

1. Ask for an explanation of the process by which the candidate did whatever he/she claims to have done. Your goal is to figure out whether the candidate was the driver, a ride-along, or a bystander.

2. Get to the essence. You want to know who they really are - how do they think, what makes them tick, etc.

Read a great story from Betsy's recent newsletter.

Are you afraid of innovation?

Economic growth is often fueled by innovation. And innovation can be tricky to cultivate and manage. Most owner/CEOs have seen examples or heard stories about workers who resist innovation because they are afraid of change, afraid that they won't be able to keep up, or afraid that they just might lose their jobs.

Are CEOs immune to this fear?

Apparently not according to innovation consultant Jeffrey Phillips. Phillips says too many executives are uneasy with the notion of unpredictable routines and uncertain outcomes. The trouble results because of the differing skill sets required to foster innovation versus manage routine operations:

"Innovation requires ART not SCIENCE
Innovation requires QUALITATIVE insights not QUANTITATIVE statistics
Innovation requires HUNCHES not FACTS
Innovation requires RISKS not CERTAINTIES"

Learn about some of the techniques great companies such as Apple use to minimize innovation fear in Phillips' Why innovation makes executives uncomfortable.

Hiring the right people

A recent post encouraged owner/CEOs to stop dawdling and take advantage of the slack economy to reinforce their management teams with high-quality new talent. Hanging out a “Help Wanted” sign will not, however, likely get the job done.

You need a quality hiring process to ensure that you hire the right people. In a recent article, Jim Jones [1] at the Kenan-Flagler Business School suggests several helpful steps to consider:

• Clearly define the skills needed for the position(s)

• Design your selection process to assess whether candidates actually possess the needed skills

• The best candidate for the job may come from a background different from what you expect

• Reference check. Reference check. Reference check.

Read the article here.

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[1] James W. Dean, Jr. is dean and professor of Organizational Behavior, the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill

Now more than ever, scale matters

Scaling up a business is hard work. Most new businesses remain relatively small affairs, especially the "mom and pop" variety.

Venture capitalists and other early stage investors generally limit their investments to startups with large market opportunities. It's simply too hard to hit an investment homerun otherwise, and without a few homeruns,the venture portfolio investing model doesn't work very well.

And scale matters even more in a low inflation, low growth economic environment such as the one we are currently experiencing. With most companies having little or no pricing power, the advantage goes to the low-cost producer and that requires scale. Or, you have to develop a high-performance niche product or service which can consistently command premium prices.

Scale does not, however, mean just bulking up unless you can also achieve the unit costs and economies of scale of the best companies in your competitive space. Bulking up via acquisitions or lower prices is the easy part. Translating that size into competitve profitability is a lot harder. It requires automation, product simplification, and significant process and cultural changes to dramatically improve profitability. Few companies can make all of these changes successfully.

Where do you start?

First, carefully evaluate your strategic opportunites. If there is a Wal-Mart in your space, becoming the largest low-cost producer may not be a viable strategy. While there are only a few such giants, there are many, many successful niche businesses which thrive because their markets are too small to attract the giants and / or the owners have developed proprietary expertise which is not easily duplicated.

Second, if you conclude that a scale opportunity exists in your space, prepare yourself for a long, hard campaign. The numbers of Google-like companies which can spring seemingly from nothing to mega status overnight are tiny. A great example is Iron Mountain, the records storage company which has spent decades consolidating a "mom and pop" industry to become "the world leader in information management services."

Finally, there is a corollary to the "Great Leapfrog Theory".* The price of failure may be extinction. Does anyone remember Webvan or Altavista?

_________

* There is no natural law which says you can't jump ahead of the guy in front of you - as long as you can make it stick. Attributed to Robert Ringer in Winning Through Intimidation. (According to one reviewer "Winning Through Not Letting Yourself GET Intimidated" might have been a more appropriate title.)

The surprising truth about what motivates us

This video is well worth watching!

Sometimes, things just don't work (out)

What do business start-ups, drug clinical trials and weather predictions have in common? High failure rates. Sometimes (many times) things just don't work out.

Over 50% of new businesses fail within four years and 71% are gone by the end of ten years. [1] Drug clinical trial failure rates are even worse, especially for new cancer medicines - only about 5% of the cancer drug candidates first tested in humans ultimately receive FDA approval. [2] And then there is the weather. We are lucky if meteorologists can accurately predict next week's weather, let alone next month's or next year's.

What are we to make of all this?

The world is a lot more complex than we realize or would like to admit. In cancer research, scientists are finding that a myriad of genetic mutations, epigenetic influences, and environmental factors all play into who gets cancer and which one of the multitude of cancer variations they get. Developing effective therapies with widespread applicability is extremely difficult.

And governmental macro economic policy is often just a crapshoot because the models used by economists are grossly simplified caricatures of incredibly complex market mechanisms. Business founders and other market participants are sometimes rational, sometimes emotional, and often wrong. And yet they just keep on trying - as long as the incentives for success are big enough. Make enough shots on goal, they believe, and sooner or later you will score. Never mind that the clock, or the funding, may run out before your number comes up.

And then there's the weather. Edward Lorenz's [3] interest in chaos theory came about accidentally through his work on weather prediction in 1961. [4] The weather, market economies, and other complex systems are not chaotic in the common meaning that their outcomes are unknowable. Such systems are in fact deterministic, but highly sensitive to initial conditions. That is, small tweaks in the initial conditions can produce a multitude of highly divergent outcomes. It is the sheer number, nature, and variety of those initial conditions that may be unknowable.

Recent work in theoretical physics by Stephen Hawking and others suggests that our observable universe may merely be one of an infinite number of randomly created universes comprising the larger multiverse. [5] According to this line of thinking, our existence in this particular universe may have resulted from the specific set of initial conditions (laws of physics, etc.) that gave rise to our particular universe. There may or may not be other universes in which our existence might have arisen.

What are we to make of all of this?

Most of us are just bit players in a grand drama whether it be business, science, or politics, to wit:

• Just play hard,
• Give it your best shot, and then
• Retire from the field so someone else can have a turn.

Once in a while, someone will score a goal, and everyone else will be the better for it.

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[1] http://smallbiztrends.com/2008/04/startup-failure-rates.html

[2] http://www.cancernetwork.com/display/article/10165/62623

[3] An early pioneer of chaos theory

[4] http://en.wikipedia.org/wiki/Chaos_theory

[5] http://www.cambridge.org/catalogue/catalogue.asp?isbn=9780521848411

Stop dawdling

Are you sitting on your hands rather than taking action on those issues, which you know aren’t going to solve themselves? Focus on the big three.

Building the team – Few companies’ management teams are as strong as they need to be to compete in today’s economy. Now is the time to recruit and build. Candidates are available. People are hungry for opportunity. Spend some of that cash and seek out those gems who can ignite your company’s future.

Righting spending – Not every company has adjusted its staffing and spending to the new realities. That doesn’t mean ramping up the layoffs. It does mean becoming brutally honest about whether that pet project or program of yours is every really going to pay off. Figuring out where to cut and where to hold is hard work, but no one else is going to do it for you.

Driving revenue – The future is all about revenue and revenue growth. That requires investing significant amounts of resources. Spend the time to analyze your opportunities and then place your bets. If your current business, product, or service is not a good bet, better start looking for another place to play.

Ignoring the crowd

“Great innovators often need the courage to ignore the crowd.” [1]

CEOs
Investors
Politicians

Whether it is economic policy, business strategy, or trying to protect your 401(k), many of us have joined the herd of lemmings running around in a circle wringing our hands and chasing our tails. Uncertainty is everywhere. What to do? What to do?

Uncertainty is not new. It’s really the volatility that bothers us. We had become accustomed to reasonably predictable uncertainty (is that an oxy-moron?) and now the markets seem to swing wildly like one of those amusement park rides (you know the ones where you almost lose your lunch).

It’s a time for calm and for staying focused on your mission, your goals and objectives. There is no dearth of ideas and opportunities, only the courage to pursue them.

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[1] “Schumpeter: The wiki way,” The Economist, September 25, 210, p. 82