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Chrm Message From: shantanuji Total Posts: 23 Join Date: 23/02/2007
Rank: Executive Post Date: 26/08/2009 06:14:19 Points: 115 Location: United States

What is the underlying handful of fundamentals that drive everything else that’s important in business? What is still fundamental today in building a successful firm that hasn’t changed for over a hundred years? Tom Meredith, former CFO of Dell Computer, and I were discussing how the fundamentals that create a great business are the same as those for parenting great kids. Early in his career, his wife had encouraged him to attend a Parent Effectiveness Training (PET) program. Reluctantly he attended. However, what he discovered were some fundamentals that were just as applicable in business as at home - so much so that he purchased copies for all the executives where he worked.

Anyone with children will recognise the fundamentals as:

Have a handful of rules

Repeat yourself a lot

Act consistent with those rules (which is why you better have only a few rules)

About the time my first son was born, as I was studying up on parenting, the book Titan was published. More than a biography of John D Rockefeller, it detailed many of Rockefeller’s leadership and management principles.

In fact, it’s a must read for anyone serious in building a successful company. What the book did was confirm three underlying habits I have observed are key to the successful management of a business and provide what I hope is a label for those habits:

Priorities - Does the organisation have objective Top five priorities for the year and the quarter (the month, if growing over 100% annually) and a clear Top one priority along with an appropriate theme? Does everyone in the organisation have their own handful of priorities that align with the company’s priorities?

Data - Does the organisation have sufficient data on a daily and weekly basis to provide insight into how the organisation is running and what the market is demanding? Does everyone in the organisation have at least one key daily or weekly metric driving his or her performance?

Rhythm - Does the organisation have an effective rhythm of daily, weekly, monthly, quarterly, and annual meetings to maintain alignment and drive accountability? Are the meetings well run and useful?

Titan also confirmed that there is only one underlying strategy, what can be called the “X” factor, which must be discovered, defined, and acted upon to create significant value and ultimately significant valuations within a business.

For Rockefeller, the key to winning in the oil business was gaining an advantage in transportation costs, which is why he was heavily involved with the railroads. Even what appeared to be minor decisions aligned with his focus on transportation costs. When he decided to vertically integrate further by producing his own oak barrels, rather than bring in green timber like his competitors, he had the oak sawed in the woods then kiln dried, reducing its weight and slicing transportation costs in half.

To finish the triangulation, I had the opportunity to spend some time with Steve Kerr, former head of GE’s famous Crotonville executive education centre. I came away from that meeting with three keys to GE’s success that are useful to growth firms:

In planning, the “middle” is gone. You only have to define two points: where you plan to be 10 to 25 years from now and what you have to do in the next 90 days. The latter point requires real time data and an executive team that can face the brutal reality of what the data is saying and then act accordingly. You don’t want to fall in love with your own 1 to 3 year plans.

Keep everything stupidly simple. If your strategies, plans, decisions and systems seem at all complicated, they are probably wrong.

The best data is firsthand data. It’s why the entire executive team of GE comes to Crotonville each month to “teach.” Hanging out with GE managers from around the world along with key customers (letting customers attend Crotonville sessions is key to GE’s value proposition) lets the top executives find out what is really going on.

It circles back to point #1 and the importance of real time data. And aligning with the importance of having only a few priorities, Jack Welch, the retired CEO of GE, had only four priorities the entire two decades he was GE’s leader.

In summary, defining a simple long-term vision 10 - 25 years out and a deciding on a handful of priorities for the next quarter are the two most important decisions a business leader makes. And it’s this yin and yang of having both a long-term “rarely changes” piece along side a short-term “changes a lot” dynamic piece that provides the delicate balance needed to drive superior performance.

You don’t have a real strategy if it doesn’t pass two tests: that what you’re planning to do really matters to your existing and potential customers; and second, it differentiates you from your competition. Add to this the requirement that you have the ability to become the best at doing implementing this strategy (back to core competencies) and you have a clear idea whether you really have a strategy or not that will work.

Some firms do things that differentiate themselves but it doesn’t really matter to a customer (high quality when the customer just wants speed) while other firms do things that the customer wants, but so does all the competition (you’ve just entered the commodity zone). And yet others might have both parts of the strategy correct from a theoretical standpoint, but no way of executing. Keep this simple definition of strategy in mind as you drive your business.

Verne Harnish is the CEO of Gazelles, a consulting firm, and the author of “Mastering the Rockefeller Habits.”

Source: Economic times

Regards,

Shantanuji

 
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