by Adam Hartung | Sep 19, 2010 | In the Rapids, Leadership, Openness
Summary:
- Richard Branson has built a wildly successful Virgin company on very unconventional “secrets to success”
- Most business leaders follow management theory than is built on myth
- Virgin has been wildly successful, even over the last decade when many companies have suffered, by being agile and market oriented
- It’s time to throw out traditional management, and its myths, for a different approach.
In my speaking and blogging I regularly comment on what great results have been achieved Virgin under Chairman/CEO Richard Branson. The founder, and the company, both started quite humbly. Even though nobody can easily define exactly what business Virgin is in, it has done very well. So I was pleased to read at BNet.com “Richard Branson: Five Secrets to Business Success“:
- Enjoy what you are doing. Really.
- Create something that stands out
- Create something of which you and your employees are proud
- Be a good leader – which he defines as listen a lot, ask questions, heap the praise. Don’t fire people, help them to be happy
- Be visible. Get out into the market and listen, listen, listen.
I am struck at how this is nothing like the recommendations in most management books. Let’s see what Richard Branson didn’t say:
- Sacrifice. Work hard. Be diligent. Be tough. Cut out anything unnecessary
- Find one thing to be good at and excel – search for excellence
- Know your core competency, and maximize it’s use. Avoid things that aren’t “core”
- Make sure everyone is “on the bus” doing the one thing you want to do. Get rid of anyone else
- EXECUTE! Optimize your business model. Focus on execution
- Cut costs. Run a tight ship. Tighten your belt.
- Focus on results. Run the business by the numbers
- Focus on quality – implement Six Sigma and/or TQM and/or LEAN processes
- Outsource anything you don’t absolutely have to do
- Hire the “right” leaders (or employees)
Business if full of myth. And we now know that many gurus have been recommending actions for years that simply haven’t produce long-term positive results. The companies considered “great” by Jim Collins have fared far more poorly than average. Most of the companies Tom Peters considered “excellent” have not made it to 2010 in good shape – if they even survived! Most of the 10 myths were things that simply sounded good. They appeal to the American way of training. But they haven’t helped those companies which applied these ideas succeed.
Sir Richard Branson has created businesses from selling recordings to bridal shops, international banking, traditional airlines and even a business flying people into outer space. By all the traditional recommendations, he and his company should have failed. It followed none of the recommendations for hiring, firing, focus or execution. Yet he has created billions in personal fortune, billions for investors and given thousand of people very rewarding places to work. By all counts, he and Virgin have been a success.
It’s time to give up our management myths, and learn to compete in today’s rapidly shifting market. It’s now more about listening to the market and managing an agile organization than “focusing on core” or “execution.”
by Adam Hartung | Jul 31, 2010 | In the Rapids, Innovation, Leadership, Openness
I’m pleased today to post another guest blog – written by Charles Searight of Vector Growth Partners. Charles offers a great viewpoint on a common issue – how to balance the needs of running a good business with implementing innovation. I hope you enjoy his point of view as much as I do:
Efficiency is a good thing, taken in moderation. The same with focus. It is good management hygiene to pay
attention to what you’re doing and try to do it efficiently. This helps build a competitive cost
structure and a results-based culture. From an operations standpoint that means that the use
of an occasional stopwatch or its modern day equivalents in order to eliminate
wasted effort and speed workflows makes perfect sense. Frederick Taylor made the great
contribution in 1911 of helping companies recognize that labor is a
controllable cost that can be managed, but he taught that a narrow focus on the
optimization of each operation and repetition of the “best practice” was the
key to success. He missed the
point (among others) that it is really the improvement of the process as a
whole that changes the game. It took Toyota and Yamaha and other
Japanese companies to teach the world that lesson 70 years later – leading to
today’s six sigma, lean, and time compression concepts.
We find the same phenomenon happening with most companies today
– they are so focused on optimizing their operations and replicating “best
practices” that they have totally lost sight of the process as a whole. The pursuit (often obsession) of
operational excellence becomes an end unto itself and gets disconnected from
the mission of generating growth and creating value. The end game is not to get lean and agile, but rather to get
lean and agile so that you can compete more effectively – leveraging these
capabilities to go to market in innovative new ways, to compete in new markets,
and ultimately to create new markets.
Companies that stay locked-in to being the most efficient
company at making widgets quickly find that low cost widgets have become a
commodity and wonder how they suddenly got into trouble. Being an efficient widget maker gets them
into the game, but not for long. In
order to survive and thrive they must immediately begin planning new markets
for widgets, innovations that will replace widgets, parallel markets targeted
at widget users, new markets for widget-user data, markets unrelated to widgets
that have been identified in conversations with customers, and so on, because
there is always a competitor that will figure out how to make widgets just as
efficiently as they can and undercut their price.
The companies that generate the most value, like Apple in
recent years, are the ones who focus on trends and where the market will be,
not where it has been. They use their
operational excellence as a competitive weapon not as a marketing message or
something to put in the trophy case.
Instead of bragging about how agile they are, they just beat the
daylights out of would-be competitors by launching new products and creating
new businesses at a pace that leaves others in the dust. They do this by planning from the
future and focusing on new ways to leverage their capabilities (or build new
ones) to satisfy tomorrow’s unmet market needs – not by focusing on optimizing the
core competencies of yesterday and today.
They combine the yin of operational excellence with the yang of market
innovation.
Charles Searight is the Managing Partner of Vector Growth Partners headquartered in McClean, VA. His firm helps companies of all sizes and industries, public or privately held, and many with external funding from private equity pools, develop and implement growth strategies. Feel free to comment on Charles input right here, or contact him directly. If you could use help developing a growth plan you can contact Charles at CSearight@VectorGrowth.com. Website www.VectorGrowth.com
If you enjoy ThePhoenixPrinciple.com and would like to submit a guest blog please contact me. I am very pleased to offer up the input of others who have insight or case studies you’d like share about innovation, strategy, growth, lock-in, defend & extend management, scenario planning, competitor analysis/insight, disruptions or white space!
by Adam Hartung | Dec 31, 2009 | Current Affairs, Defend & Extend, General, Leadership, Openness, Web/Tech
HAPPY NEW YEAR!
We end the first decade in 2000 with another first. In ReutersBreakingViews.com "Don't Diss the Dividend" we learn 2000-2009 is the first time in modern stock markets when U.S. investors made no money for a decade. Right. Worse performance than the 1930s Great Depression. Over the last decade, the S&P 500 had a net loss of about 1%/year. After dividends a gain of 1% – less than half the average inflation rate of 2.5%.
Things have shifted. We ended the last millenium with a shift from an industrial economy to an information economy. And the tools for success in earlier times no longer work. Scale economies and entry barriers are elusive, and unable to produce "sustainable competitive advantage." Over the last decade shifts in business have bankrupted GM, Circuit City and Tribune Corporation – while gutting other major companies like Sears. Simultaneously these changes brought huge growth and success to Google, Apple, Hewlett Packard, Virgin and small companies like Louis Glunz Beer, Foulds Pasta and Tasty Catering.
Even the erudite McKinsey Quarterly is now trumpeting the new requirements for business success in "Competing through Organizational Agility." Using academic research from the London Business School, author Donald Sull points out that market turbulence increased 2 to 4 times between the 1970s and 1990s – and is continuing to increase. More market change is happening, and market changes are happening faster. Thus, creating strategies and organizations that are able to adjust to shifting market requirements creates higher revenue and improved operational efficiency. Globally agility is creating better returns than any other business approach.
A McKinsey Quarterly on-line video "Navigating the New Normal: A Conversation with 4 Chief Strategy Officers," discusses changes in business requirements for 2010 and beyond. All 4 of these big company strategists agree that success now requires far shorter planning cycles, abandoning efforts to predict markets that change too quickly, and recognizing that historically indisputable assumptions are rapidly becoming obsolete. What used to work at creating competitive advantage no longer works. Monolothic strategies developed every few years, with organizations focused on "execution," are simply uncompetitive in a rapidly shifting world.
And "the old boys club" of white men in top business leadership roles is quickly going to change dramatically. In the Economist article "We Did It" we learn that in 2010 the American workforce will shift to more than 50% women. If current leaders continue following old approaches – and generating anemic returns – they will rapidly be replaced by leaders willing to do what has to be done to succeed in today's marketplace. Like Indra Nooyi of PepsiCo, women will take on more top positions as investors and employees demand changes to improve performance. Leaders will have to be flexible and adaptive or they, and their organizations, will not survive.
Additionally, the information technology products which unleashed this new era will change, and become unavoidable. In Forbes "Using the Cloud for Business" one of the creators of modern ERP (enterprise resource planning) systems (like SAP and Oracle) Jan Baan discusses how cloud computing changes business. ERP systems were all about data, and the applications were stovepiped – like the industrial enterprises they were designed for. Unfortunately, they were expensive to buy and very expensive to install and even more expensive to maintain. Simultaneously they had all the flexibility of cement. ERP systems, which proliferate in large companies today, were control products intended to keep the organization from doing anything beyond its historical Success Formula.
But cloud computing is infinitely flexible. Compare Facebook to Lotus Notes and you start understanding the difference between cloud computing and large systems. Anyone can connect, share links, share files and even applications on Facebook at almost no cost. Lotus Notes is an expensive enterprise application that costs a lot to buy, to operate, to maintain and has significantly less flexibility. Notes is about control. Facebook is about productivity.
Cloud computing is 1/10th the cost of monolithic owned/internal IT systems. Cloud computing offers small and mid-sized companies all the computing opportunity of big companies – and big advantages to new competitors if CIOs at big companies hold onto their "investments" in IT systems too long. Businesses that use cloud architectures can rearrange their supply chain immediately – and daily. Flexibility, and adaptability, grows exponentially. And EVERYONE can use it. Where mainframes were the tool for software engineers (and untouchable by everyone else), the PC made it possible for individuals to have their own applications. Cloud computing democratizes computing so everyone with a smartphone has access and use. With practically no training.
As we leave the worst business environment in modern times, we enter a new normal. Those who try to defend & extend old business practices will continue to suffer declining returns, poor performance and failure – like the last decade. But those who embrace "the new normal" can grow and prosper. It takes a willingness to let scenarios about the future drive your behavior, a keen focus on competitors to understand market needs, a willingness to disrupt old Lock-ins and implement White Space so you can constantly test opportunities for defining new, flexible and higher returning Success Formulas.
Here's to 2010 and the new normal! Happy New Year!
