More unsolicited advice for CEOs
Herewith the shortest version you'll ever see of what every chief executive of every technology company needs to know about running the business.
I realize that the advice I give CEOs may fall on deaf ears. Still, that's a lot of ears; they can't all be deaf. And if a board director, a staff member, a good friend or a gutsy employee was to forward this link, isn't a good CEO obligated to at least take a look? I know, I won't hold my breath.
Still, the CEOs of the future need to know this stuff. Now that's a thought.
Assuming somebody's getting something out of all this, today's unsolicited advice is about the business. Many technology CEOs are surprisingly short on what it really takes to build a profitable, growing company in today's competitive marketplace. This is the biggest challenge for any CEO of any company. It's not the kind of thing you learn in executive MBA school.
In many cases, and this is especially true in small- to mid-size technology companies, CEOs play to their strengths and ignore weak areas. It's human behavior. Unfortunately, they're not getting the guidance they need from their boards or others.
And that brings us to what is, without a doubt, the shortest version you'll ever see of what every CEO of every technology company needs to know about running the business, along with a few links for more info.
Strategy comes first, period. An operating plan is worthless if the company isn't pointed in the right direction. Without the right strategic plan, profits and growth will not be sustainable. Very few CEOs seem to get this.
Every company needs to have a well-defined, relatively long-term (let's say three years) goal or set of goals. Call it vision, mission, BHAG, whatever you like. Then there are business strategies the company plans to employ to reach its goals.
Frankly, everybody has a way to do what we call strategic planning--for lack of a better term--but most fail. I can't get into why that is here, but I will say that for every way to do it right, there are 10 ways to do it wrong. Here's how I do it.
Just remember the immortal words of Yogi Berra: "If you don't know where you're going, you may not get there." Truer words have never been spoken.
I'm sure every CEO knows about annual operating plans, focusing on execution, and all that stuff. I'm more interested in why some CEOs fail to address downward spiraling or downward pressure on market share, operating margins or profits with a sense of urgency, in real-time, without prejudice or ego.
Here's an example. I was just having a conversation about a once high-flying, but now beleaguered, public company. This company has been downward spiraling for some time, installed a new management team and is still chronically bleeding red ink.
Unlike strategic planning, this is not rocket science. You can work on the top line, the bottom line, or both. In most cases, the problem will ultimately require both. If you can't get the top line growing for a while, then you've got to cut, period. I don't mean cut so deeply that the company doesn't have what it takes to grow, but cut deeply enough to achieve sustainable profits in the not-too-distant future.
Turnarounds are tough, but they can be done. They do take a lot of guts, among other things. Check out this anatomy of a successful turnaround.
Processes are a funny thing. Too many, too stringent, and you have entrepreneurial-stifling bureaucracy. Too few, too loose, and you have anarchy. Each company's processes need to be just right, at that point in time.
The most important processes are for developing, reviewing and modifying strategic and operating plans. Then there's executive compensation, which must be aligned, not just to operating goals, but to strategic goals, as well. That process should include annual goal setting and quarterly measurement.
There are a few others that every company, beyond early stage start-up, needs to be successful. Key of those are phase reviews, business reviews, ZBB (zero-based budgeting) and forecasting.
Sooner or later, most companies fail. There are lots of reasons for that, but the easiest one to diagnose, in my opinion, is lack of scalability. Examples: the executive team lacks the skill-set to take the company to the next level; the organizational structure has legacy issues or needs an overhaul; the company is attempting to transition from a single product to a multiple product business; lack of well-defined and well-executed processes; and lack of scalable infrastructure such as intranet/communications, customer relationship management, customer service, sales force automation, IT, finance, etc.
Of course, these issues are significant and may require going back to square one--strategic planning. Still, good executives can sense when their organization is beginning to stretch past the point of efficient operation. Really good executives are proactive and don't let it get to that point.
Strategic positioning is necessary to a company's long-term success, but few executives really understand it. Positioning is not a document, a tag-line, a mission statement, a PowerPoint presentation, an elevator pitch, a spin, PR, or dressing up the pig.
Positioning is an outcome of successful strategic planning. In fact, positioning is a strategy. It determines how a company behaves, internally and externally. It determines how a company goes to market, including how it interacts and communicates with customers and other stakeholders. Positioning strategy defines a company's distinct value proposition.
A value proposition is what your product, service or company does--better than anyone else--to solve a critical customer or market problem. Just to be clear, I'm not talking about faster, smaller, cheaper, lower power, smaller form-factor, faster time-to-market, whatever. Those factors are simply not sustainable in a highly competitive market.
Positioning strategy can have a dramatic effect on virtually every aspect of a company's business, including operating strategy. Here's a sort of white paper on the topic.
Well, that's the long and short of it. Okay, so it was just the long of it. But you know, it's way shorter than reading an entire business book. And this way you can just click on the links to learn more. Good luck with your business. If you need help, you know where to find me (shameless plug).