Copyright Jack Mixner. All Rights Reserved. 2006. 714 449 1040 www.mixnerstrategy.com
Emphasize Pace, Practice, and Personnel. Increase Valuation
[Exit Strategy: An exit strategy is a means of escaping one's current situation, typically an unfavourable situation. An organization or individual without an exit strategy may be in a quagmire. At worst, an exit strategy will save face; at best, an exit strategy will peg a withdrawal to the achievement of an objective worth more than the cost of continued involvement. From Wikipedia.]
Why "End Game" Strategy?
Many service firms use the words "exit strategy" in their titles. Exit connotes an unfavorable situation. While sometimes all companies need to get out of a bad deal, let us look a bit further.
"End game strategies" works better. Halberstam's book The Education of a Coach about Bill Belichick and the New England Patriots portrays an "end game" strategy. He describes Belichicks recognition that if you do not practice your end game far in advance your team will not respond the way you need them to in clutch situations, especially at the close of a crucial game.
Extricating a company from a quagmire with an exit strategy is a whole lot different from practicing an end game strategy, namely, analyzing and preparing over several years in advance in preparation for the last two minutes of a crucial game.
The three main components of end game strategy are:
• Speed up the pace, • Practice in advance and • Evaluate personnel all the time.
The end game strategy of identifying possibilities and enacting them with long-term focus makes sense, especially when compared to extricating yourself and your team from a quagmire late in the game. It also increases your valuation.
Speed Up the Pace
Halberstam writes about Bill Belichick's days coaching the New York Giants and the New England Patriots. He tells the story of Belichick's strategy to beat the Buffalo Bills at their own game. Late in a game with the Houston Oilers, the Bill's Coach Marchibroda dominated by running their "two-minute" drill and scoring more than once in the last two minutes by running play after play without a huddle. Marchibroda decided to call the two-minute drill in non- clutch situations, completely befuddling the opposition. Belichick's response the next time the Giants played the Bills? Slow the game down any way he could. They practiced little things like taking longer to get up from piles after a play, messing up the ref's placement of the ball and taking longer to respond to injuries. Then they worked on actually letting the Bills get more mileage out of their runs, all so they would not go to the air (Halberstam, pages 285 - 287). Belichick also installed special defensive plays to confuse the Bill's quarterback Kelly. It all worked. Slowing down the Bills allowed the Giants to dominate and win.
Years later, while coaching at the New England Patriots, Belichick watched the Philadelphia Eagles lose because they did not step up the pace at the end of a Super Bowl game with the Patriots. No urgency at the end of the game led to a defeat.
Pace is part of end game strategy.
If you are thinking of selling your business in the next three years, pick up the pace of your sales effort. The competition may not understand the new rule until it is too late and probably will not keep up. Valuation should increase as a result. It works in football. It will work for your company.
Too Much Practice Makes Imperfect
One statistic tells it all: Before Carlos Ghosn arrived at Nissan, middle management spent approximately sixty per cent of their time planning. After he arrived, the ratio changed to five per cent planning and ninety-five percent implementing (Magee, page 102).
On the day of his arrival at Nissan, Ghosn formed nine planning teams to figure out what was wrong with Nissan. They had two months - later changed to three months - to create plans for Nissan's turnaround. That was the easy part.
The hard part was implementing. Ghosn held the planning teams accountable for actually implementing their plan. The rest is history.
Nissan closed plants in Japan (think about that), created a passel of new cars, simplified the management structure, changed compensation and advancement (read that, performance raises and promotion only), drastically reduced the number of suppliers, and tied employee bonuses to global results (Magee, page 94).
No more talking about implementing. Now they implemented. The pay-off was huge.
Planning stalled at your company? Focus on implementation, not strategy.
Disciplined Team, Disciplined Thoughts
Discipline and strategy go together. It takes discipline to implement strategies and tactics.
For Collins, however, discipline comes earlier. He points to the disciplines of
• choosing the right people and putting them in the right positions and • Structuring thought early on to confront and balance the "brutal facts" with the strengths of your organization in three areas: what you can be the best in the world at, what you are deeply passionate about, and economic results (Collins, page 34). Then, finally, comes disciplined • Acting on responsibilities and relentless pushing to achieve results. Discipline early in the process brings success. They focus on people first, then plan (thought in Collin's parlance), and only then focus on action.
Welch's 'Differentiation Curve'
When you talk about people, one person always comes to mind, Jack Welch. In his book, Welch talks about all the different charts and curves they used to evaluate senior managers over the years. They finally settled on a chart they called the "Differentiation Vitality Curve (Welch, page 159)." The curve broke a management team into three quadrants, the Top 20 (people filled with passion), the Vital 70 and the Bottom 10. Let us just say you did not want to be in the Bottom 10. Over the years, Welch has gotten a lot of bad press about the Vitality Curve. Dividing personnel according to a curve sounds mechanistic. However, let us just look at GE's definition of a "passionate" leader:
• High energy levels • Ability to energize others • Edge to make tough go / no go decisions and, finally, • Ability to execute and deliver on their promises (Welch's four E's of GE leadership, page 158).
Not a bad list. I use it to evaluate new hires. The list and the methodology point to why end game strategy takes a while. Start early on when you hire people by looking how they will work out not just now, but later on when things really matter.
Applying End Game Strategy: Speed Up the Pace
On 1 April 1981, Welch became Chairman and CEO of General Electric. On 2 April 1981, Welch announced that GE would "manufacture and sell an industrial robot as the first product of its new factory automation business (Slater, page 70)."
Welch's goal was to make things happen at GE in order to increase the share price and margin. He did it by speeding up the pace.
He began a restructuring process to dominate a business line, or leave it. Using the 1-2 mantra (have a market share of either one or two in your business, fix it quickly, or leave it), GE left many businesses, many of them that had been part of GE for years.
Where to focus at your company? Porter's value chain approach shows where to look - infrastructure, HR management, technology development, procurement, inbound and outbound logistics, operations, marketing/sales and service round out his list (Porter, page 37).
The first step is analysis, OK. But don't let it take too much time. Implementation is the key, not planning. Make it happen.
Building upon a mainline company that needed to be stronger, Welch started immediately to increase profits and share price. The rest is history.
Speed up the pace. Increase valuation.
REFERENCES
Collins, Jim. Good to Great and the Social Sectors. Jim Collins. 2005.
Halberstam, David. The Education of a Coach. Wheeler Publishing. 2005. Magee, David. Turnaround: How Carlos Ghosn Rescued Nissan. HarperCollins. 2003. Porter, Michael E. Competitive Advantage Creating and Sustaining Superior Performance. Free Press. 1985. Slater, Robert. The New GE How Jack Welch Revived and American Institution. Irwin. 1993 Welch, Jack with John A. Byrne. Jack Straight From the Gut. Warner Business Books. 2001. Wikipedia. Definition: Exit Strategy. http://en.wikipedia.org/wiki/Exit_strategy#In_business