STRATEGY IN THE NEWS
EXECUTION IS MORE IMPORTANT THAN THE PLAN
By Jack Mixner
Execution also increases shareholder value.
The eighties were tough on strategic planners. With all the downsizing and right sizing that occurred, staff – folks that did not
actually make something – disappeared. Lately, times have changed. Instead of going into mergers and acquisitions and Wall
Street, many new MBAs are opting instead for planning functions with the big consulting and Fortune 500 firms. Their
effectiveness will vary. To assume that planning is back in all its former glory is a risky assumption, however. CEOs will be smart
to consider that less of a plan might be better, especially if the plan focuses mainly on execution.
International Aid
Amartya Sen, in reviewing William Easterly’s The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much
Ill and So Little Good (Foreign Affairs magazine March/April 2006) contrasts planners with “searchers” when grading the
effectiveness of international aid to developing countries. The basic thesis is that planners come up with long-range blueprints
they expect to see enacted. Searchers, on the other hand, find out if clients are satisfied. Then they help implement. Which
process works better, especially in a work environment?
There is a lot of carping about interventional policies. The alternative, free market dynamics may be just as problematic in third
world economies (Linden’s truly scary analysis of the huge Victorian famine during the Indian Raj in The Winds of Change give a
good account of the eventual effect of global warming and the failure of policy, especially social Darwinism). Sen gives examples
of particular successful programs. Individual initiatives work better as do assuring individual voice in decision-making. Easterly
advocates “searchers over planners” because “searchers find out what is in demand.” One good example in international
planning is the micro-loan program in Bangladesh.
How do we apply this to business planning, especially planning related to increasing the value of a business? Involve more
people on your planning teams. Start with a smaller planning team and assign portions of the plan – and the implementation – to
other groups in production, perhaps, or sales. Focus on choosing tactics with the biggest return on investment. Figure out a way
to include the whole company in information gathering before you begin planning. Properly conceived surveys, some with web-
based data gathering, work very well.
China Trade
An interesting thing is starting to happen in China. Labor shortages may signal a change in the world’s perception of China as
the lost-cost provider. Labor conditions and pay are rising as a result (New York Times, April 3, 2006. David Barboza. Labor
Shortage May Lead to Trade Shift). Skilled labor is hard to find. Some production is leaving for Viet Nam, India and Bangladesh.
The premise of this article is that execution is more important than the plan. Less planning for international production makes
sense. Local production, especially with products that have “buried technology” like medical devices, has always worked. The
availability of skilled labor will continue to grow. Talking to customers makes sense. For the short term, China will win on labor
costs, with Viet Nam and India picking up some of the slack as China’s costs grow. In the end, however, production may swing
back to local sources. Engineering has managed to stay in town. Production ultimately may too.
Making the Job Meaningful
Forming a healthy partnership with labor has been job one at Nucor, the steel manufacturer that treats workers like owners
(BusinessWeek, May 1, 2006, page 57. The Art of Motivation. Nanette Byrnes). They pay for performance, listen to the front line,
push authority down, protect their culture and try new things. Why bother? Huge returns in a rust belt industry.
What to do in your middle market company? Abandon command-and-control, trust your team and share corporate wealth.
Strategies might be as simple as motivating your team to show up, engage at full speed, admit mistakes, and look to the profit
impacts of every step they take. Assume new hires need more training – read that indoctrination – than you would normally think.
Immerse them in your culture, pair them with your best workers and put them to work on their first day. Train continually. When
you bring in a new plant to your corporation, land on it with your best workers to show the new team what motivation looks like
while remembering to look to profit first while still making the right decisions.
Trust is tough isn’t it? So is pushing down decision-making. However, they both will ultimately increase the value of your
company.
Emotional High Ground
Every now and then, I go through my medicine cabinet and kitchen to see how many Proctor and Gamble products I am using. I
can remember when we started using Crest toothpaste back in the sixties (or was it the fifties?). I still have fun looking for the
American Dental Association seal of approval. Silly, right? Probably. Then I notice I still use Tide after all these years.
Occasionally we will try something else (usually a liquid made by Clorox) but we always come back to Tide. What is the point?
P&G is worried that even though their products are still growing market share, they may in fact be turning into commodities. Bad
move. Prices would plunge. How to keep their brands alive? Re-establish bonds with customers. They have abandoned men in
their planning. They have stopped talking about cleaning and started looking at the feeling involved in cleaning (BusinessWeek,
May 1, 2006, page 66. Detergent Can Be So Much More. Robert Berner).
Execution of their ads focuses not on cleaning ability or absorbency (in Pampers) but on how it feels to wear clean white slacks
or how babies develop.
BCG Matrix
Over fifteen years of teaching strategy, I always enjoyed teaching about cash cows, rising stars, question marks – and dogs. New
data (strategy+business, April/May 2006, Love Your “Dogs,” Harry Quaris) suggests that your best bet for an investment in your
diversified company is not with your rising stars but with your dogs.
Three key points:
• Fix your dogs because doing so increases shareholder value.
• Improve operations for the same reason.
• Buying and fixing your competitor’s dog will give you the largest return.
It is in the execution. Diversification is fun because you get to start over in new industries, learn a lot, and maybe succeed. Focus
on execution in your current under-performers and the pay-off is likely larger.
What steps do you follow? Value each of your businesses. Score them against each other. Assess which ones to fix. Then spend
some time figuring out what impact the changes you need will have on shareholder value. Some your dogs are actually
performing better than you thought. Analysis will show you more than you expected. My bet is that you will find some gems buried
in the rough.
[yellow tail]
Nope, I did not make a mistake. It is a wine that I have followed for some time. Named after a kangaroo, it is Australian. Sales
have grown in America from 60,000 cases in 2001 to 8 million predicted in 2006 (New York Times. April 23, 2006. The Wallaby
That Roared Across the Wine Industry. By Frank J. Prial.)
Luck is part of it. The American distributor could absorb capacity is another. But the execution is the reason. No plain label, the
[yellow tail] label is black and yellow with some creature that is actually a kangaroo. The price is low, but not the lowest. Quality is
better than the price implies (it costs $6 a bottle). “It’s perfect for a public grown up on soft drinks.”
The strategy? They offered wine not as wine, but accessible to everyone including beer drinkers, and cocktail drinkers (Blue
Ocean Strategy. W. Chan Kim and Renee Mauborgne. HBS Press. 2005. Page 20). It didn’t just steal sales from existing wines, it
created new wine drinkers. Jug drinkers moved up, novice drinkers tried [yellow tail] because the sales people in the stores
thought it was cool too, and experienced drinkers moved down. Easy to choose (the label was cool), easy to drink (it was a good
wine that people liked) and fun and adventurous to experienced drinkers. An amazing story. It took a strategy - and execution -
and little bit of luck to pull it off.
There are clouds on the horizon, however. This is all new ground for a wine. Every couple of years a new wine bursts on the
scene. [yellow tail] now has to survive beyond the fifth or sixth year. It failed at a price point a dollar higher in market tests. So they
have to keep the volume up to match their now huge capacity.
In this new environment of tougher sales, [yellow tail] will have to focus more effort on the execution of their plan. They focused
from the beginning on fostering excitement with the salespeople in the wine stores. They trained them. They had wine tastings.
They gave away free clothing. All that will have to continue. In fact, it will have to improve. Price will not do it for them. Execution will.
It will be interesting to watch.
JACK MIXNER
714 449 1040
jmixner@mixnerstrategy.com
COPYRIGHT 2006. JACK MIXNER. ALL RIGHTS RESERVED.