2012 is meant to be the year America makes its economic comeback. Since the economy tanked in 2007-8, we have been conditioned to believe that economic power and superiority has passed to China and our era was over. The US has too much debt, not enough prospect for growth, and we have outsourced our way to becoming an irrelevant economy.
Our politicians haven't helped. Knee-jerk reactions to the financial crisis and rising healthcare costs have resulted in damaging regulations that continue to keep a stranglehold on progress. Record high unemployment, real-estate losses and extremely tight credit markets add to the picture of gloom that started 2011.
However the year ended with a realization that while all of these concerns are valid, the picture is not rosier elsewhere. China is showing too many cracks in its economy, political and social status. India and Brazil are still shining but the risks are higher than ever in those economies too. Political instability around the world are major concerns for investors. And Europe is potentially going to bring down any hopes of growth in the global economy for decades.
There is no better place to invest your money than the US. Thats how we ended 2011 and the outlook for 2012 is hopeful, at best.
In my business I speak with business executives across all industries of the economy. Operational excellence is an area that is not only full of opportunity for companies to exploit, but is crucial to any hope of building a strong future. The best companies are focused on achieving efficiency, managing and reducing risk, increasing quality, while containing costs. This has to be a top three focus for any CEO and management team in 2012 and beyond. We are not going to sell our way out of the threats to our future.
Yet in discussions with top executives of both Fortune 500 and mid-cap companies, we are encountering a very relaxed, "do-nothing" attitude. At a high-level, many companies believe they have done enough in the past 10 years and if it ain't broke, don't fix it.
Areas of focus have shifted to sustainability, CSR (Corporate Social Responsibility) and mandated statistics around how many female or diverse board members we have. While these may be important areas to look at, they are neither quantifiable or impactful to the challenges we face as an economy. I am not suggesting we dismiss these areas, but they do nothing for fixing the problems and challenges we face.
Business managers have to focus on key performance indicators that can be measured. In a meeting with a Chief Procurement Officer last week I was told that their top objective for 2012 is to convince their organization to share notes across divisions in the hope of finding leverage. No numerical objectives, no savings targets, no sense of urgency to find efficiencies. This is a global $7B industrial company after all.
Another COO at a $200m company had us review their packaging spend. They spend $2.5m a year with 7 suppliers. They have no contracts in place and their suppliers have increased prices three times a year for the past 4 years. No one can explain why. We found tremendous opportunity to improve this area, save cost and reduce the risk associated with unpredictability. His people panicked and he told us he didn't want to "force his people to do something they didn't want to". I wonder what his shareholders would say.
A Fortune 500 financial services firm has taken a beating in the past three years from the regulations and backlash of the crash. Supply Chain Risk is an area of focus and to their credit they have done a nice job investing in a team of people to oversee key suppliers across their business. Our firm has deep expertise in this area, having worked with a dozen clients in the past three years on risk management in the supply base. After several meetings it became clear that they have absolutely no hard measurable objectives in this area. No cost savings, no service improvements, no innovation targets and no clear risk metrics. "We want to improve this area in 2012" is the goal for 20 people.
I have spent 20 years working with people in a variety of industries. My main learning is that the people in the heart of operations rarely do the right thing. The mindset is simple: is my job secure? Is my influence and power being reduced? Am I losing control? Only if these questions are addressed do they ask is this the right thing for our business?
The best clients I have worked with have a culture of discipline. Discipline, after all, is all about doing the right thing, at the right time, for the right reasons, no matter how hard. They are becoming a rare breed and hard to find, especially in companies of any significant size i.e. $100m and above.
I am very hopeful about the future of our country because there are still many companies and individuals who are focused on changing the world. Whether its a company like Apple who has single handedly killed the status quo of the PC market, the cell phone market, the software market and the music industry, or the many start-ups in Silicon Valley and around the country, these companies, led by courageous leaders, are taking markets away from lazy incumbents hoping for a sense of security.
Blackberry is a great example of a company that took the world by surprise in 2000 and is now at risk of dying. Remember Motorola? Krispy Kreme was talk of the town in 2003. Kodak. Blockbuster. Chrysler. Kmart. Royal Bank of Scotland. The US Post Office. Fannie and Freddie. And all the ones we haven't heard of.
The list is long and many will have you believe these companies weren't innovative enough or didn't listen to their customers. I believe the real reason why they have fallen is the inability to execute. Too many people inside these companies were pre-occupied with maintaining the status quo, protecting their jobs and keeping a firm control of their perceived power inside the company.
Execution is as much about setting the right quantifiable goals and metrics, as it is strategy, innovation and leadership. We have to fix this in America as this is where we face competition from Asia and Brazil.
However the year ended with a realization that while all of these concerns are valid, the picture is not rosier elsewhere. China is showing too many cracks in its economy, political and social status. India and Brazil are still shining but the risks are higher than ever in those economies too. Political instability around the world are major concerns for investors. And Europe is potentially going to bring down any hopes of growth in the global economy for decades.
There is no better place to invest your money than the US. Thats how we ended 2011 and the outlook for 2012 is hopeful, at best.
In my business I speak with business executives across all industries of the economy. Operational excellence is an area that is not only full of opportunity for companies to exploit, but is crucial to any hope of building a strong future. The best companies are focused on achieving efficiency, managing and reducing risk, increasing quality, while containing costs. This has to be a top three focus for any CEO and management team in 2012 and beyond. We are not going to sell our way out of the threats to our future.
Yet in discussions with top executives of both Fortune 500 and mid-cap companies, we are encountering a very relaxed, "do-nothing" attitude. At a high-level, many companies believe they have done enough in the past 10 years and if it ain't broke, don't fix it.
Areas of focus have shifted to sustainability, CSR (Corporate Social Responsibility) and mandated statistics around how many female or diverse board members we have. While these may be important areas to look at, they are neither quantifiable or impactful to the challenges we face as an economy. I am not suggesting we dismiss these areas, but they do nothing for fixing the problems and challenges we face.
Business managers have to focus on key performance indicators that can be measured. In a meeting with a Chief Procurement Officer last week I was told that their top objective for 2012 is to convince their organization to share notes across divisions in the hope of finding leverage. No numerical objectives, no savings targets, no sense of urgency to find efficiencies. This is a global $7B industrial company after all.
Another COO at a $200m company had us review their packaging spend. They spend $2.5m a year with 7 suppliers. They have no contracts in place and their suppliers have increased prices three times a year for the past 4 years. No one can explain why. We found tremendous opportunity to improve this area, save cost and reduce the risk associated with unpredictability. His people panicked and he told us he didn't want to "force his people to do something they didn't want to". I wonder what his shareholders would say.
A Fortune 500 financial services firm has taken a beating in the past three years from the regulations and backlash of the crash. Supply Chain Risk is an area of focus and to their credit they have done a nice job investing in a team of people to oversee key suppliers across their business. Our firm has deep expertise in this area, having worked with a dozen clients in the past three years on risk management in the supply base. After several meetings it became clear that they have absolutely no hard measurable objectives in this area. No cost savings, no service improvements, no innovation targets and no clear risk metrics. "We want to improve this area in 2012" is the goal for 20 people.
I have spent 20 years working with people in a variety of industries. My main learning is that the people in the heart of operations rarely do the right thing. The mindset is simple: is my job secure? Is my influence and power being reduced? Am I losing control? Only if these questions are addressed do they ask is this the right thing for our business?
The best clients I have worked with have a culture of discipline. Discipline, after all, is all about doing the right thing, at the right time, for the right reasons, no matter how hard. They are becoming a rare breed and hard to find, especially in companies of any significant size i.e. $100m and above.
I am very hopeful about the future of our country because there are still many companies and individuals who are focused on changing the world. Whether its a company like Apple who has single handedly killed the status quo of the PC market, the cell phone market, the software market and the music industry, or the many start-ups in Silicon Valley and around the country, these companies, led by courageous leaders, are taking markets away from lazy incumbents hoping for a sense of security.
Blackberry is a great example of a company that took the world by surprise in 2000 and is now at risk of dying. Remember Motorola? Krispy Kreme was talk of the town in 2003. Kodak. Blockbuster. Chrysler. Kmart. Royal Bank of Scotland. The US Post Office. Fannie and Freddie. And all the ones we haven't heard of.
The list is long and many will have you believe these companies weren't innovative enough or didn't listen to their customers. I believe the real reason why they have fallen is the inability to execute. Too many people inside these companies were pre-occupied with maintaining the status quo, protecting their jobs and keeping a firm control of their perceived power inside the company.
Execution is as much about setting the right quantifiable goals and metrics, as it is strategy, innovation and leadership. We have to fix this in America as this is where we face competition from Asia and Brazil.
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Great post, I would only add: "...and Hope is not a strategy." Laurent P.
ReplyDeleteDo not underestimate Europe - there is still industry with a strategy beyond costs
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