It’s been three years since the launch of 20/20 Outlook as an advisory service for CEOs, and I’ve been blessed with wonderfully rewarding and interesting experiences along the way. By acting as a sounding board for creative business leaders and helping them get clarity about their purpose, value, and relationships, each one has accelerated the quest to achieve his/her business vision.
Recently, Brad Young came into the 20/20 fold as another trusted CEO advisor, bringing with him a whole new set of gifts and talents. His major focus is on initiatives that complete strategies with flawless execution.
Our client discussions cover every aspect of each business, and we often discuss areas of personal challenge and growth. Similar to traditional executive coaching, building trusted CEO relationships has enabled discussions of their strengths and weaknesses, passions, and even the personal search for meaning and purpose. A side benefit that clients have cited is more effective communication with board members, leading to more productive relationships.
Along the way, a wonderful network of people has evolved around us. Each one has generously supported 20/20’s steady growth with introductions and recommendations, suggestions for new offerings, adoption of 20/20 processes, and partnering to help clients. Because of this network, LinkedIn recently recognized my profile as among the top 1% frequently viewed profiles in 2012.
To our friends and colleagues, thank you for your continuing support!
Growth relies on having a superior strategy, and in her recent HBR post, Joan Magretta identifies five common strategy mistakes. In reading the piece, two common antecedents became apparent. Hopefully, naming them will amplify rather than oversimplify her points, since she expertly explains how to correct each of the five.
The twin antecedent causes are a lack of clarity and a lack of focus:
- Confusing marketing with strategy – While good marketing is important, simply identifying your value to customers is insufficient to win big and often. A clear understanding of why you’ll win using focused execution is vital.
- Confusing competitive advantage with “what you’re good at” – Just being good at certain things isn’t enough to win business. Most companies are good in multiple areas, but sometimes the “strengths” they identify are merely minimum requirements to stay in business, like good customer service. Clarifying what you’re uniquely good at and how your unique blend of products, services, and relationships delivers higher value than competitors’ offerings leads to real growth.
- Pursuing size above all else, because if you’re the biggest, you’ll be more profitable – A young, smaller company with a clear and focused strategy can maintain higher margins than larger competitors. It happens in many industries, and Joan’s example of BMW versus GM makes the point.
- Thinking that “growth” or “reaching $1 billion in revenue” is a strategy – Desiring to “grow the business” and “enhance revenue” constitute objectives; they don’t identify the strategic moves needed to fulfill them. As discussed often in this blog (e.g., see “Attacking Business Entropy“), clarity about positioning is crucial and fundamental to a successful strategy.
- Focusing on high-growth markets, because that’s where the money is – The retail sector was not a high growth market when Amazon entered it. It’s a classic example of finding a new, better way of attacking an old, slow growth market to take share from existing competitors.
Why is it important to get strategy right? Operations-focused CEOs sometimes wonder if strategy is about hiring high-paid consultants to create pretty slides and well-written plans for consumption by boards of directors and investment bankers. As pointed out here before, clear and focused strategic thinking is the key to effective execution. Clarity and focus provide the foundation, and the value of the results – accelerated growth, higher margins, and increased understanding of the market – profoundly surpass the value of a new presentation.
Tactics is knowing what to do when there is something to do.
Strategy is knowing what to do when there is nothing to do.
– Savielly Tartakower
The reality of being a CEO differs in many ways from the popular conception. After many candid conversations with CEOs, it’s clear that the media portrayal of the CEO role as being glamorous, highly lucrative, and psychologically rewarding is incomplete at best. All of the above are true at least some of the time for many CEOs, yet when they’re being candid, most will tell you that it’s far from being chocolates and roses all the time.
In fact, one business leader laughingly told me that people don’t realize how often a CEO gets to “experience sheer terror.” Many things can go wrong that adversely affect the business and ultimately impact CEO priority number one, i.e. increasing shareholder value. What moves are competitors taking that we can’t respond well to? What drivers in the economy threaten the willingness and ability of customers to stop buying? Is our own inability to execute holding us back? Do we have a realistic vision for growing the company?
An earlier post about “The CEO Dilemma” discussed these and other challenges. Many CEOs live life on a high wire, balancing operational issues, cost and cash management, a realistic vision for growth, productive business partnerships, market presence, go-to-market and sales strategies, and many other priorities. Contrary to the supremely confident leader portrayed on-screen, a CEO is not always sure what to do.
Should we pity the poor, downtrodden CEO? Hardly! Most tell me they can’t conceive having any different role. They love what they do and feel fortunate that they have the opportunity. At the same time, life at the top can be lonely. The buck always stops there. As the CEO, you ultimately have to make the big decisions. And sometimes it pays to get assistance.
Where do CEOs look for help? If they’re lucky, experienced individuals on their board of directors are able and willing to serve as sounding boards, yet the fiduciary nature of their relationship may limit those discussions. Alternatively, the CEO may have one or more friends who are or have been chief executives whom they can trust for advice.
Often CEOs are more isolated than they need to be. Organizations like Vistage, CEO Netweavers, and others have evolved to meet the needs of CEOs over the years. They comprise CEOs who are willing to give time to help other CEOs with advice in a trusted environment, often facilitated by experienced serial CEOs. And, of course, there are independent trusted advisers who work individually with CEOs as well as with groups of CEOs to share expertise and experience that can help companies reach new levels of performance.
Based on feedback from experienced CEOs, getting the optimal value from boards of directors is a common challenge. Of course, it starts with picking solid board members. As serial CEO Bill Bock said recently, “Building a strong board is every bit as important as building a strong management team.” He recommends at a minimum that you include at least one very strong financial mind and at least one “crusty operational type” on your board to provide balanced guidance to the management team. “The ideal director sees a bigger world than the CEO.”
Assuming that you already have the right people, deriving value from them is up to you, the CEO. You have to engage their best thinking while keeping in mind that they don’t manage daily operations – you do. Giving too much or too little control to the board can decrease its value.
By focusing on growing the value of the company, the 20/20 Outlook process provides a constructive framework for discussions at the appropriate level. Another serial CEO, Mike Shultz, describes 20/20 Outlook as “a methodology that is clear and focused on developing the strategies to fulfill Job One for the CEO and in the process, creates a framework for solid communications with the Board of Directors about their most important measurement of success.” Job One, of course, is increasing shareholder value.
The diagram below depicts the continuum of choices a CEO has for achieving value from his/her board of directors:
Two common problematic relationships with boards can develop: micromanagers and cheerleaders . A CEO may allow the board to have too much control and encourage micromanagement. Since board members often have CEO and operational experience, they can be easily tempted to fill any perceived vacuum in leadership that you display as CEO. While reviewing financial and operational performance is valuable and appropriate, constrain the resulting conversation to high level suggestions for improvement rather than drilling into the nuts and bolts of daily operations. (If a particular board member has directly applicable experience, engage that person offline and don’t occupy the entire board’s time.)
On the other hand, a CEO who over-controls the board wastes everyone’s time. Having a board full of cheerleaders that rubber-stamps decisions and flatters the CEO may feel good, but it defeats the purpose of having directors and prevents their having an impact on the value of the business.
Either extreme implies weakness. The CEO who allows the board to micromanage may lack confidence in his/her ability to lead, while the CEO who totally controls the board may incapable of handling constructive criticism. Optimally you want to engage the board in strategic conversations about increasing shareholder value.
Are you having optimal conversations with your board?