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February 2 was the fifth anniversary of 20/20 Outlook. It’s gone by quickly. Long-time friends have been very supportive, and I’ve made many new ones along the way.
I’ll continue to share my thoughts and those of others about how to discover growth ideas and create new revenue initiatives through partnerships.
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CEOs rarely (never?) google to find a consultant with ideas to accelerate their business. To help a CEO with strategy, you first have to get on his/her radar, then bring credibility to the initial conversation. The relationship always begins when a CEO tells a mutual friend about a particular business challenge, then that friend introduces 20/20 Outlook as a reliable and trusted source of breakout strategies.
Earlier this month, 20/20 Outlook LLC celebrated its fourth anniversary. While it’s hard to believe it’s been four years, it’s easy to understand enables success. In a business that relies 100% on referrals to gain new business, having wonderful friends and associates means everything. Thank you!
NOTE: In December I started sending the Accelerated Vision CEO Digest once a month to about 400 CEOs and a few other friends. It shares valuable articles of interest to CEOs in a rapidly consumable format, along with an inspirational saying or two. If you’re a CEO (or a wannabe) who’d like to be included, send a note to email@example.com.
Joel Trammell requested a guest post for his American CEO blog, and it’s called 2014 Issues for a 2016 Exit. You’ll find many other great thoughts for CEOs there, and since it’s a two-part article, subscribe there and/or here to make sure you get the second half next week.
An astute CEO can often augment organic growth with acquisitions, but a majority of acquisitions fail to deliver expected returns. CEO Carol Koffinke of Beacon Associates says that “60 to 80 percent of all mergers and acquisitions fail to meet their merger goals.” Why do they fail?
Much has been written about acquiring companies’ failure to realize the value they envisioned for their acquisitions and the why’s: a lack of proper due diligence, cultural mismatch, lack of integration planning, unforeseen market factors, etc. However, of all the possible reasons for failure, M&A experts put the lack of a clear vision at the top of the list.
Source: “Creating and Executing a Winning M&A Strategy,” Merrill Data Site and The M&A Advisor, October 2013
While a clear vision can accelerate execution of any growth strategy, successful M&A demands a level of clarity most companies fail to achieve. Why do companies launch into an acquisition without sufficient vision and planning? Here are the most common reasons we’ve encountered in working with top executives:
- Some CEOs don’t naturally think strategically. A CEO who’s risen through the operational ranks can end up with a “make stuff, sell stuff” philosophy and a view that strategy is merely a set of slides for board and investors, while in fact, a clear strategy drives revenue and profitability.
- A CEO can be overwhelmed by the daily pressure of running the business. Periodically answering the question “are you working on or in your business?” can prevent the urgency of daily concerns that distract from the CEO’s paramount responsibility – increasing shareholder value.
- Pressure to make quarterly goals can diffuse and erode the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s brand and slow its ability to generate new business.
How can a CEO be more intentional about growing the company through acquisition?
- Find a way to set aside time to think and discuss new directions. In this new social media world, it’s easy to develop a chronic short attention span. Focused thought is required to create breakout strategies.
- Take an honest look to make sure you’re not hanging onto more than you should. How to cross the second chasm, i.e. growing a company from small to big, is described in Doug Tatum’s insightful book, No Man’s Land. Pick up a copy and read it this weekend. (If you think you don’t have time, you need to read it.)
- Discuss growth challenges with objective trusted advisors. Use CEO peers at Vistage and experienced consultants as soundingboards to call out any “elephants in the room.” They will help you establish the clear vision needed to drive your acquisition initiatives.
How does a company get acquired? FICO’s acquisition of Infoglide provides an excellent example of applying deliberate steps to increase the odds and accelerate the process.
CEO Mike Shultz graciously allowed us to describe the backstory in a short case study. Read it to discover what you can do to attract potential acquirers.
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!
Entering 2013, we have larger challenges than ever. Economic slowdowns in Europe and projected softening demand in Asia and elsewhere are forcing CEOs to pursue more challenging growth opportunities. This is not an option: we grow or we die.
For many firms, growth has historically come from new products or innovative extensions to existing products. The simple growth strategy where R&D generates a new widget, Marketing promotes it, and Sales introduces it to customers isn’t working that well any more. And even if revenue is growing, profits are often generated at the expense of ever deepening cuts in personnel, core capabilities, and reduced investment in capital and equipment. CEOs are worried that soon they will have to pay the proverbial piper.
M&A alone won’t do it either. While firms can and often should acquire or merge to become more competitive, most M&A data shows that the combined enterprise delivers little increased profitability. At best, results are additive, not multiplicative or geometric. So what’s next? Where can we find that elusive growth?
Leading companies are broadening their definition of growth beyond traditional product-based categories to include more novel growth strategies. For CEOs to take advantage of any of them, they must consider the real impacts on their businesses and determine the capabilities they will need to succeed.
First, creative CEOs need to generate a complete portfolio of growth initiatives that include: geographic expansion and M&A; product-based extensions and positioning; integration or bundling of products and services; marketing-driven initiatives like segmentation and value-pricing; localized delivery through outsourced capabilities; value-driven arrangements like performance guarantees; and IT-based strategies like remote services.
Second, CEOs need to determine how best to apply scarce resources to these initiatives, being especially careful to avoid the trap of over-investing in existing businesses – through both capital and key resource allocation – at the expense of novel and potentially much more profitable strategies. Communicating the necessity of and how best to implement novel strategies to their boards is a critical challenge. Key questions include: “Do I have the right leaders in the current businesses? Can my current team succeed in these new lines of business? Is the plan aggressive enough? Have we achieved the right balance of risk and projected return?”
Finally, only careful analysis will determine whether any of these breakout strategies are appropriate for your firm. Can you get buy-in from all stakeholder groups? Will employees get excited about the new opportunities? Will the board support the initiatives? Can you communicate the new direction effectively to analysts and investors?
In these especially demanding times, CEOs must gain a broader perspective and challenge their internal teams’ assumptions. Make sure that you incorporate external research and insights into your thinking before making the hard calls.
Washington Post, July 2, 2012: “Outlook for U.S. economy dims as manufacturing shrinks for the first time in nearly 3 years… ‘Our forecast that the U.S. will grow by around 2 percent this year is now looking a bit optimistic,’ said Paul Dales, an economist at Capital Economics.”
Being the CEO requires committing to a “no excuses” life. Others may offer plausible reasons for non-performance, but if your company plateaus, CEO excuses aren’t an option – you must take action:
- Softening economy? Find a way to take advantage of a changing business landscape.
- Lengthening sales cycles? Determine how to identify highly motivated prospects.
- Shrinking margins? Examine whether your company is leveraging its strengths.
Changing your business to address these and similar challenges incurs risk, but the risk of doing nothing is greater. How can you adopt an effective breakout strategy that will recharge you and your executive team?
Here’s a rational, three-step process guaranteed to provide direction: (1) reexamine your company’s true value and what sets it apart; (2) in light of market conditions and competition, determine an altered direction that will maximize value; and (3) identify new business relationships that will open doors to new business. In other words, you need to clarify, comprehend, and connect:
Clarify – Who are you as a company and what sets you apart? What truly separates companies like Apple, Southwest, Berkshire Hathaway, and the NE Patriots from the rest, year after year, is a sense of purpose. Clarifying the organization’s purpose and unique assets beyond a simple mission statement actually increases efficiency. It’s imperative to get this right.
Highly successful companies perform at a high level because they focus on a clearly identifiable market with a differentiated solution. Even successful companies eventually let pressure to increase revenue force acceptance of business outside their primary focus. Since profitability grows by exploiting core competencies, losing focus erodes margins. Having a crystal-clear shared vision of who your company targets and what customer problems it uniquely addresses enables employees to make decisions more rapidly (fewer meetings and emails needed) so more gets accomplished faster and margins increase.
Comprehend – Once you understand your company better, update your understanding of your immediate market. What change in direction will maximize value? Finding the right direction in a complex and competitive market accelerates growth. How do you define who’s in it and who isn’t? What is your relationship to other companies in your space?
One proven method is to pretend you’re selling your company and identify a number of companies that could acquire you and another set that you might acquire or partner with. By comprehending the needs of potential acquirers, acquisition targets, and partners, you will develop a value framework that identifies high value opportunities.
Connect – Which relationships will increase business the most? Whether your company is B2B or B2C, strong relationships with other companies can help it grow faster. That said, many CEOs have been burned by partnerships that failed due to poor planning, unrealistic expectations, and unmonitored execution.
The solution? Design self-fueling partnerships that continually reinforce each partner’s objectives. Partnering with potential acquirers and industry leaders will drive new revenue by providing access to new markets, extended geographies, enhanced product and service offerings, better branding, and staff augmentation.
By following this three-step process, breaking out of flat growth may be easier than you think.