Too Broad, Too Narrow, or Just Right

Driving down a major boulevard in a city where we lived at the time, my wife spied a new restaurant in a place where many others had failed. In the window, it advertised food from multiple ethnicities, including both Mexican and Chinese! I’d be surprised if “Bueno Wok” lasted long.

There’s a truism about how a lack of focus can kill an enterprise. Being “a mile wide and a quarter inch deep” is widely recognized as a cause of failure.  Typically, a desire to increase revenue leads to pursuit of business that doesn’t leverage the company’s strengths and results in lower margins and muddled branding. But, are there instances where too narrow a focus can be just as harmful?

The diagram below categorizes organizations according to two attributes, focus and potential. The Focus axis ranges from single domain to multiple domains through all domains, while Potential ranges from restrictive to growing through saturated. Companies focused on several verticals are distinguished from those whose offerings are truly horizontal (i.e. domain-independent). Of course, each axis represents a continuum so that an infinite set of combinations is possible, allowing for the unique positioning of any specific company.

Back to the original question: is it possible to be too focused? Consider the example of a company providing a niche offering to several vertical markets. In the diagram it would be classified as “saturated domain-specific.”

Suppose you’re advising a new CEO hired to grow this “plateauing” company, Your first inclination may be to assess each of the company’s currently targeted vertical markets in hopes of focusing on the one with greatest growth potential. However, if the frequency of opportunities within each vertical domain is found to be sporadic and sensitive to changing business cycles, it may make more sense to remain diversified. Finding additional verticals that the company can target may represent a more fruitful direction.

So a key factor in opting to narrow or broaden our focus ia available market opportunities. Other factors include strength of brand, plus the company’s ability to execute (e.g. capitalization), integrate, partner, and acquire. These affect companies in each of the diagram’s nine categories in different ways. (NOTE: future posts will consider how, so if one of the nine categories is of particular interest, let me know when you sign up on this page to be notified by email when the next post is available.)

Translating the CEO’s vision for growth into breakout strategies requires careful thought to determine the best way to target and deploy finite corporate resources. Too often a new direction is based on an unrealistic view of the company’s position and capabilities. While it takes an optimist to run a company, it takes a realist to lead one toward its highest value.

 

Thanks for Two

Today is the second anniversary of 20/20 Outlook LLC. Helping visionary CEOs create breakout strategies is enjoyable beyond all expectation. Before the launch in February 2010, experienced consulting friends advised that it would take a year for people to remember what 20/20 Outlook is, then another year for the business to hit full stride. They were spot on.

Nine months into it in December, 2010, opportunities started arriving on their own. I remember getting a call from a California friend asking for help in opening up U.S. operations for a European company, then days later came a request to write an article for TexasCEO magazine. The juxtaposition of two unanticipated invitations was encouraging.

My goal remains to provide cycles to busy CEOs immersed in urgent issues so they can accomplish their important but non-urgent ones. While the original 20/20 Outlook process remains an essential weapon, the scope has evolved into the role of trusted advisor to CEOs, bringing clarity and direction to the dreams those CEOs have for their enterprises.

This post is written to thank the numerous friends who have given continual guidance over the past two years, including CEO clients and other long-time friends across multiple disciplines. You make it fun to learn new ways to think about and address the challenges CEO face. From an A- guy blessed with a multitude of A+ friends, thank you!

TexasCEO and Vistage

“Symphony…is the ability to put together the pieces. It is the capacity to synthesize rather than to analyze; to see relationships between seemingly unrelated fields; to detect broad patterns rather than to deliver specific answers; and to invent something new by combining elements nobody else thought to pair.”

— Dan Pink in A Whole New Mind

Vistage CEO Rafael Pastor spoke this morning at a breakfast organized by TexasCEO magazine. He covered a range of topics near and dear to my heart (e.g., “what makes America great? its restlessness”), then reviewed the results of the most recent Vistage member survey, a reliable leading indicator of GDP and hiring trends (good news: CEO confidence is heading back toward the 2004 level).

Finally, he shared four traits of a good leader that combine to produce character:

  1. Confidence – uplifting and inspiring all constituencies to higher performance
  2. Curiosity – looking around and asking questions to learn new ways of thinking
  3. Courage – having determination to risk and innovate
  4. Collaboration – creating and learning from external relationships

How does an organization exhibit these traits? Consider TexasCEO as an example:

  1. Confidence – Driving the creation of the magazine was a desire to distribute information that helps CEOs grow their enterprises. TexasCEO founders were confident they could draw contributing authors from multiple industries to deliver value through lessons that cross domains.
  2. Curiosity – By continually meeting with CEOs and advisors from multiple industries to understand their expertise, publisher Pat Niekamp and staff provide a continual stream of challenging articles on business development, people matters, marketing, sales, leadership, finance, governance, professional development, and other topics that CEOs must track.
  3. Courage – Does it take courage in a down economy to start a combined print and online magazine? Of course, but that courage was based on a clear analysis: no statewide business publication existed in a business-friendly state.
  4. CollaborationTexasCEO continues to build relationships with groups and individuals that share their passion for helping CEOs achieve their dreams. Like Vistage, they appreciate the power of collaboration to broaden our vision. Rafael Pastor said it best when he quoted Marshall Goldsmith: “What got you here won’t get you there.” Often we can learn what works from our peers.

Joel Trammell recently told me about becoming a CEO. “Many people think that the CEO job is just the next progression after being a senior executive in a business… the CEO job is actually a unique role that doesn’t really have much in common with the other executive roles in a business.” He then related how he quickly learned to reach out to other business leaders when he became a CEO.

Vistage and TexasCEO were founded on the common goal of sharing CEO knowledge and expertise to improve business performance. With that common focus, maybe a new partnership was born this morning.

New CEO/Mentor Dialogs

If you follow this blog, you already know that I’m accumulating material for a book. It’s a compendium of the wisdom of successful serial CEOs presented in the form of dialogs between a new CEO and his/her mentor.

The latest dialog addresses the question, “Do you really want the CEO job?” and is entitled “Becoming a CEO“. It’s based on discussions with CEO Joel Trammell who has successfully started and grown several technology businesses. He has a unique perspective on how the CEO role differs from any other job and what you need to know before accepting the position.

Other recent dialogs include Market Trumps Execution, and Less is More. The point of publishing the dialogs is to gain more insight, so feel free to share yours in the comments at the end of each chapter.

 

Two Reasons for Five Common Strategy Mistakes

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

“It’s Hard to Understand If You Haven’t Lived Here”

When I was recently interviewed for a Wall Street Journal article, answering questions about doing business in Texas came remarkably easy. The interview was nominally about Rick Perry, but almost all our time was spent discussing the state’s relatively healthy job scene.

When asked why Texas is special, I told Dan Henninger about a Brooklyn native and friend named John who worked for me in Dallas in the late 80’s. After having lived in half a dozen cities across the country during his career, he deliberately targeted moving to Dallas when he and his wife were ready to start a family. What inspired him was the attitude of businesspeople in Texas when they lived there once before in the early 80’s.

At that time, the energy sector was spiraling downward at a record pace, but he remembered that, instead of bemoaning their situation, the Texans around him were talking about what they were going to do next. In some cases it meant starting over in new areas of the energy sector, while others were planning how to start anew in other markets. No one spent time crying about their dire situation. The optimism he saw in Texas was like nothing he’d seen elsewhere, so he and his wife deliberately returned a few years later.

My friend Ed Trevis (also quoted in the article) provides another perspective from a non-native Texan. As the long-time CEO of a high tech embedded computing business in Silicon Valley, Ed finally became fed up with California’s overbearing tax and regulatory environment, so he surveyed locations in many other states, looking for the best place to relocate. His criteria included a strong, well-educated labor force, less government interference, and an attractive cost of doing business. Texas came out far ahead in his analysis, and the city of Cedar Park outside Austin provided the perfect place to move his business, which has thrived there since the move two-and-a-half years ago.

To be fair, there are great people everywhere, there are thriving businesses in other states, and there are spots that beat out Texas in one way or another. What is unique about Texas, though, is not only its labor force, its supportive governmental policies, and its low cost structure, but the optimism and collaborative attitude so prevalent among its people. As David Booth, who moved Dimensional Fund Advisors’s headquarters to Austin from California, said, “It’s hard to understand if you haven’t lived here.”

 

Elephant in the Room

The Elephant in the Room

Ever been in a conference room with multiple people where the dialog circles around without coming to closure? It eventually dawns on you that the one big issue blocking a decision isn’t being discussed.  Then you realize why. Now hold that thought.

In Getting Naked, Patrick Lencioni says willing to be vulnerable is a virtue for those of us who advise CEOs and their teams. Calling out the elephant in the room is a prime example. He suggests sharing what your intuition tells you, even at the risk of being blazingly wrong. While you might experience occasional embarrassment, overcoming your fear enables you to provide far higher value over the course of your client engagement.

So, let’s pop back into that meeting where everyone is circling… the reason for lack of progress is obvious – it’s an issue that could humiliate someone or at least cause some discomfort, right? In this case, let’s say it’s a boss with an intimidating presence who has directly or indirectly made clear his or her desired outcome. Everyone else in the group knows the solution is impractical, yet they fear the CEO’s wrath or lowered respect if they point it out.

For a trusted adviser, this is a defining moment. We clearly have a moral obligation to do what’s in the best interest of our client, regardless of personal consequences. While it may be tempting to focus on staying in the CEO’s good graces, being willing and able to directly address the issue openly while maintaining and even growing rapport requires business acumen and emotional intelligence that distinguishes advisers from consultants.

Stuck? 5 “Non-Urgent” Paths to Growth

In companies who have plateaued, the leader may be absorbed with urgent matters like managing finances and addressing operational issues, while neglecting less urgent but critically important issues. In our work advising CEOs, five common “non-urgent” factors repeatedly arise that can hinder or accelerate growth.

Take a few minutes to think about where your company stands on these 5 issues:

  1. Clarify (who are we, and what sets us apart?)   A shared understanding of purpose and unique assets increases efficiency. With a crystal-clear picture of who the company targets, what problems the company uniquely addresses, and other elements of strategic positioning, managers and employees can act faster while reducing the number of meetings and emails; in short, more gets accomplished.
  2. Comprehend (what direction will lead to increased value?)  Finding the right direction in a complex and competitive market accelerates growth. By comprehending the needs of potential acquirers, acquisitions, and partners, you can identify and target those market segments with the highest growth potential.  
  3. Communicate (what key messages will attract prospects?)  In an interconnected world filled with noise, every business needs a brand that associates the company with its unique qualities. Identifying key messages that flow from the strategic positioning and repeating them frequently will reinforce existing customer relationships and open new ones.
  4. Connect (which relationships will help increase our reach?)  Too often CEOs have been burned by partnerships that fail due to poor planning, unrealistic expectations, and unmonitored execution. Self-fueling partnerships with potential acquirers and industry leaders drive new revenue through access to new markets, extended geographies, enhanced product and service offerings, and staff augmentation.
  5. Convince (how can we improve sales execution?)  Too often significant time is wasted on non-buyers. Eliminating them early through rigorous qualifying saves time and money. Based on clear positioning, high potential markets, strong messaging, and self-fueling partnerships, the right qualifying questions lead to rapid elimination of “no’s” and enable a focus on “maybes” – real prospects.

Obviously, other important factors (e.g., operational excellence, product and service strategy, customer relationship management) impact success, but less obvious, non-urgent issues are often the root cause of stagnation.  Dealing with them may be the shortest path to getting your company unstuck.

Poke the Box – Now

Seth Godin’s latest little book (little in size, not in ideas) called Poke the Box takes its name from a “buzzer box” an MIT Ph.D. uncle built for a cousin decades ago. “The box had two switches, some lights, and a few other controls on it. Flip one switch and a light goes on. Flip both switches and a buzzer sounds… A kid sees the buzzer box and starts poking it. If I do this, that happens!

As the CEO of a business, it’s easy to get trapped in a comfort zone that provides a false sense of security (“I have this all under control”). While you’re “running the business” (translation: working on operational issues and managing finance), your competitors are finding ways to deliver better, faster, and cheaper products and services. You can delegate much of  running the business, but the buck stops with you when it comes to guiding the company through the constant change needed first to hold your position and then to grow.

One way to poke the box is to partner with a company that has related interests. Consider a list of companies that (a) could acquire your company someday or (b) would grow your value through an alliance or acquisition. Take the initiative to determine what mutual or complementary interests exist:

  • Expand geographical reach?
  • Extend product life through new capabilities?
  • Enter currently underserved industries?
  • Increase product deployment and service resources?

Once you’re in the swim with a partner, market feedback will flow in and lead you to your next move. If you act, you have no guarantee of success, but if you fail to act, you’re almost guaranteed to fail in the end.

Regardless of what you need to do to grow your business, Godin’s point is that life is a buzzer box, and if we don’t poke it, we don’t learn. All actions in business have risks, but with competitors constantly pressing ahead in a globally connected world, sitting still doesn’t decrease risk – it increases it! Doing nothing cuts us off from feedback that can guide us to value.

Get into the flow now, and adjust as you learn. And read Seth’s book for inspiration.

Filling the Gaps

In a post called “Chief Marketing Obstacles: The Treacherous Trail to CMO Success” in Texas Enterprise, the authors did a marvelous job of laying out the challenges that chief marketing officers face in gaining the management clout needed to operate effectively. In responding to the article, I noted how the CMO can fill the gaps that exist in the organization.

For me, filling gaps has been a recurring theme for years. After taking my first management job in software development with absolutely no training, my psychology education helped me observe the group’s interactions and notice what was required for success. It became obvious that I needed to fill any missing gaps in the group’s combined competencies if we were to be as successful as possible. Whenever possible, the gap filler was me.

I noticed an interesting parallel after moving into product management. When the goal is to contribute a “whole product” solution, it can require capabilities outside an organization’s ability to deliver. Options for filling the gap include staff training, contract or consulting help, or partnering with another organization to acquire the needed product capabilities or features.

As I climbed the ranks and handled senior management positions in several functional areas, that early observation about filling the gaps proved to be valuable once again. Given a finite amount of people in any organization I managed, competency gaps had to be filled without additional headcount. Options included staff training, contract or consulting help, or partnering with another organization, yet the one always available was… me. If it were possible for me to learn the needed skills, then we had the resources to achieve our objectives.

If you manage a company or part of it, it’s good to keep in mind your responsibility to deliver a “whole product” and consider all the options available to fill the gaps.

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