The Winning Performance

The Winning Performance

The Winning Performance
(How America's High Growth Midsize Companies Succeed)
by Donald K. Clifford, Jr. and Richard E. Cavanagh

Toward a new tradition of management
- The neglected sector—The midsize growth companies
  - Midsize companies
    - Sales between 25 million and 1 billion
    - 15,000 businesses
    - Less than 1% of all businesses
    - 25% of all sales
    - 20% of all total private-sector employment
  - The top 25% of these midsize companies
- Where and how to compete: The explanation of success
  - Where to compete
    - Not by following the conventional wisdom
    - Broad sectors of the economy don't win
    - Think organically and economic results
  - How to compete
    - Innovation: The best competitive edge
    - Value, not low price alone, wins
    - Diversification: Expansion by Edging Out
    - Bureaucracy: The mortal enemy
    - The bottom line: It isn't only profit—Mission and values
    - Leadership: Building an Institution
    - Sidebar : The ten commandments of How to succeed in business
The will to grow and the skill to win
- The odds against reaching midsize($25 million): 1 out of 1000
- The will to grow
  - The will to grow usually totally lacking
    - Make a living for their family
    - Contribute something to the community
    - Enjoy the many advantages of manageable pace
    - Strong and lasting relationships that can be the envy of hassled employees
  - Virtually any business can broaden its geographical horizons if it chooses
  - The constraint on growth is not lack of opportunity
- The skill to win
  - But even companies that do aspire to grow usually fail—lack the skill
  - Up to midsize, this inability to grow usually comes down to one or more of three factors
    - Faulty business design
    - Financial overextension
    - Human frailty
  - The risk and challenges of growth beyond midsize
    - Cope with tougher financial requirements in a more hostile business environment.
    - Respond to explosive growth in product and market complexity by mobilizing new organizational capabilities.
    - Fundamentally adapt the leadership role of the CEO to shifting demands that come with growth.
Guerrilla strategies
- Introduction
  - Guerrilla warfare
    - Find adversary’s weak spot and takes him off guard
  - Guerrilla basics
    - Selection of the battlefield
    - Speed and surprise
    - Fanatical spirit
    - Concentration of effort
    - Triumph of ingenuity and common sense
  - A successful business strategy provides a sustainable competitive advantage based upon delivering superior value to the customer
- The great majority of winning performers combine five strategic traits:
  - A focus on how to compete, less so on where
  - An emphasis on innovation: The winning competitive edge
    - Innovate early and often
    - New products
    - New "old" products
    - New ways of doing business
  - Skill at creating, serving and leading in niche markets defined by customers’ needs
    - Finding the right niche
    - What is it and how do we sell it?
  - Ability to identify and build on distinctive strengths
    - The Augat Circles
    - The Analog Answer
  - Recognition that the value of product or service, not just its price spells success.
Winning Organization: The eternal conflict
- Introduction
  - Organization is people with a purpose working together.
  - Good organization is effective people working constructively together toward a common goal.
  - Organization
    - Structure
    - Style and shared values
    - Management systems
    - People and institutional skills
  - The fanatic
  - The staggering task of the midsize company is to combine
    - the discipline necessary to execute the day to day activities of the business
    - the freedom to
  - The ripple factor
  - The comfort-with conflict factor
  - The "Us" factor
  - The missionary factor
  - The communication factor
- Dynamics of Change
  - Safety-Kleen story
  - Kollmorgen
  - The Also Rans
    - Inability to leave things alone
    - Recklessness
    - Long-distance management
    - The Pollyanna syndrome
    - Focus on wrong disciplines
    - Corporate neuroses
- How the Winning Performers Do it
  - An evangelical sense of mission
    - It distills the articles of faith
    - It zeros in on the long view
    - It beckons the stumbler back to the straight and narrow
    - It shows how to beat goliath
    - It inspires the faithful
    - It prompts the CEO to become the "Chief Evangelical Officer"
    - It supplies courage in the face of the unknown
  - Relentless Focus on the fundamentals
    - Financial performance
    - Operations
    - External focus
  - Bureaucracy: The Archenemy
  - Encourage Experimentation
  - Getting Inside The Customer's Mind
  - Counting on People
    - Attracting and developing people
    - Motivating people
The CEO: Mainspring of a Winning Team
- How hard the work
- How they cope
  - Commitment and Perseverance
  - Builders, not bankers
    - Pursuing the Vision
    - Building an institution
  - Team Players and Individualists
  - Calculating Risk-Takers
    - Taking Risk
    - Knowing the Odds
    - And a little bit of luck
- The changing role of the CEO
  - Stages of Leadership
  - Toughest Element of Change
    - A heightened emphasis on team building
    - Greater skill in communication
    - A higher level of personal discipline
  - Patterns of personal change
    - Structural change
    - Changing people
    - Reeducation
    - Reprogramming
  - Managing Succession
When bad things happen to good companies
- It happens to almost everybody
- Responding to trouble
  - Positive
    - Sell divisions that no longer show promise or meet financial standards
    - Invest in new product lines or technology
    - Reorganize to recapture former simplicity by combining divisions
    - Split up divisions to created smaller, more entrepreneurial, faster response businesses.
    - Double R&D to regain product advantage
    - Put top priority on trimming the inefficiencies that crept into their cost structure
    - Severing unproductive people
    - Adding new skills that may be key to coping with the new problems
  - Avoid unsound business and financial practices
    - Shipping poor-quality
    - Unsound financial practices
    - Shortsighted organizational steps
    - Don't assume that the problems will solve themselves if the company simply "stays the course"
- What happened to cause the trouble
  - Trouble in the economy
  - New competitive tactics
  - Strategic errors
  - Organization weaknesses
Putting it All together—Examples
- The genius of Cray Research
  - Strategic Positioning
    - Innovation as a way of life
    - Leading in Niche Markets
    - Building on Strength
    - Competing on Value
  - Focused Organization
    - Institutionalizing Mission and Shared Values
    - Mastering the Business Fundamentals
    - Fighting Bureaucracy, Encouraging Experimentation
    - Understanding Their Customers
    - Attention to People
  - Evolving CEO Leadership
- The intensity of ADP Automatic Data Processing
  - Strategy
    - Wall street "back office" Operations
    - Collision estimating
    - Automobile dealers
  - Organization: Disciplined Freedom
  - Attention to the fundamentals
  - Fight Bureaucracy, Encourage Experimentation
  - Think like customers
  - An emphasis on people
- The Winning Team at Sealed Air Corporation
The Entrepreneurial Corporation
- Managing Purposeful Innovation
  - Innovation is technological but not necessarily technical
  - Innovation and bureaucracy just don't mix
  - Customers and distributors as partners in the innovation process
  - Creativity is highly valued and effectively promoted
  - Creating new markets
  - New ways of doing business
- Orchestrating Spirit and Discipline
  - The false dichotomy—The humanist vs the rationalist
  - Situational Management
  - Selective Discipline—Knowing what few things to control
  - Synchronization
    - Avoiding conflicting objectives
    - Consistency
- Providing Entrepreneurial Leadership
  - Commitment to the point of Obsession
  - Institutionalizing Values, Passion, and Leadership
    - Transforming personal commitment and obsession into institutional obsession and energy
    - A special pride in the central values of excellence
    - A commitment to and understanding of the values
    - Acts—symbolic and substantive—build meaning for these companies
  - Perspective
    - Outward vision
    - Internal realism
- So What?
Appendix
- Members of the American Business Conference
- 119 Fastest growing publicly listed midsize companies in the USA
- Technical notes on Approach and Analysis
  - Methodology
  - Description of Data Sources
  - Description of Data Analyses and Finding (similar to industrial profile)
    - Analysis of all midsize companies

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