CEOs’ Balancing Act
December 3 2010 by Bob Donnelly
We have watched many once great companies morph into corporate memories as a result of becoming complacent, and whose CEOs abdicated their responsibilities to conflicting risk averse bureaucratic management committees whose indecisions strangled the life out of the firm.
Amazon’s Jeff Bezos captured this scenario best: “small companies are good at taking risks, they have nothing to lose. Big companies lose their way when they stop taking risks.”
Everyone knows that innovation and keeping up with customers’ changing requirements are the cardinal rules for success in any business. Then how can some CEOs lose track of these strategic imperatives and let the flame of creativity get snuffed out in their firms?
Is it that they tire of the challenge? Or, as many have described, take on a feeling of entitlement? Size, left unchecked, is also a breeding ground for bureaucracy.
However, some large firms like 3M, P&G, and now Ford, who temporarily stumbled, have resurrected themselves with a fresh focus on creative strategic thinking and the controlled execution of a well formulated plan. In these well known firms, the CEO currently in charge has reorganized their teams and operations, and runs the business under a results oriented, tightly controlled, reporting system.
Mulally at Ford says: “Communicate, communicate, communicate…everyone has to know the plan, its status and the areas that need special attention.” His emphasis on the plan for Ford has reached every employee who has received a small plastic card with four goals of expected behavior on one side and “One Ford,” the company’s revised definition, on the other.
He has instituted weekly meetings with senior managers to ensure that everyone is executing the plan to identify small problems and take corrective measures before they intensify and is functioning as a team that is focused and accountable for clearly defined objectives. This allows for management to share results, problems and information.
Mulally believes for the company to succeed everyone has to know what is expected, what the objectives are, what is working and what is being revised to work better. His technique obviously doesn’t allow for bureaucracy in any form to exist in the new Ford that he is building by a constant weekly review of results against plan.
This relentless implementation at Ford is a far cry from the typical corporate quarterly reviews that take place at many other large firms. Often these quarterly review events are staged presentations of aggregated results that frequently camouflage and overlook any real problems. Any noticeable variations from plan are explained away in a variety of “corporate speak” terminologies, like “a temporary aberration,” “a seasonal anomaly” or “a temporary economic hiccup.”
To avoid falling into the “business as usual” trap, CEOs have to be the catalyst for the perpetual search for innovations like 3M’s well known innovation mantra that rewards creativity and sets a strategic goal to have 25% of the company’s volume generated by new products. At P&G, Bob McDonald has set a strategic goal to raise the value of P&G products consumed by their customers on a global basis by a certain percentage. At $79 billion, a few percentage points can raise the annual volume to $80 billion plus, with incremental profits.
Probably the best example of how to keep creativity alive is what Steve Ballmer is presiding over at Microsoft where they have identified 70 technologies that they are exploring under several broad umbrellas: enterprise management, online and now consumer electronics. At Microsoft, the dynamics of creativity have become a natural part of the culture that is constantly nurtured by a gregarious CEO.
Another good example is Jeff Bezos at Amazon, who is perpetually searching for opportunities to expand his online business model. Last year’s acquisition of Zappos is now about to be supplemented by the acquisition of Quidsi, Inc., the parent of Diapers.com and Soap.com. Amazon is constantly researching trends for opportunities to add more SKUs to their online megastore. Last year, sales of household products over the internet reached nearly $10 billion as estimated by Nielsen Research.
The Amazon innovative strategy is to have more and more consumers buying frequently used everyday staples as repeat customers that can also easily become consumers of other higher-margin products.
The message is clear for CEOs. They have to be the motivators and regenerators of the entrepreneurial spirit that was the foundation of the firm in the first place. Once they lose the desire to be at the forefront of change the rest is history.
If you are struggling to keep creativity alive in your company let’s start a dialogue.