|
|
|
|
Beyond Cost Reduction
Five
Generations of Profit Improvement:
Corporate Intellectual Growth This is a dream of immortality. We want our companies and our jobs to outlive us.
Life
is dynamic and so are the companies that populate its commercial world. As individuals
grow and mature so do companies. But like people, companies do not always fit in every
situation. Sometimes they must change and adapt to survive and prosper. I am often called
in to help companies who are either seeking to grow to the next generation or recover a
generation they have lost. The measure of success or failure is often seen in the bottom
line profitability as a primary measure of long-term corporate value.
Generation 1 - Work: Struggling
start-ups that may be months or even years old are still locked in to the dreamer’s
dream that everything will be all right as long as “We keep our eyes on my dream and
work hard.” This is the empire of dreamers and the dream counts more than execution.
Leaders at this stage don’t even think about efficiency because that’ll come
later. “All we need is a good value proposition and we’ll attract the capital to
succeed.” The interesting thing is that
in this Dot.Com world, many millionaires are made at this stage even if the company later
folds. In the cold reality outside that world, tens of thousands of mundane companies go
belly-up under the backbreaking labor of trying to make it work with heroes but no
millionaires. The interesting thing is that without dreamers the company would not even
exist. A failure to grow beyond the dream generation, however, is a sentence of death. Capital
may be getting scarce, investors may be impatient with losses, or the planned growth just
isn’t there. Volume is the salvation. This is the domain of the salesman and the
marketer. Now it’s time to get out there and sell. “All we need is enough sales
to cover the fixed costs and we’ll be rolling in dough.” I’ve heard this from companies in their
infancy as well as those that are decades old. The infants never knew any better but the
older companies somehow lost their way. Dreamers may still be dreaming but the marketers
and tacticians are now playing a bigger role. The
company may be on the verge of success having grown to this point or may have fallen from
grace and is now in trouble for lack of satisfactory profits. Capital may have dried up or
the stock market may have demoted the stock value. The obvious and immediate way to fix
the situation is to improve margins. This is where the operators rationalize the company
with rules and systems that impose efficiency. If the situation is dire, they will first
cut the fat. They may have no choice but to slash and burn large pieces of the company.
Waste, perquisites, products, business units, and, all too often, people may be shed. For
companies that see change as a natural part of the ongoing process of evolution, this
stage will not be traumatic while the operators work with architects to design a smoothly
running machine. For others, that find themselves in trouble, this may be a painful and
bloody process. This is where cost reduction projects are often born and dreamers are
asked to step aside. This
is the stage when the builders and strategists are creating the company in the current
image of the architects and the future image of the strategists. These should be good
times. The company is buying machines, systems, and maybe even other companies to create
an efficient and effective organization with a strong position in its markets. They will
be engineering, benchmarking, and copying the best in class to become the best themselves.
For those who continue on to the next stage, life is good. For those who rest on their
laurels, life may run them over. The dynamic forces of the rapidly changing world can make
a product, strategy, system, or company obsolete in the blink of an eye. Acquisitions can,
and often do, fail to deliver on the strategists’ dreams. Companies may find
themselves in a position where they are forced back a generation, to cut to survive. The
opportunity is to think. Thinking
is the key to immortality. A visionary leader knows that change and growth must be
integral parts of the corporate culture and operating structure. The power here is the
collective intellectual capital of the organization melded together toward a common vision
of the future. People are working smart and they work together. Everything they do is
tested against the questions of whether or not it fits the strategic plans and is a good
investment of the resources involved. All of the energies of the dreamers, marketers,
tacticians, operators, architects, builders, and strategists are focused on the
corporation. They use all of their vital resources (financial, materials, space, time,
knowledge, energy, and people) in a cost-effective manner and are the Cost-Effective
Organizations of the world. They are never surprised by financial results because they
drive them. They have ongoing continuous improvement programs such as quality processes
and the Profit Improvement Process and prosper through change. Corporate
immortality comes to those who harness their intellectual capital to embrace change though
continuous improvement. The promise is to think sooner and move more quickly through the
generations with diminished trauma and maximum success.
Steven C. Martin Business Solutions – The Positive Way® visit www.profitpro.us
our new website dedicated to cost reduction and profit improvement.
| ||||||||||||||||||||||||||||||||||||||||
Cost Reduction & Profit Improvement
|
