Sustained Success

Sustained Success

          
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Sustained Success

1984
Strategy
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    • Richard Lochridge
    Munich more about Richard
    • AlanZakon
    more about Alan

    • Progress is necessary for everyone, not just those in growth markets. We must build, manage, and gain advantage.

    • Corporate organization requires a unifying theme that highlights where the company is and what the next strategic challenge will be.

    • The change from building to strategy is difficult for most organizations.

     

    We all need to progress, to achieve, to seek a greater goal. Yet the more successful we are, the harder it is to find the “what next.”

    Earnings and return on investment are the scorecards of past success. A portfolio of strong and advantaged competitive positions that translate into strong financial performance is the base of current success. But what of the future? What signs are there that success will be repeated?

    The Lure of Growth

    The most visible sign of future success is market growth. The opportunities are clear, and the only question is whether competitive advantage can be gained – and held. For this reason, managers and shareholders alike seek growing markets. Yet we know that few competitors win, and that pure growth markets are the exception, not the rule, in mature economies.

    Sustained success appears easiest, therefore, for companies in large, growing markets. But progress is necessary for all of us, not just those in growth markets. We must build, manage, and gain advantage.Having done so once, we must do it all over again. But this does not necessarily require an allout assault on new (or unfamiliar high-technology) markets.

    A recent study of the 500 fastest growing private U.S. companies provides dramatic insight. Thirtyone of these companies reached $25 million in revenues by 1982, and all have grown at least 50 percent per year since 1978. Only seven are in high technology. Twenty-four are transforming mature businesses, ranging from shoe manufacturing to agriculture to financial services. They are innovating by approaching old businesses in new ways.

    Organize for Success

    Sustained success requires most organizations continually to find new opportunities in mature markets. We must find new organizational vehicles that will focus our attention on sustained success, as well as manage what we have today. Unfortunately, it is axiomatic that organization structure is developed to execute current business strategies, not to seek new strategic opportunities.

    Corporate strategy is more than the summation of individual business strategies. Corporate strategy must provide for tomorrow’s success as well as today’s. For this reason the corporate organization is different from each business organization. Corporate organization requires a unifying theme that highlights where the overall company is and what the next strategic challenge will be. It must recognize the management needs of each business unit, the skills required for success in it, and the need for “transitions.”

    Successful business units pass through four phases in their development toward maturity. Each phase is most fundamentally different from the others in orientation.

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    Each of these phases – and orientations – requires a different set of management skills, imperatives, and focus. Success within one phase is necessary for survival, but does not guarantee transition to the next.

    Sustained success requires managing the transitions between phases. Competitors who do not see the transitions fall by the wayside. This is, in part, a question of skills and attention. It is also a question of orientation, goals, and values, as reflected in organization.

    Low-calorie beer was a brilliant insight in the creation phase, but did not succeed until Miller added the skills and attention needed for growth. Xerox built a worldwide business, but Ricoh found a cost-effective strategy to attack a segment with efficiency.

    Creation of opportunity rests on entrepreneurial skills – and people. Successful businesses are founded by entrepreneurs, grown by marketers, made great by strategists, and fine-tuned by administrators. The complex of orientations, goals, and success skills becomes the organizational values. The more powerful the values in each orientation phase, the more difficult the transition. In part, this is “the way we do things” in the culture.

    In a more concrete sense, corporate culture is the information collected and acted upon for each orientation, the quantitative measure of achievement for each goal, the skills rewarded in money and promotion for each phase, as well as “the way we do things” for each value.

    exhibit
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    Manage Transitions

    Of all the ideas presented, only a few are built into businesses. This explains why successful entrepreneurs are so highly rewarded and praised. But business can be grown into bankruptcy unless competitive advantage is gained and maintained. This explains why so many businesses fail. The transition skill required from growth to advantage is strategy, and the change from building to strategy is difficult for most organizations.

    Once advantage is captured, the next transition is often much easier; perhaps too easy. Organization structure moves from loose to increasingly hierarchical and rigid. The internalization of “the way we do things” becomes even stronger.

    Action plans become rules of thumb.

    Rules of thumb become beliefs.

    Beliefs become norms.

    Each business – and the corporation – becomes larger as ideas become businesses and businesses grow and mature. Transitions then become not only harder, but more risky. Efficiency has a way of depressing innovation. The fourth transition skill is innovation.

    The Adaptive Organization

    Managing an adaptive organization is far more than managing a business within each phase. Managing within a phase is structured by clear orientation, goals, success skills, and measurements of success.

    Managing adaptation is attending to the transitions from phase to phase. Managing adaptation requires understanding that all four phases must exist simultaneously in a vital corporation. Whenever the orientation, goals, skills, measurements, of any one phase become the dominant corporate values, change will cease to occur. Thus we see the great tension between efficiency and innovation in many companies today. Innovations come too often from outside the company, even in our strongest businesses. Perhaps they will especially come from outside in our strongest businesses.

    Great businesses should come from great corporations. Large companies can and will innovate. All it requires is

    • managing transitions as well as businesses,

    • making the culture tangible to see what it is, what it should be, and what to change,

    • internalizing the fact that vitality depends on finding and acting on opportunities in all of our businesses, even if the ideas come from the outside, and

    • a willingness to compete with ourselves, for if we don’t, someone else will.

    Change is never easy, but we need not make it harder by locking ourselves into the success pattern of one phase. We all want to be professionals and do things right and better. At the same time we must remind ourselves that management means vision as well as professionalism. While we manage today’s business we must see the next phase clearly and build a roadmap for transition.

    This is sustained success.

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