building the business to be the best

Victor Borchers

Master Coach

BUILDING THE BUSINESS TO BE THE BEST

COLLINS & PORRAS

INTRODUCTIONWelcome• Thanks

• Focus: Building the Business to be the Best

• Participation: Everyone will be included

• Not a lecture but facilitation

• Decisions recorded

• SMT to present a proposed plan to


SOURCES OF OUR THINKING• Classics of Business Literature and Research in the greatest 20th Century Organizations

• Text books: “In Search of Excellence”, “5th Discipline”, Built to Last”, ”Good to Great”

• My work as Coach and Consultant and former entrepreneur and Corporate Chairman

• My exposure to Academia: 3 Business Schools/3 Universities/PhD


SOURCES OF THINKING


EQUITATION: SKILLS ARE NECESSARY BUT UNDERSTANDING THE ANIMAL IS CRITICAL


UNDERSTANDING THE BUSINESS “ANIMAL”What is a Business Organization?

BUT this describes a Process and people are not in-animate “parts”


UNDERSTANDING THE BUSINESS “ANIMAL”What is a Business Organization?

a. Systems Theory“Interconnectedness”

b. Holism Jan Smuts: “Teamwork”Aristotle: “The end result can/must be greater than the sum of the parts”

Does not respond consistently to input nor to people


UNDERSTANDING THE BUSINESS “ANIMAL”Leadership

The leader is the trigger to changing a group of people into a team

VALUES PURPOSE


UNDERSTANDING THE BUSINESS “ANIMAL”MOST IMPORTANT FACTORS OF BUSINESS


UNDERSTANDING THE BUSINESS “ANIMAL”Formula for Establishing the Purpose and Values

Customers: Who? What? How?

Staff: Who? What? How?

Sustainability: Profit, People, Planet

Purpose and Values Statement•Who can recite it?

•How is it applied?

•But it doesn’t end there

•As Generator, Boundary, Guiding Force

•Moving into Action side of Built to Last Paradox Model


UNDERSTANDING THE BUSINESS “ANIMAL”In order to understand why Built to Last was published, one needs to start with Peter’s and Waterman’s In Search of Excellence (1982)•43 Top companies in the world•8 basic principles•No.1 Best Seller•Still on the Bookshelves

BUT5 years later, many of the companies were in trouble – some had gone bankrupt•1992: Built to Last•6 year study by 30 researchers on companies 50 years and older. •These companies had been through two World Wars and a depression•18 Visionary companies – the average age was 97years – they were consistently No.1 in their industries


UNDERSTANDING THE BUSINESS “ANIMAL”FINDINGS:•Every company had Purpose and Values statements that gave them stability in the toughest of times•Every company used goals, strategy and structure to stimulate progress (agility)

Paradox: “two seemingly

contradictory forces or ideas existing at the same time”


UNDERSTANDING THE BUSINESS “ANIMAL”

• Understanding the human being may help in understanding the organization.

• Personality once formed, is always the same

• Physical body: always in a state of change


• The 18 Visionary Companies are premier institutions, the crown jewels in their industries. They were widely admired by their peers and had a long record of significant impact on the world around them

• The Visionary Companies have woven themselves into the very fabric of society

• They were more than successful; they were the “Best of the Best”. However this doesn’t mean that they had perfect unblemished records

CHAPTER 1: THE BEST OF THE BEST


CHAPTER 1: THE BEST OF THE BEST


CHAPTER 1: THE BEST OF THE BESTTHE STUDY SHATTERED THE FOLLOWING TWELVE MYTHS:

1.It takes a great idea to start a great company

2.Visionary companies require great and charismatic visionary leaders

3.The most successful companies exist to maximize profits

4.Visionary companies share a common subset of “correct” core values

5.The only constant is change

6.Blue-chip companies play it safe

7.Visionary companies are great places to work for everyone

8.Visionary companies make their best moves via brilliant and complex strategic

planning

9.Hire outside CEO’s to stimulate fundamental change

10.Most successful companies focus primarily on beating the competition

11.You can’t have your cake and eat it

12.Companies become visionary primarily through “Vision Statements”


CHAPTER 2: BUILDING THE COMPANY TO BE THE BEST

“I have concentrated all along on building the finest retailing company that we possibly could. Period. Creating a huge personal fortune was never particularly a goal of mine”. Sam Walton, Founder of Wal-Mart

•The most important consideration is “WHAT DOES THE ORGANIZATION STAND FOR?”•Builders of Visionary Companies concentrate on building the organization

was a fundamental “corner stone”•For Visionary Companies the most important thing is a shift in perspective and not just action. •The company itself is the ultimate creation•Visionary Companies embraced the

“Genius of the AND”

and discarded the “Tyranny of the OR”


CHAPTER 2: BUILDING THE COMPANY TO BE THE BEST


CHAPTER 3: MORE THAN PROFITS•“Our basic principles have endured intact since our founders conceived them. We distinguish between core values and practices; the core values don’t change, but the practices might. We also remained clear that profit – as important as it is – is not why the HP Company exists; it exists for more

fundamental reasons”. John Young, CEO, Hewlett Packard 1992.

•“Medicine is for patients. It’s not for Profits. When we remember that, the profit never fails to appear.” George Merck II, 1950

•“I don’t believe that we should make an awful profit on our cars – a reasonable profit is right. This enables a larger number of people to buy and enjoy the use of a car and it gives a larger number of men employment and good wages. Those are the two aims I have in life”.

Henry Ford, 1916He reduced prices by 58% from 1908 to 1916 and he introduced $5 a day pay for his workers which was twice the standard rate.


CHAPTER 3: MORE THAN PROFITS•The Purpose and Values statement becomes the shaping force of the Visionary Company

•The Purpose and Values Statement is a declaration of • This is who we are• This is what we stand for• This is what we are all about• It’s like a National flag (colours) carried into battle by soldiers

•“Certain principles have been characteristics of Procter and Gamble since our foundation in 1837. While P&G is oriented towards progress and growth, it’s vital that employees understand the company is not wholly concerned with results, but how those results are obtained” Harness, President P&G 1971


CHAPTER 4: TRANSITIONThis Chapter emphasizes the transition from Chapter 1 – 3 to Strategy, Structure and Goals of Chapters 5 – 11

•“If an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except its basic beliefs. The only sacred cow in an organization should be its basic philosophy of doing business” - Thomas J Watson Jnr, IBM.

•“It is the consistency of principle that gives us direction. Certain principles have been characteristics of Procter & Gamble (P&G) since our founding in 1837. While P&G is oriented to progress and growth, it is vital that employees understand that the company is not wholly concerned with results, but how the results are obtained”. Ed Harness, President of Procter & Gamble, 1971.

•“To succeed you have to stay out in front of change” Sam Walton, Wal-Mart.

Core ideology is essential, but this alone can’t make a visionary company. If the company refuses to change, the world will pass it by.


CHAPTER 4: TRANSITION

•Core Ideology enables progress by providing a base of continuity around which a Visionary Company can evolve, experiment and change

•The Drive for Progress enables Core Ideology; the change and movement enables the Visionary Companies to be strong

•It’s not about balancing the two, BUT seeking both at the same time

•Visionary Companies INSTITUTIONALIZE both the CORE IDEOLOGY and the DRIVE FOR PROGRESS. Both are woven into the fabric of the organization


CHAPTER 4: BRAIN STORM

• Do our people know and live the Purpose and Values Statement?

•Does our organizational structure reinforce the values/behaviour of the members of staff?

•Does out Organization have primal urge to drive for Progress, Change and Movement?


INTRODUCTION TO CHAPTERS 5 - 11Quotes:

Jim Collins:

“Life is uncertain, the future is unknown. The task is: How to master our own fate”

“Events only serve to reinforce the sense of unease”

“What’s coming next? No one knows”

“Some companies and leaders navigate the world exceptionally well:

•They don’t merely react, they create

•They don’t merely survive, they prevail

•They don’t merely succeed; they thrive”


INTRODUCTION TO CHAPTERS 5 - 11

Peter Bernstein

“We simply do not know what the future holds”

Wall Street Journal

“The future is unknowable”

Peter Drucker:

“The best way to predict the future is to create it”


INTRODUCTION TO CHAPTERS 5 - 11How do we move from vulnerability to become a great group, with spectacular performance in unstable environments?

•The future will remain unpredictable and the world unstable for the rest of our lives

•We need to understand the factors that distinguish great companies.

•Research of Best Companies and their leaders in extreme environments gives insights – understand what separates greatness from mediocrity

•How do the truly great differ from the merely good?

Built to Last shows what the visionary companies did to become visionary



What does it take to build a great Company?•Have to understand what it takes to survive, navigate and prevail•Understand the principles and actions that distinguish the great organizations form the good ones

Invitation to join me on a journey•Take what you find useful and apply it to creating a great enterprise that doesn’t just react to events BUT shapes them:The best way to predict the future is to create it



Built to Last shows what the visionary companies did to become visionary.

CHAPTERS 5 – 11

•BHAGs (Chapter 5)•Cult-like Culture (Chapter 6)•Evolutionary Progress (Chapter 7)•Home Grown Management (Chapter 8)•Continuous Improvement (Chapter 9)•Alignment (Chapter 10)•Building the Vision (Chapter 11)


CHAPTER 5: BIG HAIRY AUDACIOUS GOALS - BHAGS

1.WHAT ARE BHAG’s ?

•They are goals that are clear and compelling and they unify an organizations effort

•They are bold, exciting, energizing and highly focused

•They are consistent with and preserve the organizations Purpose and Values

•They require a high level of commitment

•There is a massive difference between having goals and being committed to huge daunting BHAG’s


CHAPTER 5: BIG HAIRY AUDACIOUS GOALS - BHAGS

2. EXAMPLES:• Boeing, when building the 747:

“We will build this airplane even if it takes the resources of the entire company”

• Jack Kennedy’s proclamation: May 1961“This nation should commit itself to achieving the goal, before the decade is out, of landing a man on the moon, and returning safely to earth”

• Jack Welch of General Electric: 1981

“We must become #1 or #2 in every market we serve and revolutionize this Company to have the speed and agility of a small enterprise”

• IBM in the 1960’s made an all-or-nothing investment in the IBM 360 Computer. This required more resources that the Manhattan Project to develop the first atomic bomb.

• Sam Walton of Wal-Mart: 1945•“I will make my store the best, the most profitable variety store in Arkansas within 5 years”. •At that time sales totaled $ 72 K for the full year. •By 2010, there were 8576 stores, 2 100 000 employees,

and sales of $408.2 B (The second biggest is Shell at $285.1 B)



•What suggestions can you offer for us to consider as a BHAG for our organisation?


CHAPTER 6: CULT-LIKE CULTURE

1. WHAT IS A CULT-LIKE CULTURE?• A cult-like culture is tightness around an ideology when enables the organisation

to turn people loose to experiment, change, adapt and act. It enables them to adapt and act within the boundaries of the core ideology.

• Visionary companies are not cults; they are “cult-like”. It’s not about a person, a leader or boss. It’s a fanatical preservation of core values.



1. Characteristics of cult-like organizations are:

• Fervently held ideology

• Indoctrination (not just induction) into Core Ideology

• Tightness of Fit – people fit well or not at all

• Elitism ie a sense of belonging to something special or superior


2.EXAMPLES:

•Sam Walton 1980: “I want you to raise your right hand and repeat after me: ‘from this day forward, I solemnly promise and declare that every time a customer comes within 10 feet of me, I will smile and look him in the eye and greet him. So help me Sam”

•Nordstrom: 50% of the new hires leave within the first year if they don’t like the pressure, hard work and values; they don’t buy into the system

•IBM:Watson Jnr said IBM had a cult-like atmosphere. Some compared joining IBM with joining a religious order or the military. Elitism ran throughout the entire history of the company. They believed the company was superior and a special place to work at; they had a fanatical attitude of preserving their core values.




3.BRAINSTORM:

•Do we have a fervently held ideology?

•Do we indoctrinate every employee into the core ideology?

•Is there a tightness of fit – people fit well or not at all?

•Do our people feel a sense of belonging to something special and superior?

•HOW CAN WE CREATE OUR ORGANISATION TO BECOME CULT-LIKE?


CHAPTER 7: EVOLUTIONARY PROGRESS1.WHAT IS EVOLUTIONARY PROGRESS?1.Visionary Companies, like organic species, evolve through an evolutionary process. They adapt to their natural environments – THIS IS DIFFERENT TO THE PROGRESS THAT COMES AS A RESULT OF BHAGS2.BHAGs involve clear, bold unambiguous goals (climb the mountain)

3.Evolutionary Progress involves ambiguity (try a lot of things – we’ll stumble onto something).

4.It involves small steps and seizing opportunities are critical (try a lot of stuff and keep what works)5.Evolutionary Progress is unplanned progress – just like the species in the natural world came about NOT as a result of well-executed plans

6.Darwin’s great insight and central concepts of the Evolutionary Theory are:1. “Species evolve by a process of undirected VARIATION

(random genetic mutation) and natural SELECTION”• Charles Darwin said

“multiply, vary, let the strongest live and the weakest die”


CHAPTER 7: EVOLUTIONARY PROGRESS2. EXAMPLES: • Johnson & Johnson

• Baby Powder ended up producing 44% of their revenue• Band Aid became the biggest selling category in the Company’s history

(Your Uncle in the Furniture Business – JD Insurance)

• Marriott • The Store at Hoover airport started selling snacks to passengers

and this led to contracts with Eastern and American Airlines

2. Wal-Marts success resulted from evolutionary process. Their systems came into being largely by evolutionary process of variation and selection. Their motto is “Do it. Fix it. Try it”.

• 3M is known as the “Mutation Machine from Minnesota”• Began life as a failure and moved from mining to sandpaper• 1914 William McKnight (in his 20’s) was made General Manager• He created a company that would self-mutate from within and not depend on him

and institutionalized the evolutionary process that led to Scotch Tape

UNDERSTAND THAT BIG THINGS EVOLVE FROM LITTLE THINGS – TRY LOTS OF LITTLE THINGS AND KEEP THE ONES THAT WORK;

DISCARD THOSE THAT DON’T.


CHAPTER 7: BRAIN STORM• Do we try a lot of things knowing that many will die?

• Do we accept that mistakes will be made?

• Do we give people the room they need to experiment?

• WHAT MECHANISMS SHOULD WE CREATE TO CONTINUALLY STIMULATE ACTION IN MANY DIRECTIONS?


CHAPTER 8: HOME GROWN MANAGEMENT

1.WHAT IS HOME GROWN MANAGEMENT?

•It is management development and succession planning within the organization

•Visionary Companies promote carefully and select from inside the company – this is a key step to preserve their core

•IT’S NOT JUST THE QUALITY of leadership that separates visionary companies from comparison companies –

IT’S THE CONTINUITY of quality leadership that matters

1.The crucial question visionary companies ask is “how well will the company perform under the next generation of leadership?”


CHAPTER 8: HOME GROWN MANAGEMENT

2.EXAMPLES:

• General Electric• CEO’s came from deep inside the Company. Every CEO was grown from inside

the Company for over 100 years• Jack Welch, CEO, GE, “From now on, (choosing my successor)

is the most important decision I’ll make. It occupies a considerable amount of thought almost every day”. He was speaking about succession planning in 1991 – nine years before his anticipated retirement.

• Motorola Corporation• Robert W Galvin, 1991, “One responsibility (we) considered paramount is seeing

to the community of capable senior leadership. We have always striven to have proven backup candidates available, employed transition training programs to best prepare the prime candidates, and been very open about (succession planning)…We believe that continuity is immensely valuable”.



•Have we a succession plan in place for all senior management?

•Are we developing and promoting insiders who are highly capable?

•How well will the company perform under the next generation of leadership?

•WHAT IS OUR PLAN TO ENSURE SEAMLESS AND SUCCESSFUL FUTURE HOME GROWN

MANAGEMENT?


CHAPTER 9: CONTINUOUS IMPROVEMENT

1.WHAT IS CONTINUOUS IMPROVEMENT?

•It is a disciplined action ingrained into the fabric of the organization and reinforced by tangible mechanisms•It is long term investments for the future, investing in employee development and doing everything to make the company stronger.•It is the creation of mechanisms of discontent to obliterate complacency and to stimulate change and improvement•It is good old fashioned hard work, dedication to improvement, and continually building for the future. There are no shortcuts. There are no magic potions. To build a Visionary Company you’ve got to be ready for the long, hard pull. Success is never final.

VISIONARY COMPANIES ATTAIN THEIR EXTRAORDINARY POSITION NOT BECAUSE OF SUPERIOR INSIGHT OR FROM SOME SPECIAL SECRET OF SUCCESS. THEY BECOME WHAT THEY ARE BECAUSE THEY ARE SO TERRIBLY DEMANDING OF THEMSELVES.


CHAPTER 9: CONTINUOUS IMPROVEMENT2. EXAMPLES:

• Wal-Mart: “Beat Yesterday” – it was comparing sales figures with the same day of the week, 1 year earlier

• HP: Forced funding of capital expenditure form within ie from Profits• GE’s “Work out”: The employees were able to challenge Senior Managers

for immediate decisions• Motorola: They cut off mature product lines to force innovation • P&G: Caused their brands to compete with each other• Marriott vs Howard Johnson

• 1960 Johnson Snr retired. He had established 700 hotels/restaurants• Marriott Jnr hoped one day to be as successful• 1985 Marriott surpassed Johnson by a factor of 7 times• The reason was Marriott’s relentless self-discipline• Johnson’s focus was on making money –

they became overpriced, understaffed and had outdated ideas



•What can we do better?

•How can we do better tomorrow than we did today?

•What are we doing to invest in the future?


CHAPTER 10: ALIGNMENT1. WHAT IS ALIGNMENT?

• It is the essential and consistent alignment of all the elements of a company to work together in concert within the context of the company’s core ideology and the type of progress it aims to achieve – viz it creates its vision as a result of alignment

• Vision is a combination of an enduring core ideology plus the envisioned progress for the future. This is what creates Visionary Companies

• Purpose and Value Statements can be fashionable and elegant BUT they do not cause a company to be successful UNLESS EMBEDDED, INTERNALIZED, AND LIVED.

• The Core Ideology must be translated into the fabric of the organizations goals, strategies, policies, processes, cultural practices, management behaviours, pay systems and job design

1. It is the creation and nurturing of an environment that envelopes the employees and reinforces the Core Ideology – it must be created and nurtured. A set of signals, consistent and mutually reinforcing, must bombard employees from every angle


CHAPTER 10: ALIGNMENT

2. EXAMPLES OF THE “POWER OF ALIGNMENT”:

• Merck • In the 1920’s formulated the backbone of their vision which they built upon their

core values Merck built a company that would benefit humanity through innovative contributions to medicine. Profits were not to be the primary goal but the result of succeeding at that task

• Merck consistently aligned itself with the core ideology plus the type of progress they envisioned. They set the BHAG of creating a research capability so outstanding that it “could talk on equal terms with the universities and research institutes”.

• Merck created a process that secured the “survival of the fittest”. The best projects attracted resources and the weakest perished

• Whatever they did was perfectly aligned with their ideology eg:• Streptomycin to Japan at no profit to eliminate TB after World War II• Mectizan for river blindness which they gave away without charge


CHAPTER 10: ALIGNMENT

2. EXAMPLES OF THE “POWER OF ALIGNMENT”:

• Ford, in the 1990’s:• Their intervention of mission, values and guiding principles

placed People and Products ahead of Profits

• Ford focused on:• QUALITY IMPROVEMENT• EMPLOYEE INVOLVEMENT• CUSTOMER SATISFACTION• This resulted in the alignment of the whole organization from Head Office,

Manufacturing Plants, to Agents and Dealerships on a global basis

• Ford’s lessons for alignment:• The comprehensive detail of Ford’s intervention was overwhelming –

all the pieces had to fit together• Their approach was to cluster their actions together and to reinforce

everything to provide a powerful combined punch



How can we EMBED,

INTERNALIZE, AND LIVE

our purpose and values plus ACTION our BHAG’s, create a cult-like culture,

ensure evolutionary progress, grow management from within

and continuously improve?


REVISION(In order to appreciate Chapter 11)

Chapters 1 – 3 Understanding the Animal ie Business Organization – it is a

o Complex Living Organism o Group of People that need Leadership o The Trigger is Leadership

A LEADER NEEDS A GOAL TO UNITE THE TEAM

PURPOSE VALUES


REVISION

PURPOSE AND VALUES

PARADOX


REVISION

PURPOSE AND VALUES STATEMENT Chapters 1 – 3

It must be a statement of who we are and what we stand for The Purpose and Values Statement needs to be

Embedded, Internalized, Explained, Lived STIMULATE GROWTH Chapter 4 Transition into Action: Build the Business to be the Best


REVISION

ACTIONS NEEDED TO BUILD THE BUSINESS TO BE THE BEST Chapters 5 - 10

BHAGs (Chapter 5) Cult-like Culture (Chapter 6) Evolutionary Progress (Chapter 7) Moe Grown Management (Chapter 8) Continuous Improvement (Chapter 9) Alignment (Chapter 10)


CHAPTER 11: BUILDING THE VISION

1. CORE PURPOSE• It is the organizations fundamental reason for being• Core Purpose taps into the company’s idealistic motivations. It captures the soul of the

organization. It gets at the deeper reasons for an organizations existence beyond just making a profit

• David Packard of HP in 1960 said “Many people assume, wrongly, that the company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being”

Examples of Core Purpose:• Disney: “To make people happy”• Wal-Mart: “To give ordinary folk the chance to buy the same things as rich people”• Merck: “To preserve and improve human life”• Israel: “To provide a secure place on earth for the Jewish people”• Hewlett Packard: “To make technical contributions for the advancement and welfare of

humanity”


CHAPTER 11: BUILDING THE VISION2. CORE VALUES

• These are a small set of timeless guiding principles that require no external justification. They have intrinsic value and are important to those inside the organization

• Ralph Larsen of Johnson & Johnson said “We have Core Values because they define for us what we stand for and we would hold them even if they became a competitive disadvantage in certain circumstances”

• The Values should be relevant to the most important factors of the business viz. Customers, Staff, Sustainability - VJB

3. CORE IDEOLOGY • Defines what we stand for, why we exist and how we will behave• It sets forth what we aspire to achieve and create• It requires significant change to attain the envisioned future• It provides the bonding glue that holds an organization together as it grows,

decentralizes, diversifies and expands globally• It is similar to the principles of Judaism

that held the Jews together through centuries without a homeland



4. WHAT IS BUILDING THE VISION?• It is building a vision that will galvanize people. • It is something eternal, the underlying reason for an organization’s existence.• It is something that reaches inside us and pulls out our best efforts.• It enables the realization of our dream.

5. ENVISIONED FUTURE

• The Envisioned Future consists of two parts:• A ten to thirty year Vision-level BHAG, and• Vivid descriptions of what it will be like when the organization achieves the

BHAG

• The Envisioned Future contains a paradox:• On the one hand it conveys a sense of concreteness –

something vivid and real, you see it, touch it, feel it• On the other hand, it portrays a time yet unrealized –

a dream, a hope, or an inspiration


…..

….

….


THE ENVISIONED FUTURE

10 – 30 Year BHAG Create the Dream

……

…..

……



6.EXAMPLES: • Henry Ford “I will build a motor car for the great multitude. It will be so low in price that no

man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God’s great open spaces. When I’m through everybody will be able to afford one, and everyone will have one. The horse will have disappeared from our highways, the automobile will be taken for granted and we will give a large number of men employment at good wages”.



6.EXAMPLES: • Winston Churchill: “Hitler knows he will have to break us on this island or lose the war.

If we can stand up to him all Europe may be free and the life of the world may go forward into broad, sunlit uplands. But if we fail, the whole world including the United States, including all we have known and cared for, will sink into the abyss of a new Dark Age, made more sinister, and perhaps more protracted, by the lights of perverted science. Let us therefore brace ourselves that if the British Empire and its Commonwealth last for a thousand years, men will still say, “This was their finest hour”.



• How can we rigorously apply the concepts of Building the Vision to create an effective guiding context for the future building of our organization?

• How will we eliminate the misalignments that drive the company away from the Core Ideology and those that impede progress toward an Envisioned Future?

• What concrete changes must we make in our organization to ensure alignment and to build vision i.e. what should we add and what should we obliterate?


“THANK YOU”

VICTOR BORCHERS Master Business Coach and Consultant

MOBILE: +27 83 628 2247

EMAIL: [email protected] WEBSITE: http://www.execucoach.co.za


building the business to be the best

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