The "Secrets" of Enduring Business High Performance
Genworth Financial
ALM
January, 2011
Ed Hess
Professor of Business Administration
Batten Executive-in-Residence
Hesse@darden.virginia.edu
www.EDHLTD.com
1
WHAT DO WE KNOW?
The DNA of HPOs- We know the “secrets”
Consistent HP requires the RIGHT kind of leadership, internal
System, and processes
Growth results from behaviors NOT strategies
Growth results from experimental learning
HPOs build 2 X 2 X 4 Growth Portfolios
HPOs distance the competition in bad markets and tough times
2
A
GROWTH INHIBITORS
Individuals :
Corporations:
Cognitive blindness
Failure to experiment
Cognitive dissonance
Standardization/No variance
Legacy thinking
Short-termism
Hiring & promotion biases
Low employee engagement
Arrogance
ROE-it is
Fear of failure
Punishment of mistakes
Product centricity
Group think
3
HPOS: 30 YEARS OF RESEARCH
The “best” 8 studies:
1982, Peters &Waterman, The Search for Excellence
1994, Collins & Porras, Built to Last
1997, DeGeus, The Living Company
2000, O’Reilly & Pfeffer, Hidden Value
2001, Collins, Good to Great
2003, Joyce, et. al., What Really Works
2007, Hess, The Road to Organic Growth
2009, Simon, Hidden Champions
4
HPOS
Sysco
UPS
Starbucks
Southwest Airlines
Wal-Mart
Best Buy
Tiffany
Costco
USMC
San Antonio Spurs
McKinsey
Room & Board
Ritz Carlton
Outback
Walgreen
Chick-fil-A
Levy Restaurants
SAS
McDonalds
Corning
Danaher
5
9 CONSISTENT FINDINGS
The “Not so secret sauce”:
1. Simple focused strategy- an “elevator pitch” business model
2. Structures that enable entrepreneurial behavior- “Small company soul
in a large company body”
3. Higher purpose than shareholder value/profit- Money is not enough
4. Culture of relentless constant improvement- the DNA of growth
5. High employee engagement- an implied social contract – an
accountable “family”
6
9 CONSISTENT FINDINGS (CONT.)
6. Customer centricity & closeness- Being better is more important
than being bigger
7. Humble passionate operators who are servant leadersdevaluation of elitism
8. Execution & service champions- excellence everyday every way
by everyone
9. An Internal aligned consistent self-reinforcing System ( strategy,
culture, structure, HR policies, leadership behavior,
measurements, rewards, communications) that enables,
motivates, and rewards desired behaviors
7
NOTICE WHAT IS MISSING
Diversified complex best strategies
Unique products or services
Visionary or charismatic leaders
Lowest costs
Most innovative
Best talent
8
WHY SO RARE?
Short-termism: mentality, tenure, comp
Easier to be external facing
Focus on financial metrics not behaviors
Alignment is hard to create and maintain
Hypocrisy
Leaders fail to role model desired behaviors
9
COMMON GROWTH PROGRESSION
2 Studies: McKinsey & Hess
1.
Geographical expansion
2.
Complimentary products to existing customers
3.
New customer segments w/existing products
4.
Complimentary services for existing customers
5.
Cost efficiencies
6.
Technology productivity in creation &delivery
7.
Small strategic acquisitions
8.
Move from selling products to selling solutions
9.
All of the above continuously
10
Darden Growth/Innovation Model
(1)
(2)
(3)
(4)
(5)
(6)
(7)
New S
Curves
(1) An Enabling Internal Growth System
(2) Strategic Ideation
(3) Ideation Communication and Evaluation Processes
(4) Learning Launches
(5) LL Project Tracking and Portfolio Management System
(6) A Growth Initiatives Portfolio
(7) Growth Portfolio Management/Review Process
11
2 X 2 X 4 GROWTH PORTFOLIO
HPOs create and continually manage a diversified portfolio of
growth initiatives:
2: both short-term & long-term initiatives
2: both top-line & bottom line initiatives
4 Ways to Grow:
Improvements: better, faster & cheaper
Innovations: something new
Scaling: doing more of what works
Strategic acquisitions
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3 KEY GROWTH PROCESSES
Strategic Reframing: Illuminating & challenging your underlying
assumptions “givens” about your industry, business model,
customers, distribution channels
Customer Experience Mapping: A granular charting of every step
in a customer or channel distributor experience - “in their
shoes”
Learning Launch Experiments: Uncovering and testing key CV
and execution assumptions to generate better data to make
investment decisions
13
HOW DO HPOS DISTANCE THEMSELVES IN TOUGH MARKETS?
They keep doing what they do everyday but with even more
resolve and intensity by focusing on:
1.
Becoming even closer to existing customers
2.
Aggressive acquisition of key customers from weaker
competitors
3.
Being even better & faster & cheaper
4.
Continuing to invest
5.
Becoming even more easier to do business with
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HOW DO HPOS DISTANCE THEMSELVES IN TOUGH MARKETS? (CONT.)
6. Focusing on helping their customers survive hard times- “in their
shoes”
7. Taking care of their people- leaders are on the front lines even
more
8. Expanding judiciously into the right customer segments and
geographies where growth is likely by leveraging existing
capabilities
9. Creating new “bundles ” or offerings and new distribution
channels
MORE OF WHAT THEY DID BEFORE !!!!....... More “farming” not magic
15
HPOS CONSTANTLY QUESTION & DEBATE
The following slides are intended only to spur more “growth
thinking”
HPOs continuously engage in critical and constructive debate
about their business assumptions
16
QUESTIONS FOR YOU?
Do you have a culture of constant improvement?
Do you have a servant stewardship leadership model?
Do you have a highly engaged workforce?
Have you defined the right behaviors to drive growth?
Do you measure and reward the right behaviors?
17
QUESTIONS FOR YOU? (CONT.)
Are you structured to maximize growth behaviors?
Is being better & faster part of every employee’s job and measurements?
Do you- the leaders- spend meaningful time listening to customers and
line employees?
Do you have an experimental learning process?
Do you proactively review quarterly your Growth Portfolio?
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IN TOUGH TIMES, YOU SHOULD
1.
Deepen competencies & capabilities
2.
Improve your Internal System
3.
Experiment more
4.
Rethink how you market, position & sell your products in this
psychological environment
5.
Become even more customer-centric
6.
Become even much easier to do business with
7.
Challenge & rethink the basic assumptions underlying your
industry & business
19