Performance-Based Strategy: Tools and Techniques for Successful Decisions
In September 2004, Steve Fairbanks walked into a medium-sized manufacturing company in northern Iowa as the new CEO. The private equity firm that owned the company had hired him to turn around a business that had been going downhill for two and a half years; the value of the company was decreasing fast. The usual slash and burn efforts had been tried – budgets had been cut, assets reduced and capital frozen – with little effect. There was no strategy or plan. All Steve had to do was reverse the trend of 10 consecutive quarters of company devaluation by the first quarter of 2005. That, and rescue a business that was vital to the local community. The pressure was clearly on.
Fortunately for the firm that hired him, they got a CEO who was prepared for the challenge. In his career, Steve had already demonstrated success at running similar manufacturing businesses. During that time, he’d developed a set of tools that had proven to be effective and valuable in generating significant improvements in company results. Now, if he could just apply those tools to the current business, maybe the company would have a chance.
Steve called his team together and began to share the tools he’d developed. They analyzed the market and identified the strategic customer segments. Processes were reviewed and improvements identified. Milestones were established. Critical factors were set and programs put in place to address these needs. In 90 days, the team had put together a comprehensive strategic plan for the Board of Directors to review. The Board’s take: “Looks great on paper – now execute it.” More tools were applied to drive action, and the team delivered. After 6 months, the company showed positive market share growth and an increase in quarterly valuation.
They didn’t stop there. After two years, revenues had increased by 50%, almost FOUR TIMES the industry average, and earnings had doubled. In 2008, the Great Recession hit – yet the company continued to grow revenues and earnings in an economy that was destroying other manufacturers. In 2009, in the depths of the recession, when hundreds of business were being shuttered and factories closed, the company actually OPENED a new plant to handle the growth. By 2011, the business had doubled sales and tripled earnings. The Compound Annual Growth Rate (CAGR) for 2004 through 2011 – including the Great Recession period – was over 10 percent for revenues and over 16 percent for earnings (keep in mind that the U.S. economy was growing less than 4% during this same time period). The owners were very, very happy with the results.
This wasn’t the only time the tools had been used effectively. In another situation, Steve was appointed CEO of a company that was in what the banks termed (in their usual understated manner) a “distressed situation.” Lending covenants had been broken, the company’s future was in jeopardy, and the situation required immediate reversal if the business was to be saved. In the same way and within 90 days, the tools were used again to construct a winning strategy and plan. The lead bank retained one of the largest consulting firms in the U.S. to review and test the plan. The consultants’ response? The tools used to develop the plan were “fantastic,” and this was one of the few companies in this situation the consultants had seen who actually “got it.” The results? Over the next 5 years, revenues grew at a compounded rate of nearly 10% per year, gross margins grew by nearly 25% per year, and earnings grew almost 70% per year. The bank went from being the harshest critic to the company’s strongest advocate, even encouraging the firm to now borrow more money to support further growth.
Every manager who’s walked into a new job or a new company and has been charged with improving business performance and increasing results understands these stories. The manager comes in, sits down at their desk, and says, “What do I do now?” The challenges are significant, the problems real. Resources are constrained and the clock is ticking; bosses and owners expect results now. Managers don’t have years to figure out what to do. They need real, practical tools and processes that will enable them to analyze the situation and make the right decisions to drive future success right away.
That’s why we wrote this book. It’s for every manager who has ever been put into a situation where they were expected to quickly and effectively improve organization results – and we’re betting that describes most managers. They were put there because they have the knowledge and experience to do the job. Now they need to apply that knowledge and experience effectively and quickly. How can we make it easier for them to do so? That’s what the tools in this book are for.
The bases for many of these tools aren’t necessarily new; many of these concepts have been available in business literature for some time. The real-world need was to embrace and adapt the powerful strategy ideas that were out there into a framework that would work in organizations that are constrained in both time and resources (which, if you think about it, describes virtually all organizations). The goal for each of the tools is meaningful and actionable results in hours and days, rather than the more typical weeks or months.
The positive feedback we’ve received from those who have been exposed to and employed these tools has been eye-opening. The success that has been achieved by organizations that use these tools speaks for itself. It has been especially gratifying to see these tools applied across public and private organizations, small-cap and Fortune 500 companies, service and manufacturing firms, for-profit, not-for-profit, governmental, and charitable organizations. These tools are universally applicable – and they work.
We think we can create value not only by sharing the tools with the reader, but by demonstrating how to construct and use the tools. And we provide real-world anecdotes of how each tool has been successfully applied. This is not a conceptual or theoretical discussion of strategy and planning. It is a practical book with proven tools and the guidance on how to properly use them to drive business results. If even one of these tools resonates with the reader and helps them make a better business decision, the payback can be substantial. We know, because we’ve done it.
Steve Fairbanks
Aaron Buchko
April 2018