Reform Your Business When Business is Good

I find it very interesting how many executives want to wait to meet, start projects, hire key people and start change initiatives, because they’re making a profit and “Things are fine.” Why should they put effort into improvement when nothing’s wrong right now? Here’s why:

1) Succumbing to the status quo (even if it’s good) can be dangerous.

2) Their competitors are getting better everyday.

Toyota, the icon of Lean and continuous improvement, is always striving to get better. In an article “The Contradictions That Drive Toyota’s Success” (Harvard Business Review, June, 2008) senior executives said, “Never be satisfied.” The chairperson of Toyota said, “There has got to be a better way, and we need to reform business when business is good.”

Embracing Vulnerability

To recognize the need for improvement, we have to be vulnerable, which requires acknowledging weaknesses. You need to be vulnerable in order to grow. Being vulnerable means focusing on improvement, regardless of how things are going right now. When companies get caught up in how well they’re doing, they often get complacent, which gives competitors or a disruptive new company the chance to zoom past and leave them in the dust.

World-class athletes continuously strive to be better. They recognize that their competition is always improving, so they practice and work hard. They hire coaches to watch them and provide input on what they can do to reduce their time or boost their score. In his prime, Tiger Woods had five coaches.

Profit Disease

Why would you reject an opportunity to improve? When someone tells me their company is doing fine, I ask, “How do you know you can’t do better?” The General Manager of the New York Metropolitan Opera once said, “If you’re not moving forward, you become swamped in your own history.” What I call Profit Disease afflicts many companies. They think that since they are growing and making money, all is well and they don’t need additional help.

Here’s how to help prevent Profit Disease.

  • Push for breakthrough results. Don’t be satisfied with basic improvement; set stretch goals that put you in the top 10% of your industry. You need to think differently to achieve breakthroughs. Forget being good; push to be great.
  • Create an Action Imperative™. An Action Imperative goes beyond basic problem solving and uses change management, culture development, and innovation to move your company to industry-leader levels of performance.
  • Exploit your success. Use your greatness to increase market share, profitability and revenue growth.

Unexpected Opportunities

Opportunities for improvement can hide in places you’d never expect. A current client has very strong Lean skills, and is growing 20% to 50% per year, and they still think they can do better, particularly with profit and cash flow. Their reputation in the market place is excellent and they produce a great product. Their investment in growth has been significant and the owners think it’s time to get some return on their efforts.

During my assessment, we discovered several things they weren’t aware of, even though their finance team is pretty strong:

1) Their materials costs were rising.

2) Their labor costs had very little variability, and were behaving like a fixed cost.

3) Fixed items were not being well managed.

4) The staff didn’t have common goals for improvement.

We’re developing a framework for improvement that we believe can significantly improve profitability in 12 to 18 months, setting the stage for continued profitable growth.

The Take-Away

My most successful clients are the ones who continually ask, “How can we get better?” Inactivity is dangerous. Rather than succumb to Profit Disease, create a culture of action and of continuous improvement and seek experts’ help to make sure you’re developing world-class performance. If you’re ready to achieve top 10% levels of performance, call me.

 

© 2017 – Rick Pay – All Rights Reserved