Did you know that since the year 2000, 52% of the companies in the Fortune 500 have either been acquired, gone bankrupt, or no longer exist? Every savvy business leader knows that success is a year after year challenge to maintain core businesses, improve operations, and grow revenue. If we look back to the Fortune 500 from 1955, 90% of those companies no longer exist. Indeed, any company could one day have a gravestone that reads “success is not permanent”.
On one hand, the immense turnover of companies is evidence of increased global competition, consumer changes, weak succession planning, hyper competition, the power of disruptive technologies, and the appetite of mega companies to gobble up competitors and consolidate industries. On the other hand, companies that consistently outperform competitors, grow and improve, have long-term viability.
In the first article on performance culture, we looked at how to build a performance culture by establishing purpose, developing a shared identity, and creating alignment. The second article explored how leading and developing people underpin a performance culture. In this final article on sustaining a performance culture, we dive into the balancing act of strengthening core work while dedicating resources (time, money, labour) to work that improves and grows the business.
Companies of all sizes can fail. Sometimes the failure is nearly beyond their control such as when financing dries up, costs increase, or tough competitors emerge. Yet, what is in their control is how they focus their resources and work. The small corner grocery store in Kathmandu may not compete with corporate giants, but they still have the challenge to maintain their operations, improve services, and grow the business. The travel agency needs to continue to adapt to trends and grow their list of partnerships with airlines and hotels to provide a competitive service.
The Core, Improvement, Growth (CIG) Model is a way of looking at three basic, but vital types of work people do at a company. A person may do a little of each type of work, but usually someone spends the majority of his or her time on a certain type of work. First is Core work, which delivers the current product or service of the company. Improvement work focuses on increasing the efficiency or effectiveness of the company or incrementally making the core work better. Growth work expands the business, creates new opportunities, or introduces completely new services or technology that changes the company.
Maintain the Core
Core work is the foundation of the company and makes the bulk of the money. It aligns the goals of the company and is the basis for their operations. Companies need to maintain the core work to keep customers and raise capital to support the improvement and growth work. When core work is weak, then the company can experience a myriad of problems such as reduced cash flows, poor customer retention, and low product or service availability.
Kevin Stirtz says it well when he emphasises “Know what your customers want most and what your company does best. Focus on where those two meet.” Restaurants must ensure food quality and that customer service and prices are acceptable. Consulting firms must keep customers happy with their popular and core services while making sure they stay relevant in the market.
Some questions for strengthening core work:
- Which employees are in critical roles that drive the core work of the company?
- What is the risk of losing each critical role employee?
- How well are our most experienced, high-performing critical role employees developing others in the core work?
- What competitive advantage do we have based on the brand reputation, customer loyalty, and market share of our core products or services?
- Do we have adequate resources, machinery, and staff dedicated to our core work?
Constantly Improve
Nothing remains static in business. New ideas, new companies, product improvements, and service excellence fuel the economies of the world. Every company must evolve, both incrementally and sometimes with fundamental shifts in the business.
Michael Porter, the renowned Harvard Professor, once noted that “Continuity of strategic direction and continuous improvement in how you do things are absolutely consistent with each other. In fact, they are mutually reinforcing.” Improvement work in a company is what keeps a company profitable as they find ways to reduce cycle time, eliminate low value work, improve throughput, and streamline processes.
Who in your company is responsible for driving improvements? The answer is simple… everyone. Customers, suppliers, and employees all must be encouraged to look for ways to improve the business. Does your company have a suggestion programme? Does management listen to employee ideas? Do you survey your suppliers and customers to understand how they view your business and learn what they think could be done better? In larger companies, do you have a team that coordinates improvement ideas and new projects? Leaders must be vigilant in finding ways to reduce costs, improve service, and deliver more value.
Here are some more questions to consider for Improvement work:
- How do we measure improvement across our business?
- Have you asked customers what they value most, or what additional features or services they want?
- Are you really improving the product or just reducing the cost of production while lowering the intrinsic value or the quality of the product?
- What do the market leaders do better than we do? Do they just offer a similar product at a better price point or is their brand power carrying an inferior product?
- If we cannot compete on price or breadth of products, then in what ways can we make our products or services better than the competition?
There are two important notes of caution when it comes to improvement work. When I worked for Kraft Foods, we talked about the risk of reformulating food products to reduce costs. Sometimes this can be done without adverse changes to the taste, texture, colour, nutrition, and overall quality of the snack. However, this is difficult to achieve. Customers are sensitive to their staple products and may not like the changes. Companies can find many ways to reduce the cost of a product or service, but they must deeply consider and test how customers will respond. The second is if you try to improve a product in ways that increase its cost, then will customers pay more for the improved product or service? Does the improvement have perceived value for the customer? The least risky improvements a company can make are to safely take costs out of the production flow without changing the product.
Continue to Grow
Any company that is not growing is in trouble. Growth by entering new markets, adding customers, expanding product lines, introducing new services, and expanding territories is essential for companies. Without growth, a company must rely on a strong core business and incremental improvements while reducing costs to maintain a healthy balance sheet.
“Keep your eyes on the stars, and your feet on the ground” said the famous US President Theodore Roosevelt. Companies can heed this advice as they strategically plan their growth path while ensuring that their core business remains strong. Too much focus on growth and customer retention and revenue decline can become serious issues within existing core services.
Here are some questions to consider with Growth:
- What is your business plan? How much growth is expected and what resources are needed to drive the growth?
- Do you have the corporate capabilities and employee competencies to support business growth?
- How strong is the market analysis of the growth markets? Are the profitability and cost projections well-grounded or optimistic?
- Can you leverage partnerships to enter new markets?
- Will the growth plans jeopardise existing products or markets? Are you expanding the ‘revenue pie’ or simply changing the proportions?
In sum, sustaining a performance culture is hard work. It takes a clear purpose and alignment. Leaders must manage and develop their talent to ensure strong business performance. Balancing the work of the core business with improvement and growth initiatives can be challenging, yet the alternative of failing is too great of a possibility if you don’t sustain a performance culture.
