Field trips were an amazing part of growing up. Living in Southern California, we went to the La Brea Tar Pits and Forest Lawn Hollywood Hills. La Brea Tar Pits gave a perspective of dinosaurs and the like. While on paper it seems strange to visit a cemetery for a field trip, Forest Lawn back then had an amazing exhibit on US history. Being able to see history put it into context, at least as much as you can without a time machine, took the learning to a different level. Trips as I got older took me to Checkpoint Charlie and Auschwitz during the cold war. An experience that cannot be had from books. Seeing something in real life gives context. The same is true in leadership. Walking around a facility, talking to the people, visiting customers gives an unfiltered, contextual experience. It is one that is critical to really understanding your business, your customers and your people. How are you making field trips into your business on a daily basis?
The best surround themselves with the best. Top performing companies hire the best talent, work with the best partners and surround themselves with thought leaders. They continue to get better because they are constantly innovating and growing. They are constantly looking for top talent and hire them when they find them. How are you surrounding yourself with the best?
Running your business well isn’t just for show. A business is worth exponentially more when it is well run. The math bears this out. An example of the same business, pre- and post-transformation based on a real business transformation:
- Pre: $10MM EBITDA x 3 multiple = $30MM value
- Post: $30MM EBITDA x 8 multiple = $240MM value
As EBITDA grows, the multiple expands dramatically. And that’s all due to running your business well. How are you positioning your business?
Recently, an individual was touting the mark of high performance as hours worked. In other words, it is a matter of activity rather than results that garners the mark of high performance. The reality is top talent produces at a rate of 3 to 17 times the average in the same amount of time depending upon the industry. High performers are clear about what they are trying to accomplish. People work together to accomplish a common goal. High performing leaders set the tone, attract top talent, focus on results and have financial results as evidence. How are you focusing on results rather than activity in your organization?
Businesses exist in an ecosystem that comprise the business, the community, the people who work in the business and the stakeholders of the business. The strength of the business has a profound impact on those that it touches. As the business becomes more successful, it employs more people and generates a host of benefits in the community and for stakeholders. How is your business contributing to the ecosystem?
Have you ever heard this situation? A company makes changes to its strategy and people development plans to grow, only to find it is stumbling significantly after the changes are made. This exact situation came to light in a conversation recently. A few decades ago, the company underwent an initiative to address cyclicality in its business, leading it to change its strategy and expand its offerings to minimize the impact of the cyclicality. It also undertook a deliberate effort to match the right people to the right position to minimize risk in the business and grow skillsets.
Years later, the company backed out of the newly expanded offerings. The cyclical part of the business was doing extremely well at the time and the newly expanded offerings were not quite as profitable, so resources were reallocated. And to meet the needs of the business, people were promoted more quickly and did not have the full skillsets. As a result, the company found itself in the same spot it was a few decades before. The history lessons had not transferred between generations of leadership. How are you making sure history does not repeat itself in your business?
Making a mistake isn’t the problem. People will make mistakes as they grow in the company and their career. The trick is getting them to a place where they can make mistakes without major consequences. And if you are hiring senior people, you need to learn what mistakes they’ve already made and what they learned. Otherwise, you run the risk of them making a needless mistake with you.
Recently, the city of Portland installed parking meters on a street where a business I frequent resides. I’ve gone there regularly for the better part of seven years. And the street was always packed, making it difficult to park. That was until last week when the meters went in. I was shocked. No cars were parked on the street. I was told a letter from the city explained this would happen. After all these years, the cars disappeared. I did not expect that result, but then, I’m not an expert on the patterns of behavior after parking meters are installed. The goal was to make more parking available. Goal achieved.
Have you ever found yourself in a situation where you are being advised by an expert to take specific actions to achieve your goals? Sometimes it is worth listening to and acting on the advice when demonstrable results exist. How are you finding different perspectives to get the results you desire?
If you know me, you know I like shoes. When the news came out this week that Michael Kors is buying Jimmy Choo for $1.2 billion, it caught my attention. Jimmy Choo is a prestige brand primarily focused on womens shoes. It has a cult following and many top celebrity loyalists. The shoes start at $500 and rapidly increase from there. Jimmy Choo shoes are not just a product, they are an experience.
Michael Kors is down the main with a wide product offering ranging from shoes to clothing. MK shoes start at $50. A much different market than Choo. MK sells through both retailers and company stores. Amidst declining sales, 100-125 stand alone stores are being closed. MK is also looking to sell less through retail channels that heavily discount to move inventory. In other words, revenues and earnings have been declining rapidly. The appeal of Jimmy Choo is the global reach and high end design. MK plans to expand Choo beyond shoes and leverage a higher online presence.
The reality is, most acquisitions fall short of their expectations. The investment thesis does not adequately capture what made the company successful and appealing to its customers. As changes are made with the intention of growing earnings, the point of distinction is lost and customers drift away. And so to does the value of the acquisition. Will Choo maintain its high end design sense? Will the brand get watered down? Time will tell.
In your quest for growth, how do you maintain an eye on the point of distinction of your latest acquisition? Do you really understand what makes the company successful? How are you making sure you don’t screw up what you just bought?
“Getting the right people on the bus” is the wrong metaphor. It suggests passivity — you amass a group of good people and they go for a ride. The right way to think about putting together a team is that you’re filling the chairs of an orchestra. On their own, each person must be an outstanding player. But, for the piece of music to work, they also have to play together in harmony.