Be Prepared For Change From Bottom Up

Dec. 21, 2004
Market changes are inevitable; management changes necessary.

I was born in one of the poorer places in Ohio. Our house had a path instead of a bath. Oil lamps instead of electricity. Our schools had McGuffey readers instead of language labs. And our transportation needs were supplied by hay burners instead of gas burners. We bought our groceries from two hucksters -- Mutt and Jeff -- who drove their wagons to our front door stocked with everything from caster oil to corsets. Mutt and Jeff were competitors. They vied in offering products, services, prices, credit, and candy canes for kids. They watched each other like spinsters checking out the stag line at a Saturday night dance. To Mutt, Jeff was the competition. To Jeff, Mutt was the competition. It wasn't long before Mutt and Jeff were both out of business --victims of competition they didn't know existed -- the washing machine, the automobile, the supermarket, and the refrigerator. Mutt, Jeff, the iceman, the blacksmith, and the buggy-whip manufacturer were blind-sided by the phenomenon of change. Today we live in an "Age of Alternatives." The customer has never had so many choices. Competition is everywhere. It's also an "Age of Ideas." Ideas you need to help you make your company's products smaller, faster, more useful, designed more efficiently, from new materials, with new and more saleable features your customers demand. Your customers also need (and want) ideas to help them avoid problems, solve problems, test their products, expand into new markets, buy cheaper, automate, standardize, improve efficiency, shorten production cycles, improve quality, and deliver their products just in time. The idea needs are endless. And so are the idea opportunities. The future of your company rests precariously in the hearts and heads of you and your employees. You will stay competitive only if your people are inventive, innovative, creative, daring, sensible, practical, ready, smart, determined, persevering, and enthusiastic enough to care. And to dare. In fact, you may be restricting your company's growth. All companies need continuous change at the top if they expect to grow from small to large. Small, start-up, privately-owned companies develop new needs as they mature. They require different leaders with different skills at different stages of their companies' development. At birth, a company has a founder -- usually an entrepreneur. Once it arrives at the age of puberty, it faces new problems that require new, specialized, management skills to grow to maturity. If the company wants to grow into a giant, additional management styles and leadership will be required. Visionary founders must give way to enterprise builders who can plan and execute the company's long term direction. Enterprise builders must eventually give way to corporate leadership with the experience and know-how to compete with equally competent giants. It's difficult for a founder to turn his/her company over to someone else. Yet, not to do so may very well stunt its growth. Take this real life example: New Company was founded in 1890 by an entrepreneur. It was incorporated in 1904. The entrepreneur remained chief executive until 1932 when he was removed by his board, which was made up of a combination of investors and executive management. During the next 20 years, four other chief executives -- all long-time employees of the company -- managed the company. And managed to keep it barely alive. In 1952 the company now employed 200 people, its revenues were less than $5 million, but fortunately, it's profit margins were double digit. It had no debt. So management continued to manage with pre-depression ideas and pre- depression standards. Over the next 20 years the company increased revenues to a meager $16 million. It now employed 600 people, and profits margins had eroded to 6%. The board of directors finally got the message. It needed new management. And in 1971 that new expertise was brought aboard. An enterprise builder. The change was necessary and timely. Under his leadership the company increased its revenues to $225 million, held on to its double-digit margins, and employed 1,500 people. Today a new management team is in place. Its goal? To grow New Company to $500 million in revenues within five years at the same time it continues to deliver double-digit profit margins. The growth will come from the development of new products, the use of new technologies, the acquisition of new and compatible companies, and the expanded vision and competence of the new management. Who is the new chief executive who is going to accomplish this? My successor, that's who. He is far better qualified than I to take New Company to its next level of growth.

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