The answer to which came first: chicken or egg?
I’ve often noticed an inverse relationship between how much a management team focuses on profit and the profit that it actually achieves. In other words, those that focus hard on numbers sometimes produce poor results. This is particularly evident when there is impatient capital.
Much of this is attributable to attempting to cut your way to greatness. Slashing expenses is sometimes necessary, but it’s a tactic rather than a strategy. Two examples from recent business news illustrate the point. Perhaps you’ve watched Kodak’s long-term tumble from greatness. Not the type of “Kodak moment” the marketing department had in mind when it coined the phrase.
Kodak is clearly on death’s door, but the headlines about the company have largely been about how it was selling its assets (intellectual property) to grow other areas – mainly printers, which looks like an awfully crowded field. It took a long time for Kodak to get to this point, but selling off your intellectual property (the chicken that produces eggs) doesn’t bode well! By the way, Kodak was an innovator in digital photography long ago, so it wasn’t as though it didn’t understand the change coming.
Another headline that grabbed my attention from the Wall Street Journal was “New at Sears: An Expert in Retailing.” What a concept! Sort of like “New at Your Favorite Restaurant: A Chef!” I guess the financial machination and marriage of two losers – Sears and Kmart – couldn’t create a winner.
Most certainly, strong action driven by robust leadership is required when the wheels fall off, but two questions remain: How did this happen? How will we delight customers in addition to cutting expenses?
If you try to water your lawn and nothing comes out of the hose, it’s most likely not a problem with the end of the hose. Yet many management teams spend inordinate amounts of time staring at the hose’s end when the kink is upstream or perhaps the water was never turned on.
A large organization I know got a new management team backed by impatient capital that focused most of its time on the numbers (the egg) but completely ignored strategy, culture and new product development (the chicken). In spite of what the team thought, it’s not really ALL about execution, and the slide toward irrelevancy continued.
Financial results are merely an indicator of how good your strategy is and how well you execute. Healthy chickens produce better eggs.