Looking to Create Value, then Tinker, don’t Muddle EBITDA will follow.

Let me share with you a story that reflect reality of the US manufacturing sector circa…well you guess, the era.

The latest EBITDA <2%, obvious signs of  intense competition reducing this business value, as increasingly their buyers viewed  their products as commodities and looked to squeeze prices.  Many of the familiar management responses  broke out  into distinct  buyer segments.

1. Residential market was hit the hardest as 80% of the demand was for a handful of products that the Asian markets overseas had instantly copied an then niched out a more cost effective production environment.
2. OEMS , likewise were more cost conscious and still used pressure tactics such as purchase goods they needed at public auction.
3. Finally the wholesalers, who demanded quality and quick response time.

When viewed this way it proved difficulty for the executive team to maneuver.  Their cushion of years past was significantly disproportionate to the risks they viewed would be necessary to take advantage of  new market opportunities.  Their zealousness attention to EBITDA made them keenly aware  that  needed more margin or room to improve in order to expand.  But that’s how they may have missed some easier more continuous improvements opportunities due to:

• Inefficiencies in an existing process, existing industry system
• Ineffectiveness noticeable with changes in external or internal expectations

It’s why tinkering versus muddling remains a more prudent attitude and provides any organization ongoing strategic advantage.

This is why paying attention to EBITDA may help, but also may obscure the focal point where improvement or advantages remain possible.  Sounds easy to align effort with delivery systems.  In earlier eras, your know-how, experience and relationships  also insulated you by creating formidable barriers for new entrants into your business.  Today, widespread digital connectivity levels the field of play and forces firms to behave more transparently and may make them more vulnerable than ever before.

…for each of the big moves, a related ego-trap often gets in the way of rational decision-making.

This is where the best defense proves its offensive value.

• Is the business focused on outputs or on insuring business continuity?
• Do the efforts of individuals align with the tools and systems that further enable their know-how and  extend their experience?

If you think I’m talking about employees, then think  about aligning tools and system for your customers? Your suppliers?

Consider mapping your Value stream.  These diagram materials and the information flow that inevitably occur with every task assignment associated with any product or service creation and its delivery.  Focusing your executive team focus and coordinating their activity around the value they are collectively creating and then mapping what’s needed changes their interactions and sets an example.  These efforts require leadership to challenge and then reward “What if?”  thinking and tinkering. Nip the muddling in the bud.  Internally, connect more people to processes and discover how much more effective they become.  By rooting out inefficiencies sooner and relaying information through improved channels, the organization and executive team gives permission to the right people in the right place at the right time to see and act on stuff that’s important.

Are you committed to protocol or driving value at every level in the organization?

Enabling more people throughout your business to understand what your business needs to accomplish to be successful unleashes their creativity and also insures cooperation if not a little bit of excitement.  These changes require new thinking to structure incentives that incorporate organizational performance and at the same time suspend judgments about what work looks like. It also goes a long way to capturing more value and cement your experienced advantage.

A couple of characters–how best to drive returns for your organization?

OK,  between Sherlock Holmes and Goldilocks, who would you trust with your current business challenges?

I have a colleague who recently re-read J Conan Doyle’s fictional representation of Sherlock Holmes and thought it represented a great model for his own consulting practice. So I can understand that many of you would also choose Sherlock Holmes for his brilliance. I’d like you to reconsider how Goldilocks may be a more appropriate choice for the times.

Yes, Goldilocks!

I’m sure you have read more than one post heralding the new age where social media and networking mastery will not only differentiate your business but also insure your long term survival. Or maybe you worry more about how to incorporate big data and the internet of things, or the sudden mystique of social capital has cost you to lose a little sleep. No matter what topic, the only certainty in life is uncertainty. Sure, Sherlock Holmes offers a variety of approaches that can help minimize the uncertainty. His methods deconstruct the immediate mystery, circumstantial problem and suggest solutions are always possible. True in time, but do you have that kind of time and patience? Do your customers, suppliers and shareholders?

This is why I propose Goldilocks may be a better hire. There’s no illusion with Goldilocks. She doesn’t fear what she encounters and does what we all wish we could. She’s focused and intent to try out all present possibilities and then decisively chooses what suits her. She quickly satisfies her immediate needs and then gets on to the next task.

Now Goldilocks doesn’t bear any responsibilities for her actions. Instead her confidence means she doesn’t waste time asking questions, second-guessing her actions, investigating or looking hard for clues.

Do you believe she lacks due diligence, or feel her actions suggest some shortcoming because she doesn’t stop and consider the possibility of alternatives beyond her line of sight? After all, she does what most of the people within your organization do in the absence a clear vision, leadership guidance and integrity. She muddles through.

I know, now you’re really puzzled. How does Goldilocks thinking really help me get through my immediate challenges?

The answer lies in the question. Action beats inaction, doesn’t it?

The oldest character tests, include a surmountable challenge. In many legendary tales, how the character responds provides the emotional tension in the story and drives the dramatic arc, and serves as a turning point. If you never thought of your own actions as part of a larger story that has yet to be played out, then I hope you will now.

point in many legendary tales and it’s how your answers to similar questions really hinge on your own leadership image.

This subtle business of our own character development deserves more attention, than the tasks that consistently demand responses. My colleague took a long time to realize his kinship with Sherlock, and once he did he understood his limitations and his opportunities better.

We all get caught up by time and its rhythmic certainty that we can’t control. It’s why I’m so intently focused on strategy, because it offers individuals and organizations perspective and a handle on the future and the inevitable variety of tasks and challenges we will encounter.

Don’t start with evaluating how much time may be available to decide, thought that will be useful. In this context Goldilocks does well, making split second decisions. Sherlock in spite of his amazing deductive reasoning skills requires time to investigate, learn the facts and only then be ready to help make decisions.

Instead I suggest you turn your attention to strategy and invest your efforts in character building. Recently Harvard Business Review shared a brief synopsis of provocative work done in 2014 by Fred Kiel of KKR. Kiel and his team surveyed 84 organizations’ employees to assess their leaders consistent exhibition of the following universal character traits: integrity, responsibility, forgiveness, and compassion.

“I was unprepared to discover how robust the connection really is,” Kiel says. In addition to outperforming self-focused CEOS [lowest scoring] on financial metrics, the Virtuoso [consistently top scoring] CEOs received higher employee ratings for vision and strategy, focus, accountability, and executive team character.

As a leader, you often don’t’ get the luxury of selecting your team, but you best have a strategy. Even the most zealous of organizations who screen for any number of capabilities and personality traits, still need to assign tasks and/or pair projects and teams. Pairing Sherlock and Goldilocks oddly may introduce the right tension, risk counterweight and inhibit delays in decision making. But neither will do what’s best for the organization unless you have made the biggest objectives and vision crystal clear.

Know and develop your own character and you too will be surprised by what performance will follow.