Surviving

Much is being and will continue to be written as to how companies should survive the recession. I need to add my own brief comments to this topic.

1. Focus on margins, not market share or gross revenue. Too many companies will take any job no matter the profitability (if any). If you do this, and unless you are sitting on a huge cash reserve, you will end up spending your way out of business just to perform those jobs. A focus on financial health, now more than ever, is critical, and underperforming lines of business are not worth maintaining. Rationalize products and parts and drop what is not worth carrying. What good is market share if the business goes under?
2. Get as close to your customers are possible. This has been trumpeted many times as a response to globalization, but it's just as important in this recession. Analyze the principles of mass customization and see if there are any you can adopt - even if the whole paradigm is not a match for your business.
3. Grasp competitive advantage. The recession will end at some point. Be prepared to leverage every bit of competitive advantage you have now and for the future. Use this time to exploit your value chain (Porter's tool for analysis of competitive advantage) for every bit of competitive advantage you can find. Build a strategic plan (see Align/Excel, www.AlignExcel.com) based on competitive advantage and focus on internal capabilities.

Business Success, Strategy, Lean, and Zealotry

I attended an interesting presentation last week sponsored by the Minnesota chapter of the Association for Strategic Planning (ASP), www.strategyplus.org. Two Professors of Management from the University of St. Thomas, Dr. Michael A. Sheppeck and Dr. Jack Militello, spoke on the "Mediating Factors in Strategy for Successful Organizations." The professors are doing empirical research on which strategic processes lead to positive financial outcomes.

While their findings are preliminary, they have strong data that show that no one single factor can be claimed as the "secret of success." What the data does appear to show is that a combination of factors, really a mixture of strategy and tactics, is the determinant of financial success. The specific set of mediating factors are correlated to market strategy, workforce competency, organization culture, and HR management practices, with company to company variation.

I think their findings underscore the contention of Phil Rosenzweig in The Halo Effect that:

"What leads to high performance? If we set aside the usual suspects of leadership and culture and focus and so on - which are perhaps better understood as attributions based on performance rather than causes of performance - we're left with two broad categories: strategic choice and execution. The former is inherently risky since it's based on our best guesses about customers, about competitors, and technology, as well as about our internal capabilities. The latter is uncertain because practices that work well in one company may not have the same effect in another. In spite of our desire for simple steps, the reality of management is much more uncertain than we would often like to admit - and much more so than our comforting stories would have us believe." (emphasis added)

So what does that have to do with Lean and zealotry? Anyone who participates in lean discussion forums sees that the level of emotion and certainty about lean does rise to the level of zealotry at times. It clouds that fact that lean, while without a doubt one of the most powerful methodologies a company should use and a powerful cultural construct, is, by itself, not the primary driver for a company's success. Marketing decisions, HR management practices, and the other mediating factors that Professors Sheppeck and Militello are studying, have just as much impact, or more or lack thereof, on a company's financial success.

Zealotry about lean can also cloud one's judgment in terms (1) how lean should be implemented in specific situations, such as high-variety manufacturing, and (2) is lean the answer to the real root causes of a company's lack of financial or competitive success. In either case, it is likely that the reality of the benefits derived from the lean implementation will not be aligned with the expectations - a potentially devastating outcome. I wonder if this misalignment of expectations with reality is one of the reasons that the track record of lean implementation is spotty within American industry.