Get burned up after reading

September 11, 2008
By: Dan Davis

I heard this company president say one time that one of his hobbies was reading business books. I thought to myself that hobby ranks right up there with sword swallowing and power walking in malls as things that make me scratch my head.

I"ve got my own management theory. If a company is run by doofuses, it will perform in a doofus-like manner. (To
determine if one is a doofus, please create a Facebook page and ask for feedback.)

The simple fact of the matter is that sometimes a company can"t control its environment. How many companies thought
the price of oil would shoot up to almost $150 per barrel? Who truly knew that this housing slump and subprime mortgage fiasco would bring down powerful financial firms? What company could have predicted the developing world"s thirst for commodities? Not many.

Michael Treacy, author of Double-Digit Growth: How Companies Achieve It No Matter What, told the crowd at the Metals Service Center Institute Economic Summit: Forecast 2009 that he
studied 30 companies that grew over 10 years and discovered that none of them routinely had growth strategies that were a lock. Instead, they had many strategies that may or may not work.

The key was diversification, just as it is in playing the stock market. These successful companies selected multiple
growth strategies each year and then funneled money to the ones that showed promise, while turning off the spigot to the ones that went nowhere.

The companies that were able to sustain growth were not lucky. They were skilled, he told the crowd of metal service center executives.

He said the idea of progressive investing in select ideas from a portfolio of initiatives is like poker. A company
executive has to ante up a little and then decide where to increase the investment—if he or she isn"t bluffing, of course.

But that"s not where the risk ends. A company has to be willing to experience the good and bad of trying new things; that"s one of the only ways people truly can learn what works and what doesn"t work.

A company also has to compress the plan-do-learn cycle, Treacy said. The idea that a company can take a year to plan and two to three years to execute is laughable. The business needs to follow the pace of the market, not a planning cycle.

Treacy added that this approach simply follows the concept of the free market: Let the best ideas win based on their own merit. The irony is that U.S. company leaders claim to worship at the feet of Adam Smith, but more than likely they still follow the Soviet style of management where party leaders make decisions for the people, without their input. Treacy argued that middle managers, who are closest to the customers, have the most vital input in deciding on future company plans.

That makes me feel good. In today"s world where we deify business leaders, the real heroes are the middle managers and the feet on the street. They are the best bets to beat the unpredictability of the global market.

Oh yeah, Treacy mentioned four companies that used to be great as examples of how quickly the market can turn and make idiots out of one-time geniuses. He encouraged the crowd to look up how Circuit City, Pitney Bowes, Wells Fargo, and Fannie Mae have been doing recently. All happened to be featured in Jim Collins" 2001 book Good to Great: Why Some Companies Make the Leap . . . and Others Don"t.

I guess that"s one business book I can scratch off my winter reading list.

Dan Davis

Dan Davis

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8281