Iron Fist Execution

Today, companies are no longer in a steady and steady growth trend, but in times of setbacks and adversity.

When the company continues to develop at a high speed, there may be sudden twists and turns and stagnant performance, which will sound the alarm for the company. These twists and turns are often caused by some new factor: declining market demand, lack of product information, a company growing too fast, a lost business opportunity, and in most cases, poor execution. Due to the above factors, the company cannot maintain profitable growth for a considerable period of time, at least two years. It's abrupt because most business leaders didn't foresee it, and it often precedes it with very strong performance.

Corporate performance reversals can come as suddenly as Cisco Systems experienced in the winter of 2000-2001. It may also emerge gradually, as GE experienced in the late 1970s and 1980s, and IBM throughout the 1980s. While many company leaders may refuse to acknowledge its existence, this sudden alarm bell is not hard to hear. First, sales stagnated or declined. Soon, company management began to cut costs. Both customers and employees lack confidence in the company. If it is a public company, its share price will start to slide.

When leadership sees the company in adversity, it should execute with an iron fist. The Iron Fist Execution Strategy has three components: Leadership, Governance, and Critical Capabilities. This doesn't mean that taking these steps will help your business through the storm, this article just provides you with the success stories of leaders who have helped your business through the storm.

Leadership

There seems to be no need to define leadership because it covers so many things. However, there are two important aspects to the execution with an iron fist: adjusting the strategy and cultivating the business philosophy. Both help leaders address the following questions: Are we better than our competitors at delivering the product or service our customers want? What are the main drivers behind our strategic trade-offs? Are we investing the right resources in the right areas to win the market?

Strategic adjustments. The first thing management has to do is adjust the strategy. That means rearranging business plans, evaluating the resource allocation for those plans, and determining the direction of the company.

Leaders who succeed in overcoming adversity have a deep understanding of the business and what factors affect future performance. They understand the ins and outs of a company's value creation, prioritize operational efficiency improvements and business growth, and focus on revenue growth rather than cost control.

An important step for management in adjusting strategy is to rearrange the business plan (see the box "Management of the Business Plan Portfolio"). This will help management to be more nimble, quick and action-oriented. They are able to analyze each plan in detail and adjust accordingly to changes in the environment. An important quality of a great leader is his analytical skills and his fact-based principles. Management should adjust strategy without personal emotions.

For those business leaders whose companies are underperforming, the most important thing is to analyze exactly what creates value for the company and discover the real factors that affect the market.

Among the examples of how business leaders adjust strategy after a company setback, Cisco's John Chambers is worth mentioning. When he took office, the company was growing rapidly. But in the early days of Chambers' tenure, Cisco's business reversed in early 2001 because all aspects of the company were growing too fast and not efficient enough.

Chambers knew the company had to adjust its strategy: focus on operational performance, go back to fundamentals, take stronger measures to control the business, and sell underperforming businesses. To this end, he proposed six new priorities in the plan: slowing down the growth rate of the number of employees and non-essential expenses, dedicating resources to major business growth opportunities, focusing on profit contribution (rather than sales), utilizing Networking technology increases productivity and ensures that each employee can focus on business improvement in his or her area, while maintaining focus on Cisco's existing breakaway strategy.

Eventually, Chambers restructured the entire company. Previously, business units were divided by customer type. After the reorganization, the departments are divided according to the type of technology. The company no longer just encourages sales growth, but focuses on profitability. The company is also no longer constantly recruiting new employees, but ensuring that the productivity of all employees continues to increase.

Cultivate business ideas. The second step is to develop a business philosophy. It's a set of guidelines that help business leaders communicate and institutionalize ideas that are critical to running the company. Business ideas come from the top of the company, have distinct personal characteristics, and are often aligned with the ideas of the head of the company.

It is often said that a great company requires a great culture. Yet the characteristics of corporate culture are often vague and too general to serve as guidelines for employees. For example, an important component of some corporate cultures is putting the customer first. But what exactly should employees do?

In contrast, a business philosophy is something very specific and involves everyday issues. General Electric's former CEO Jack Welch (Jack Welch) put forward the "first, second strategy", every employee understands what this means: a company must be the first or second in the market, otherwise just leave this market. When Welch suggested that the company should be "borderless," GE employees began to remove the barriers that hinder the flow of information and normal operations.

If business leaders truly understand the value of cultivating business ideas, they should adhere to the following principles when communicating these ideas:

● Straightforward: Clearly and honestly communicate the tasks to be accomplished and the expectations for employees.

●Unsurprisingly: Be consistent; don't hide important issues.

●Speak with facts: The basis for making strategic choices should be provided, including data.

●Keep your promises: keep your word and deeds, or you will lose trust.

Welch succinctly conveyed his intention: to make GE "the most competitive company in the world." He then gave his employees a set of guidelines for decision-making, and he acted decisively himself. And most importantly, he knew how to bring his organization to his lead.

Governance Capability

Governance here refers to operational governance, not corporate governance. It involves how decisions are made and how leaders make teams subordinate to management. Leadership should answer these questions: Do we have a rigorous process for allocating resources and using funds? Are we using appropriate performance indicators to measure appropriate behavior? Are we implementing strict performance management mechanisms?

There are three important components of operational governance: accountability to people, performance management systems, and discipline.

The responsibility rests with the people. To turn around business woes, business leaders must implement strong accountability mechanisms. Not only do leaders need to know what work to assign, but they must also ensure that their senior executives are responsible for effectively and accurately implementing the assigned tasks. The most important thing is that they have to make a grade.

To hold employees accountable, collaboration is essential: management and employees must work together in the implementation of corporate strategy. Fostering a spirit of collaboration means giving employees, both inside and outside the decision-making level, an accurate understanding of how the company operates and its purpose at all times.

Performance Management System. One of the best ways to achieve accountability to people is to implement a sound performance measurement system. A proper performance measurement system helps employees understand where work is being prioritized, how work is measured, and how those work affects performance across the company. Great business leaders develop incentives to ensure that employees strive to deliver performance that contributes to the company. Unfortunately, most company performance evaluations are based on the employee's job itself, not the degree to which that job affects the company's strategy. In this way, employees have no impact on the company's financial performance.

Discipline. In addition to accountability to people and performance management, discipline is also important. Discipline mainly means that the employee knows what work has to be done and ensures that the work is done without compromise.

According to research by Jim Collins, author of Good to Great, there is no magic formula for business success. Collins found that successful businesses don't need a famous president, the latest technology, or even a brilliant business strategy. What businesses need most is a culture that finds and promotes employees who think hard and act decisively. These employees are able to get work done quickly and efficiently, rather than bureaucratically procrastinating and procrastinating.

Lou Gerstner, who took over IBM in 1993, exemplifies this discipline. At the beginning of his tenure, the board asked him to focus on a short-term goal: saving IBM. Gerstner realized that the problem IBM had faced over the years was not product quality but poor management execution.

According to Gerstner, the company must consistently and consistently execute on its plans. All parts of the company must accept his way of doing business from beginning to end. Gerstner set an example by not talking about things outside of work during office hours. He made frequent field trips and got to know the client; he learned to catch the main problem. He insists on self-discipline and wants that message to reach all employees as well.

In order for IBM employees to properly implement the plan, Gerstner felt that a sense of crisis should be conveyed. He thinks IBM employees take too long to make decisions, study too much, and have too many meetings. Gerstner has often said that acting quickly may be better than seeing things. Acting quickly is not reckless, but rather a sense of "today's done today" urgency in moving forward with the project. He knew that if he could shorten meetings, allow management to make decisions faster, and get products to market faster, IBM would be moving in the right direction.

One day early in his tenure, Gerstner planned to move a product launch a few days earlier to get ahead of his competitors. Some employees told him not to, because IBM always only releases new products on the first and third Tuesdays of every month. Guess what Gerstner did? He insisted on moving the date forward. If he doesn't like a part of IBM's culture, he changes it.

Key Capabilities

A key capability is the ability of management to take concrete steps to overcome a difficult situation, and it is entirely action-centric. This is a key skill and ability that business leaders must possess. Do you have these abilities? You can try to answer the following questions: Does the organization’s DNA include cost and productivity improvements (organizational DNA is the organizational characteristics that adapt to the company’s own characteristics and strategic needs, and generally consists of four aspects: enterprise structure, decision-making power distribution, information transfer, and driving forces) composition, see the July 2004 issue of this journal "How to Help Small and Medium-sized Enterprises Grow Up")? Are you good at spotting and weeding out underperforming businesses? Which business functions need to be retained and which ones need to be abandoned?

Key competencies include: productivity management, talent management and focus on corporate restructuring transactions.

Productivity Management. This includes cost management, working capital management and the adoption of technology to increase productivity.

Those companies that have managed to break through are treated differently when it comes to cost management. These companies will never cut costs indiscriminately, and more importantly, they will never cut costs across the board. Their main focus is on continuous improvement in cost of goods sold and working capital.

Management of working capital helps business leaders increase cash flow from investing activities. Approaches to improving working capital efficiency vary by industry and generally focus on key business processes such as inventory, accounts payable, and accounts receivable. For example, Dell's inventory time is much shorter than that of its competitors, which reduces the financial pressure needed when the company is growing rapidly.

Business leaders who are breaking through the traps place a high priority on using information technology to improve processes and increase productivity (see the box "Three Ways to Improve Productivity and Processes").

Talent Management. This means putting the right people in the right roles and retaining them for the long term. Jack Welch and Larry Bossidy, the former chairman of Honeywell International, both spend a lot of time scouring the company for the best talent with a view to developing the company's future leadership. . Both leaders have often said that the best strategy is useless for the company without the right people to execute it.

Key competencies also include deliberately retaining top performers, removing the bottom 10% of underperforming employees, and regularly improving the talent pool.

Focus on corporate restructuring transactions. One difference between successful business leaders and unsuccessful ones is their intense focus on acquisitions, mergers, and divestitures. A corporate divestiture is the sale of part of a business or asset, and outsourcing also falls under the category of divestiture.

Acquisitions are a major way for many companies to grow. However, great business leaders don't rely solely on acquisitions to increase sales. They understand that they should rely on their own products, not the acquired company, for this purpose. Also, these companies are focusing on developing their core revenue streams, rather than just looking to grow through acquisitions. Most importantly, business leaders who have overcome adversity know that the post-acquisition merger implementation process is more important than the transaction itself. They make sure that the acquired company is integrated into the parent company.

Novartis was created through a corporate merger in 1996, a corporate restructuring deal that shows why this is a key capability for corporate leadership. Dan Vasella, president of Novartis, knows that success doesn't come easily. He learned that the two merged companies, Ciba-Geigy and Sandoz, both had very slack cultures, and the leaders of the companies did not have enough innovative spirit and courage.

Vassera knew that if he wanted to weed out the inefficient parts of Sandoz and Ciba-Geigy, he would have to make bold changes quickly. He spent a lot of time studying in the United States, learning the American way of doing business with a strong emphasis on sales and marketing. Vasella needed Novartis to produce high-quality products and get them to market quickly.

In order to reject the snail-inefficient corporate culture of Ciba-Geigy and Sandoz, Vasella established strict performance standards. He abolished "work tenure", which had been in place at both companies and acted as an umbrella for employees. Vasella wants to scrap that umbrella and make employees work harder. To inspire employees, he developed an incentive mechanism and increased the amount of bonuses. He urged the Swiss unions to agree to performance-based incentives for every employee, including those at the lowest level. In addition, he recruited senior executives and asked them to focus on marketing. At the same time he fired managers who were not motivated. With outstanding achievements, Vasella was later named one of the 25 best managers in the world.

Originally adapted from the first edition of Ruthless Execution: What Business Leaders Do When Their Companies Hit the Wall by Amir Hartman with permission. The book is published by Financial Times Prentice Hall, and the author is copyrighted in 2003. Translated by Dai Fenghua.

Amir Hartman is a global authority on business and technology transformation. He is also the author of books such as Net Ready and Search for Digital Excellence.