Every general manager today—all the way up to the CEO—is expected by his or her stakeholders to achieve new breakthroughs in performance—and fast. Those who don't make visible progress toward that goal within the first year or two will likely find themselves looking for another job. It is precisely because of this growing breakthrough imperative that managers today, whether in corporations or nonprofits, need to get off to a fast start. They don't have time for mistakes or for going back and redoing what they should have done right in the first place.
But, despite the intensity of these pressures, despite the high expectations and short time frames, a number of CEOs and general managers turn in truly exceptional results. How do they meet and exceed the breakthrough imperative? To answer this question, consultants and former managers Mark Gottfredson and Steve Schaubert interviewed more than forty CEOs from both industry and the nonprofit sector, conducted an intensive study of what successful managers do right—and what some do wrong—and drew on their own combined fifty-plus years of experience at Bain & Company, where their insights have consistently been found in the pages of the Harvard Business Review. Together they came up with the four straightforward principles—deceptively simple yet remarkably powerful—that everyone must follow to succeed at achieving breakthrough results:
1. Costs and prices always decline
2. Competitive position determines options
3. Customers and profit pools don't stand still
4. Simplicity gets results
Although seemingly simplistic, mastering these four laws means mastering the basics of great management—a foundation on which to build the rest of one's management strategy. Whether you're managing a small work group or a multinational corporation, a single division or an entire nonprofit, The Breakthrough Imperative presents these core laws of business to help you determine where you are, just how far you can go, and how to get there with stellar results.
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About the Author
Mark Gottfredson is a partner in Bain & Company's Dallas, Texas, office, which he founded in 1990. Currently global head of Bain's performance improvement practice, he has advised clients in a wide range of industries and is a leader in the firm's business strategy, airline, manufacturing, and retailing practices. In 2005, Consulting Magazine named him one of the world's top twenty-five consultants. He has written extensively for publications such as the Harvard Business Review, Wall Street Journal, Singapore Business Times, The Edge (Malaysia), South China Morning Post, London Business School's Business Strategy Review, and World Business Review. He is fluent in Japanese and has worked extensively in Japan. Mark graduated magna cum laude from Brigham Young University and received his MBA from Harvard Business School with high distinction in 1983. He lives in Dallas.
Steve Schaubert is a partner in Bain & Company's Boston, Massachusetts, office. He joined the firm in 1979 and became a partner the following year. Currently Bain's chief investment officer, he has worked with clients in numerous industries including steel, textiles, automotive, health care, consumer products, distribution businesses, and financial services. Prior to joining Bain, he held several senior general management positions in the health care industry. A summa cum laude graduate of Yale, Schaubert earned his MBA from Harvard Business School with high distinction, and an MS in engineering management from Northeastern University. He lives in Boston.
Read an Excerpt
Breakthrough Imperative, The
The Two Keys to Breakthrough Results
You only have to do a very few things right . . . so long as you don't do too many things wrong.
Gary DiCamillo took over Polaroid Corporation in 1995.
It was his first job as CEO, but he was hardly inexperienced. He had gone to Harvard Business School and built a successful career. Before coming to Polaroid he was a high-ranking executive at Black & Decker, charged with turning around the company's power tool division. Though trained as a chemical engineer, he described himself as a "consumer products guy." The press portrayed him as smart, likable, and decisive.
Polaroid's board knew that the company faced some strategic challenges. Its signature instant cameras weren't the big hit that they had once been. Digital photography was coming down the pike fast, threatening traditional film-based cameras. But the right CEO with the right strategy, the board believed, could turn things around and lead the company into a profitable digital future. After all, Polaroid had been conducting intensive research and development on digital imaging for nearly fifteen years. Its image-sensor technology and image-compression algorithms were highly advanced, and were protected by several key patents. It even had a professional-grade digital camera, the PDC-2000, ready for production. When the camera came out in March 1996, it won rave reviews from analysts and photography experts.
But though Polaroid seemed to know where its future lay, it wasn't able to get there. The reason is clear in hindsight: though the company had great R&D, it didn't have the other capabilities required to execute a winning digital strategy. Five years later, Polaroid's business was a shambles, and the company filed for the protection of bankruptcy court. Its digital cameras were doing poorly in the marketplace. Its instant camera and film sales were continuing to decline. Polaroid was eventually acquired by a Midwestern holding company, Petters Group Worldwide, which owns a variety of consumer brands.
In late 2002, Warren Knowlton took over a company called Morgan Crucible, a 150-year-old UK-based manufacturer of carbon, ceramics, and other industrial components. Like DiCamillo, Knowlton was assuming the role of CEO for the first time. And he, too, was an experienced executive. He had spent twenty years with Owens Corning and five with Pilkington, the big international glass manufacturer. Morgan in late 2002 was in far worse shape than Polaroid in 1995. Sales had declined for three straight years. Profits had vanished. Debt was high, and pension liabilities were three times the company's market capitalization. The banks were growing nervous. So were shareholders: Morgan's stock price had declined 90 percent between 1997 and 2002.
And yet, only three and a half years later, Knowlton had executed a transformation. By mid-2006, Morgan's continuing businesses had registered 5 to 6 percent revenue growth for three straight years. Operating margins were more than three times what they had been when Knowlton arrived. The company had paid down its debt and secured its pension fund. The share price had risen more than tenfold, and analysts were once more issuing "buy" recommendations.
One company that should have succeeded but didn't.
Another that seemed destined for failure but turned itself around. Two smart, experienced, and capable leaders. What accounts for the difference?
We will try to answer that question in this book, and not just for Polaroid and Morgan Crucible. Rather, we want to use these two companies and many others to dissect the challenge of improving an organization's performance. We want to highlight the lessons learned by leaders who have run the management gauntlet, who have learned to achieve results for their companies as they rose through the ranks. We hope to distill the best of their insights and experience for other CEOs, especially those new to the job, and for every up-and-coming general manager who may aspire to the corner office.
Our aim is not to convey new strategies; rather, it is to articulate a short list of business fundamentals that are essential to performance improvement, and then show how to apply them. Staying focused on the fundamentals takes enormous discipline. Whenever new leaders take over the reins of a business unit or indeed any kind of organization, they face a daunting list of tasks. They find they must spend time with other managers in the company, with key customers and suppliers, and with the company's financiers. They must simultaneously look to the future and run the day-to-day business. If the company is public, the new general manager will feel the pressure of reporting quarterly results. If it's a private company, a division of a corporation, or a nonprofit, the pressure will still be there...it will just come from investors, bosses, or donors, who will expect answers about cash flow and covenants and forecasts. Knowing what to do and in what sequence can become an overwhelming challenge, particularly since everything initially appears so urgent.
Today the pressure on managers is more intense than ever. The average price-to-earnings ratio on Wall Street and other global exchanges has generally been climbing for thirty years. Companies find that they must deliver increasing levels of growth and profitability or leave themselves vulnerable to takeover. Top executives facing this clamor for performance naturally expect quick results from everybody under them. Managers throughout the organization "have to perform or perish," said CEO John A. Challenger of the outplacement firm Challenger, Gray & Christmas, which tracks managerial tenure. "If you don't produce immediate results, you just don't have much room to move."1
One sign of the increased pressure is that nobody gets much time to show what he or she can do. Between 1999 and 2006 the average tenure of departing chief executive officers in the United States declined from about ten years to just over eight.2 The distribution is bimodal: about 20 percent of CEOs have very long tenures (the average is twenty-three years for this segment), and about 40 percent last an average of less than two years. . . .Breakthrough Imperative, The
. Copyright © by Mark Gottfredson. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.
Table of ContentsThe Two Keys to Breakthrough Results 1
First Law: Costs and Prices Always Decline 21
Second Law: Competitive Position Determines Your Options 55
Third Law: Customers and Profit Pools Don't Stand Still 97
Fourth Law: Simplicity Gets Results 147
Where You're Starting From: Diagnosing Your Point of Departure 181
Where You're Going: Mapping Your Point of Arrival and Making a Plan 225
The Road to Results 247
Research Methodology 285
Experience Curves 295
The Full-Potential Performance-Improvement Diagnostic 307