Joel Strom

Tuesday, 24 May 2005 06:20

Puppy love and growth

Recently, in Phoenix, I heard PETsMART CEO Philip Francis talk about his company's growth. PETsMART got its start with just two stores in 1987, and today has annual revenue of more than $3 billion. That got me thinking about the lessons Francis has learned.

Outgrowing the infrastructure

Francis said PETsMART began with a great idea that met a need in the market, allowing the company to grow very quickly. The problem was that it grew so quickly -- outgrowing its infrastructure -- that "they almost lost it," he says.

Companies can and do grow themselves out of business. In PETsMART's case, Francis recognized what was happening when he was hired as CEO in 1998 and was able to pull the company back before it disintegrated. He put a temporary hold on expansion and rebuilt the operational structure to support the growing enterprise.

He also closed the gaps in support and outlined the type and quality of people required to turn the company around and achieve continued successful growth.

Focusing on employee fit

Francis and his management team understood how important organizational culture would be to the turnaround efforts. They also understood that the company had an opportunity to create a unique pet/family centered culture.

To accomplish this, he changed PETsMART's hiring practices and focused on finding the right employees to fit the culture.

When the company hires into positions requiring a college degree, it doesn't care what that degree is as long as the candidate is the right fit. He has confidence that no matter what the degree, if the fit is right, his team can train the employee in the skills for the job and in the PETsMART way.

This is straight-forward business management - recognizing a problem, developing a solution and implementing it. Too many companies fail to recognize problems until it's too late. But identifying them early on, then making solving them the primary focus, can lead to even more stellar growth than your company experienced before.

Joel Strom is the founder of Joel Strom Associates. His firm works with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Reach him at (216) 831-2663 or jstrom@cp-advisors.com.

Tuesday, 22 March 2005 06:12

Man in the mirror

I've worked with some really successful businesses, and others that had just as much potential for greatness but were never able to put it all together.

What was the difference? There was no single reason but there is one underlying cause -- the owners. An entrepreneur is his own greatest enemy.

This enemy can take many forms. It could be the inability to seek advice; even the smartest among us do not have all the answers. Yet too many entrepreneurs refuse to tap outside assistance. To be fair, there are entrepreneurs who are open to and seek advice, and run highly successful companies. They recognize that getting help is not a sign of weakness but of brilliance.

Sometimes, the enemy arrives disguised. The frustrated entrepreneur says he or she wants advice, solicits it but ignores it. In these cases, the enemy's form is "rationalization," which can be dangerous to the company's future.

Entrepreneur rationalizes away the advice so they can keep doing what they've been doing. The worst-case scenario usually involves financial performance, and the resulting wounds can be fatal if an entrepreneur rationalizes poor financial performance as simply a blip on the radar screen.

A final form of the enemy is "take no action," which closely resembles rationalization. In the take no action form, the entrepreneur, when faced with a pressing situation, either takes no action or is extremely slow to do so. When quick action is required, this can severely hamper any chance for success.

So how do you battle this enemy? Your employees can be great soldiers in defense. They have the ability to see the battlefield from a more realistic perspective. Unfortunately, entrepreneurs often see employees as the enemy and direct the fight at them rather than utilizing them to help overcome the real enemy, themselves.

The first step to overcoming the enemy is admitting that it might exist. Look closely in your mirror. Is the enemy preventing your business from reaching its true potential staring back?

Joel Strom is the founder of Joel Strom Associates. His firm works with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663 or jstrom@cp-advisors.com.

Monday, 20 December 2004 11:30

Innovation

Innovation has always been one of the great differentiators of fast-growth companies. In today's super-competitive environment, in which every customer is important and every sale dollar is critical, innovation has become more important than ever to success and growth.

When a company introduces a new product or service, there is a lot of excitement. Unfortunately, not only does this innovation get the attention of the potential customer, it also gets the attention of the competition. And it probably won't be long until the competition either copies the innovation or goes it one better.

The good news is that innovation can separate your company from the competition and provide new revenue opportunities. A new product design or service offering can cause a stir in the market. However, most innovations have limited lives in which they provide a competitive advantage. Consider a decade ago when golf club manufacturer Callaway introduced its new titanium driver.

For nearly three full years, the driver gave Callaway a competitive advantage in the industry. But as competition heated up, other manufacturers introduced their own innovative drivers, removing Callaway's competitive advantage. Today, that advantage can be as short as a single year. No matter how long the advantage, innovation is imperative to success. It is comprised of a four-step process.

* Introduction. It is here your company has its greatest advantage. You attract new customers, solidify existing customers and often achieve premium pricing for your product or service.

* Growth and maturity. This incorporates two stages. As more competitors copy the innovation and you expand its use, your business loses more of its advantage. The market, therefore, moves the innovation closer to being the standard. Customers see less and less differentiation, and prices tend to equalize.

* Required. There is very little, if any, advantage here. The market considers the innovation standard. What was once a new innovation is now required if a company wants to stay in the market.

Today, in order to grow and remain competitive, companies can no longer consider innovation an option. But innovation cannot be a one-time event. To be effective and continue to provide advantages that your company desires and requires, innovation must be part of your corporate culture and a cornerstone in your growth strategy.

Joel Strom (jstrom@cp-advisors.com) is the founder of Joel Strom Associates. His firm works with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.

Tuesday, 22 June 2004 12:23

Sowing seeds

Most business owners want to grow their companies.

However, no matter how sincere they are, only some will achieve the desired growth. The others will continue to talk about their desire to grow but it won't translate into action. So what's the difference?

There are many reasons companies achieve or don't achieve growth. But there is only one underlying requirement that forms the foundation for the companies that do achieve growth -- their leaders understand that growth must be cultivated.

Cultivating growth requires that leaders have a clear vision, confidence in their ability to reach that vision and the willingness to invest in the resources necessary to enable them to utilize their abilities. Clear vision establishes the growth target and point of focus for all of the organization's resources. Growers commit to that vision and are passionate about achieving it. They understand that investing in long-term growth possibilities may reduce short-term profitability.

The stagnators have a different perspective. Their concerns are focused on "what if" scenarios. They ask, "What if the investment in resources doesn't pay off?" rather than balancing the risk with the prospective reward. Stagnators are focused only on today's profitability and are unwilling to take calculated risks.

Short-term profits important, and it would be impossible to maintain your business without them. But if a company is committed to growth, management must be willing to invest some of those short-term profits into the resources necessary to achieve long-range growth.

Uncontrolled and undisciplined investment of current profits into growth-related resources doesn't benefit anyone. It's important to maintain a strategic growth focus. It's not that the stagnators don't want to grow; it may simply be that they say it before they know what specific plans they'd be committing to finance growth.

If business owners and managers really understood what commitment and investment was required, maybe fewer would say they want to grow their businesses. Then, they could adjust their vision to better reflect their own reality. Joel Strom (jstrom@cp-advisors.com) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.

Friday, 30 January 2004 07:32

Off the shelf

I spend a great deal of time convincing people of the benefits of planning, explaining it is not that difficult and can actually be fun.

You get to choose goals and then decide how you will achieve them. When else in your job as a business owner or manager can you move away from the reality of today and think about what you would like the reality to be in the future?

Why, then, do so many people groan whenever planning is mentioned?

My bet is that the groaners have either been involved with or heard stories about intense planning processes -- the type in which the participants invested time and energy into developing a plan they truly believed in and were excited about, but it was then placed on the shelf once it was announced to their organization.

Planning processes have a bad reputation, not because they don't work but because they are not allowed to work. The only way a planning process can provide the organization and its people with real benefits is if the plan gets off the shelf.

Two things are needed for a planning process to produce real results. The first is a commitment by management that the plan will not simply end up as a nice-looking binder among other books and paperwork. Management must support the plan and manage by it.

The second, and perhaps even more important requirement, is to involve the organization in the process. The more people that get involved in at least some part of the planning process, the better the chances for real payback.

By their involvement, people gain ownership in the plan, then create and maintain the momentum that ensures it gets implemented. Successful implementation then becomes less dependent on management.

However, true involvement must be more than the announcement of a management-developed plan at a company meeting and a few rah-rah speeches about how this plan will move the company forward to new heights. Real involvement means being a participant in the process itself, and having opportunities to provide meaningful input. It means some part of the plan (even if it's a very small part) must have your employees' signatures on it.

The right planning process enables you to enjoy the creative aspects of the project. It excites and even grows your team through their involvement. And it produces a plan that doesn't have much chance of getting stuck on a shelf. Joel Strom (jstrom@jsagrowth.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.

Wednesday, 17 December 2003 06:42

A leaf turned

Every year at this time, people make resolutions to change their ways for the coming year. Here are a few you may want to consider as a business owner or manager.

Stay on the diet

Now that there are signs the economy is starting to come back, heed the lessons learned over the last few years and resolve to stay on the "diet" that the economy forced you to be on.

If you can preserve the improved efficiencies and cost controls, the new year's new growth will be that much more profitable.

Hone your focus

The most successful owners understand their competencies and maintain a strong and selective focus. This allows them to direct the majority of their resources -- money and people -- toward what they are best at and what can produce the greatest return for the company.

Resolve for this year to gain an understanding of your competencies and focus the resources of the company toward utilizing those competencies.

Don't lose the passion

One of the most important components of success for entrepreneurs is their passion for what they are doing. Wayne Huizenga, a very successful entrepreneur, when asked in a recent interview how he could have passion for videos (Blockbusters), trash (Waste Management), cars (Auto Nation) and baseball (The Florida Marlins), he responded that he didn't.

He said he is passionate about each of these as businesses. He is passionate about building them and seeing the profits get larger each month.

Whatever your passion, whether it is the business itself, the product or simply growing the business and increasing profits, resolve to keep that passion alive and strong in the coming year. Then, resolve to spread that passion throughout the organization by your actions.

Build your team

Think of the successes you have had over the past year. Then think about how many of them were due to the strength of your team.

For those successes to continue in the coming year, the care and feeding of that team becomes very important. Make a resolution for this and every year to never lose your appreciation for your team members and their role in your success and the company's.

Then resolve to continuously invest in that team in order to continue to develop and strengthen it.

Recommit to your vision

Are you where you thought you would be today? Where do you want to be next year at this time?

Where do you want to be five years from now? Are the visions you established in the past still valid?

Achieving a vision requires true commitment to that vision, and true commitment requires that it be clear and real. Resolve to rethink, redefine and recommit to your vision for the future. Then strengthen your vision and the benefit it can provide to the organization by resolving to share it with your team.

Best wishes for a happy and prosperous new year. Joel Strom (jstrom@jsagrowth.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.

Friday, 28 March 2003 06:18

Regaining control

The world has changed in a short period of time.

It wasn't long ago that we were confident we could project future business activity and profits with some degree of accuracy. We felt in control.

Now, many feel out of control. How can you make good business decisions when you can't predict what the demand will be for your products or services next week, let alone next year?

Something beyond your control -- the environment -- is attempting to control your business and your success. You may not be able to change that environment, but you can't take a "lets just ride it out" attitude, either.

Work on the internal factors, areas you can control. Reassess how you do things and how to do things better. This can help you regain control and reduce the negative effect of the environment.

Pricing is one of the most important areas the environment has taken control over. No longer can you set prices based on costs plus a healthy dose of overhead and a nice markup. The power of pricing has shifted to the buyer and the competition.

The competition has excess capacity and will sell at any price to keep its factory running or its people busy. The customer knows there is excess capacity and pressures suppliers to lower prices or lose business. This reflects a business owner operating under environmental control.

But it is possible to take back pricing control. This requires a better understanding of your true costs and overhead, and of your company's competencies. Those who lack this understanding often make poor pricing decisions. They take orders they should have passed on or pass on orders that could have contributed to the bottom line.

Taking back control requires examining the pricing process and determining which products and services are helping and which are hurting. A reassessment of pricing strategy requires:

* A realistic assessment of core competencies. Determine which products and services you are good at producing and which you can never realistically be competitive on without losing money.

* A realistic assessment of the way direct costs and overheads are applied to determine prices. Should every product or service carry the same overhead burden? Products may be charged a disproportionate part of the overhead and your best customers may be paying huge portions of the overhead.

Eliminating products or services may prove the best strategy. Refusing work and reducing gross sales can be discomforting, but you will regain control and maintain profitability. Joel Strom (jstrom@jsagrowth.com) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.

Monday, 22 July 2002 09:42

Clear vision

In “Alice in Wonderland,” Alice asks the Cheshire Cat which way to go. When he asks where she wants to go, she answers, “I don’t care.”

The cat replies, “Then it doesn’t matter which way you go.”

The same holds true with operational succession planning. If you don’t know where you want to go, it’s impossible to develop a plan. Last month, we saw what could happen to a successful company as it transitioned to the next generation. The disaster could have been averted with a little effort and basic planning.

But it all begins with choosing a direction.

Commit to the vision

Determine what you want to accomplish, your vision for the future. This impacts not only the future of the company, but that of yourself and your family.

Some owners have absolutely no idea of their vision. Others have a fairly well established vision. Finally, a very few have actually put their vision on paper. Until that vision has been defined to the point that it is written, it is too loose and too easy to change or forget.

Just the act of writing it causes you to think about it, and because it is written, it is more permanent, more real, and, to some, more frightening. Documenting your vision confirms your commitment to it.

How difficult this process is depends on the individual. To some, it is natural to work toward a vision. It was the vision that got them into their business to start with. To others, it is a really difficult task. The good news, if you fall into this second category, is that the vision is usually there, it just needs to be coaxed out.

The important thing to remember is that no matter how difficult the task may be, it is the first step in ensuring your future, your business’s future, and your family’s future. As the owner or CEO, you cannot use the excuse that you are too busy running your business to deal with this now. It is your job.

It is so crucial and so important to future success that I often recommend that clients go away from the business to someplace they can do some serious, dedicated, uninterrupted thinking.

A good example

One of the best and most succinct examples I have found is that of the owner of a growing business who told me that his vision was that 1) He wanted to be out of the day-to-day operations in five to seven years; 2) He did not want his kids in the business; 3) He wanted his employees to have opportunities for equity in the business.

With a vision so well defined, it wasn’t very difficult to move through the next steps in the operational succession process. He is now implementing the plan we developed, which should enable his vision to become reality.

I’m too young to worry about succession

It is never too early to start planning for succession. It is understandable that the earlier you start, however, the less defined the succession objectives may be.

It’s too early to tell whether your kids will want to be involved or what the future holds for you and the business. Don’t use this as an excuse. Set the vision and begin the succession planning process now and modify it as time goes on and your situation changes.

On the positive side, the succession planning process should make your company and organization stronger and enable it to maintain successful growth. You can reap those rewards even if you avoid that bus for many years to come.

The process

Setting the vision is an important first step in the operational succession planning process. Once it is set, you can move on to the other three: assessing the current situation; developing the succession plan; and implementing the plan.

Next month, we will examine how assessing the current situation will help determine the extent of the gap between where you want to go and where you are.

Joel Strom (jstrom@jsagrowth.com) is president of Joel Strom Associates Inc., Growth Management. His firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.

Monday, 22 July 2002 09:41

Reality check

It’s not hard to develop great operational succession visions for your businesses.

Perhaps you want to move out of the daily operations as the kids take over. More golf, more vacations without calling back to the office every day, less stress and a comfortable retirement.

Or maybe your succession vision is to sell the company for a nice amount of cash or stock that will help pay you back for all of your years of hard work and provide a very comfortable life for you and your spouse.

Reality check

Last month, I discussed the first step in the operational succession planning process, establishing your vision and objectives. Once those are clear, you can develop the plan to achieve that vision.

The first part of developing that plan is to understand where you are now. By assessing the current situation in the business, you can determine how close you are to achieving your objectives. This also serves as a reality check on whether your vision is realistically attainable.

One client, the owner of a technology development company, wanted to sell his business to a public company within the next five years. While performing the assessment, we found that the company’s product and service would likely be an attractive strategic acquisition for a number of public companies.

We also found, however, that the organization had major deficiencies. The owner was completely in charge of the day-to-day activities of the business and the middle management team was either nonexistent or sorely incapable of moving the owner out of that role.

The key to added value

The owner’s vision was to sell to a public company, but even if he had wanted to succession it to his family, the weak management team issue loomed large. A potential suitor or successor equates a strong management team, capable of running the business successfully, without the owner, with a higher value. An investment banker recently said that if the management team is not in place, he loses interest in the acquisition.

Our assessment revealed there was quite a gap between the owner’s vision and the reality of achieving it. For the vision to become reality, a management team would need to be developed and the owner would have to become less important to the company’s success. These missing requirements for attaining the vision provided the basis for developing and implementing the company’s operational succession plan.

The need for objectivity

To be worthwhile, the assessment process needs to be objective. Objectivity, however, is sometimes very difficult for business owners. They are involved in the business daily, and, therefore, are often unable to back up and take an objective look at the company and its people.

There are also ego issues. Business owners know their efforts, dedication and hard work built the company, and thus, it is often difficult to admit that perhaps not everything is perfect and that the company, operating as it is today, may not be worth as much as they think.

Unfortunately, you may not discover that you are going down the wrong road until many dollars and years have been invested.

Once the assessment has been accurately and objectively completed, a plan for closing the gaps can be developed. Next month, we’ll discuss utilizing the results of the assessment to develop the operational succession plan.

Joel Strom (jstrom@jsagrowth.com) is president of Joel Strom Associates Inc., Growth Management. His firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.

Monday, 22 July 2002 09:41

Closer to the goal

I’ve developed some of my best plans while driving to work, exercising or sitting on the patio.

The problem is that I can’t easily write them down, and by the time I find a pencil and paper, the idea has begun to slip from my mind. Worse, when I analyze these great plans, they are usually missing some key elements and turn out to be not so great after all.

Over the past few months, I’ve discussed the importance of operational succession planning and the initial steps in the process. This month, we’ll cover development and documentation of the plan.

The plan itself is much too important to dream up while driving to work because it’s designed to ensure the continuation of your business and the well-being of your family. It must be well thought out, take all factors into account and be written out.

Closing the gap between vision and reality

Once the first two steps are complete, you should have a clear vision and understanding of the situation in your company and realize the size of the gap between your vision and your team’s ability to achieve it. Closing this gap provides the basis for the succession plan. The plan is simply the road map for developing an organization and key management team capable of realizing the vision.

I hear so often, “Give it time, the organization will grow into it.” It may, but then again, it may not. Perhaps your vision is to be working a reduced schedule in five years and be totally out of the company in 10. The key is to make sure the organization will be ready when you are.

A series of action steps

Once most business owners understand the concept of closing the gap, some of the mystery (and fear) goes away. The plan becomes a series of action steps designed to develop the team. These steps could include:

  • Planned career progression;

  • Increasing responsibility for key management;

  • Formal management development programs;

  • Personal coaching of selected managers;

  • Finding, hiring and evaluating new talent when necessary.

This may take years to accomplish, so the plan must be a fluid document that is reviewed and updated regularly. Building milestones and timelines into the plan can ensure it is working and taking the company in the right direction.

Undesired but planned

Your efforts in developing the plan are likely directed toward a desired planned succession. But there remains the real potential for an undesired and unexpected succession caused by the proverbial bus or other untimely mishap or illness.

If a contingency plan is part of the overall succession plan, it can ensure that even if unexpected and undesired, the succession may remain planned. That can help ensure minimal disruption of the operation and minimal loss of value.

I was involved in a situation in which the owner had no operational succession plan, even after learning that he had a terminal illness. Following his death, the company struggled for months, and as happens in these situations, its value began to decrease immediately upon his death. His children, who had not previously been involved in the business, were forced to take an active role to salvage its value.

To share or not to share

Once created, the plan must be implemented. A question often asked at this juncture is, “Should I share the plan with the organization?” The answer, in most situations, is yes ... but sparingly, carefully and differently to different persons.

Sharing parts of the plan can give employees a feeling of security. They know you have thought about and are planning for the future of the company and their jobs. But sharing the wrong information can create insecurity.

If you tell them you are building the company so that it can be sold, they may feel their future is in jeopardy. Sharing the name of the heir apparent to the presidency or other positions can cause elation in some, but can also cause deep organizational strife.

We will further examine this question and other plan implementation issues and suggestions next month. Joel Strom (jstrom@jsagrowth.com) is president of Joel Strom Associates Inc. Growth Management. His firm works exclusively with closely-held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Contact him at (216) 831-2663.

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