Take No Prisoners: A No-Holds-Barred Approach to Corporate Excellence

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9780814480601: Take No Prisoners: A No-Holds-Barred Approach to Corporate Excellence

Now more than ever, American companies are experiencing a nagging feeling that they could be doing much better. Globalization, digitization, and the development of cellular technology have increased competition by leaps and bounds. As a consequence, skating by on marginal performance isn't enough. It's time for businesses to find the tools that will help them excel. A turnaround expert, Marvin Davis has made a career out of transforming underperforming companies. He assesses their mistakes, issues a diagnosis, and has helped allay the fears of many CEOs across the country - leaving businesses more efficient and ultimately more competitive.In "Take No Prisoners", he gives hard-line, tough-love solutions to the real and difficult problems that hinder profitability. By addressing issues that may at first seem too messy or dangerous, companies can learn how to truly improve performance, increase profits, and boost cash flow. Companies shouldn't wait until they are in dire straits to make changes; they can alleviate many problems if they act now and meet them head-on. Through real-life examples of corporations who have made these solutions work successfully, "Take No Prisoners" tells American companies the truth about the state of their business, and how to make it even better.

"synopsis" may belong to another edition of this title.

About the Author:

Marvin A. Davis, CTP (Atlanta, GA) is the author of Turnaround , the classic how-to manual on returning businesses to profitability. He has chaired the boards of Simplicity Patterns, Datamax Corporation, and Folger Adams Corporation, and his clients include Advent International Corp., Polaris Capital, and Liberty Partners International Corp., and Liberty Partners.

Excerpt. Reprinted by permission. All rights reserved.:

C H A P T E R ■ T W O

COMMON LIES COMPANIES

TELL THEMSELVES

I have seen great ideas wither and die because companies tell

themselves lies that are ingrained in their corporate makeup, and

thus they fail to fix problems. This is why one of the biggest problems

in optimizing a company’s profitability is not external (unless

the market strategy is extremely flawed). It is the culture of the

company.

So what are these lies?

‘‘WE’RE SO MUCH BETTER THAN THE

COMPETITION, WE DON’T HAVE TO WORRY’’

This is corporate chutzpah or arrogance. IBM, General Motors,

and Ford, all major companies with great resources, fell into this

trap. They underestimated their competitors and took their eyes

off the ball. IBM failed to realize that it was not ‘‘keeping up’’

with more agile companies in the PC market and lost its position

through sheer arrogance.

Ford, GM, and other U.S. carmakers failed to see the strategic

steps of the Japanese carmakers, failed to understand the Japanese

carmakers, failed to understand the consumers’ desire, and

have lost tremendous share to offshore companies over the last

50 years. Toyota is now the largest auto manufacturer in the

world, but Ford and GM are struggling to stay alive. I will revisit

the Ford and GM problems since there are many other problems

in these companies. But at many points in their histories these

companies have been poster children for Arrogant Corporation

Syndrome.

For example, I was once being interviewed for the board of

one of IBM’s ‘‘enterprise’’ businesses. The business had developed

a new method of creating DVDs, was about to go into the DVD

publishing business, and professed to be seeking guidance in this

area. During the interview I asked how IBM was picking titles,

because I saw the enormous potential of information flow,

through the computer, of this new medium.

The thing to remember in all of this was that the people who

were running the enterprise were all born and bred IBM ‘‘techies.’’

They stated that they were picking titles without any outside

input and were selecting titles that appealed to them individually

and that they believed the market would accept. In addition, IBM

was afraid to lend its logo and name to the new enterprise, so they

had to come up with a separate logo for the effort.

I think their first interactive DVD was about the sex life of the

tsetse fly or something equally interesting. Of course I’m being

facetious, but I told them they were doomed to failure because of

their arrogant approach. I told them they needed to view themselves

as publishers, not as IBM, and pick products with mass appeal.

Second, they should arrange to utilize IBM’s considerable

brand recognition in their marketing.

Needless to say I didn’t make it onto the board and the venture

disappeared, much to my chagrin.

‘‘OUR PROFITS ARE SO GOOD

THEY CAN’T BE IMPROVED’’

Many executives are reluctant to reexamine their profit structure

for fear of embarrassment if they discover an overlooked area of

profitability. I can’t name the number of times I’ve been told that

an area is doing the best that it can and I should seek profit enhancement

elsewhere. This slams the door on investigation, on

structure modification, on pricing, and on other areas of improvement.

The only way to get past this is to:

Convince the affected executive that you are going to

make a hero out of her if she will let you look.

On a less desirable basis, have the CEO force the issue.

The facilitator in this instance must have the full support of those

in command and the indication that there are no protected areas

or sacred cows that are beyond scrutiny. The ideal is to have a

team that bands together to achieve common profitability goals.

Quite often I have had to replace people who were not receptive

to this concept and continued to be obstructionists.

‘‘OUR BUSINESS MODEL IS AS GOOD

AS IT CAN POSSIBLY BE’’

One of the major exercises I go through in every company I help

is a reexamination of the business model to determine if it is

flawed in any way.

Quite often a company will be marketing to the wrong customers

or selling the wrong product or service. It would be like

opening a pork rib joint in a highly religious/kosher or Muslim

neighborhood. It just wouldn’t fly. I have also found companies

selling to the least profitable part of the market just because it’s

‘‘easier,’’ or selling to buyers because of the high volume they will

take despite the fact that the business is at an extremely low profit

level. It is amazing how many companies invest money, people,

and time in flawed or suboptimal ventures.

For example, I was once the CEO of a wax-refining company

that was losing many millions of dollars per year and had been

doing so since its inception. The initial marketing concept for the

company was to sell microcrystalline waxes to a small but highpriced

user market (pharmaceuticals, food, etc.). In concept this

top 5 percent of the business would more than cover the cost of

the other 95 percent the company would sell at breakeven or a

loss or burn for energy.

There was only one small problem: Since microcrystalline

waxes have an enormous impact on the physical characteristics of

the products in which they are used, extensive testing at great cost

would therefore be needed to introduce a new source of these

waxes. In addition, quantities of microcrystalline waxes used in

any single product were miniscule. In view of these factors, no

level of pricing incentives could convince end users to switch

from their existing suppliers to us. The probability of selling product

was nil. In Chapter 3, I talk about what I did to solve the

problem, but what I had was a severely flawed market strategy.

This was after more than $100 million had already been invested

in assets.

‘‘OUR PRICING MODEL CAN’T BE

IMPROVED—BESIDES, WE’RE CHARGING

THE MAXIMUM WE CAN GET’’

When I tell my clients that I always get a price increase that adds

to profits, I always get a mixture of disbelief and horror. Most

companies fight price increases like a virulent disease because they

fear a loss of volume. The greatest resistance to price increases, no

matter how well thought out or benign, is internal.

In this book I will illustrate through various techniques how

every company, with few exceptions, can drive dollars to the bottom

line through pricing. I have never failed to achieve price increases

for a client successfully unless internal resistance was so

great that it was unwilling to take a chance.

This area is the most frustrating for me because it takes so

much to achieve. At one company I was involved in, it took almost

a year and many meetings to achieve a price increase that the

entire company endorsed.

‘‘OUR COST STRUCTURE IS THE OPTIMUM IT

CAN BE UNDER THE CIRCUMSTANCES’’

No one likes to admit that there is a better or cheaper way to do

something. I have seen companies pay as much as twice the going

rate for a service or product because it was difficult or inconvenient

to obtain competing bids or because of prior relationships.

The U.S. Government is a prime example of purchasing inefficiency

in action. Of course companies must strike a balance

among price, quality, and delivery, but often the worst offenses in

cost structure occur when there is no regular review process. In

one company, by merely reviewing the manner in which we insured

our facilities and casualty insurance we saved $1.2 million

per year in premiums.

In this book I will discuss most major cost areas and some

devices to lower costs; however, the caveat is that all costs must

be continually reviewed to determine if they can be further optimized.

‘‘OUR ORGANIZATION IS SO GOOD THAT I

(THE CEO) DON’T HAVE TO BE INVOLVED

ON A DAILY BASIS’’

A sure sign of trouble exists when the CEO or any executive thinks

that he can operate the business on autopilot. I was recently involved

with a small private company whose president had a passion

for sailing. His business was failing, but rather than face the problems,

he would find any excuse to leave and sail. It was obvious

that he hated the process of fixing the business and was escaping

into his hobby because he couldn’t face day-to-day problems.

I have also seen executives who think that operations are

doing so well that they don’t have to monitor or control the company.

Both approaches are equally faulty. Companies need controls

in place and need guidance from someone who has a vision

of the future. Companies can operate for a short while without

daily leadership but soon begin to falter when the strategic guidance

begins to falter. The Walt Disney Company began to falter

when Walt died. It was a local joke that the corporation was being

managed by WWWD (What Would Walt Do). It wasn’t until

new visionary leadership stepped in that the company began to

grow once more.

‘‘OUR ORGANIZATION IS AT ITS OPTIMAL LEVEL’’

A question I ask participants in my various seminars is, ‘‘If you had

to discharge someone in your organization today, who would it

be?’’ There is always a name associated with the response, which

proves to me that almost every organization is suboptimal in nature.

Keeping an organization ‘‘right sized’’ is one of the most difficult

tasks a manager can perform, and often this painful process

is delayed because of emotional issues associated with the process.

Most companies have taken the ‘‘easy’’ method of offering early

retirement or block reductions in staff based on longevity. These

methods are faulty because early retirement denudes the knowledge

base and block layoffs get rid of high-energy, high-potential

individuals.

In Chapter 6, I will discuss a scientific and logical method for

adding and reducing personnel that is dependent upon talent and

need rather than pure numbers of people.

‘‘COMPLACENCY IS NOT A

PROBLEM IN MY COMPANY’’

Complacency is the enemy of all companies and avoiding it is

an everyday job of every manager. When a company becomes

complacent, it has begun to slide down the slippery slope of failure.

If anything, the speed of communications—e-mails, Internet,

and fax—has made the cost of complacency more severe. I don’t

know about you, but I find that I must work even harder to keep

up and keep ahead of events that affect my markets and my business.

‘‘FRAUD IS NOT A PROBLEM IN MY COMPANY’’

It is estimated that fraud plays a major role in fully 50 percent of

business failures. I must admit, having been CEO of over 100

companies, I have found fraud in some form in each of them. It is

especially true in troubled companies, since someone in the company

wants to ‘‘get theirs’’ before the ship sails. The lessons of

Enron, WorldCom, and Tyco have exposed all of us to fraud and

waste in the corporate arena. In Chapter 18, I will discuss how to

detect fraud and what to do about it. I will discuss some things

employees don’t consider theft but really are. I will also show how

to empower the organization to deal with fraudulent behavior on

the part of employees, including senior executives.

‘‘MY BANK LOVES ME’’

For some reason most companies and executives elevate their

banking relationship to that of an amorous affair. Maybe because

it involves money. I hate to disillusion my readers, but your

banker is a vendor who sells you money and charges you for the

privilege in the form of fees and interest. Like any other vendor,

he or she should be treated well and kept informed of the company’s

performance; however, he or she should be measured

against other vendors of the same type. In Chapter 17 we will

discuss the care and feeding of your banking relationships, how to

treat personal guarantees, and how to have fallback positions in

case your banker fails you.

* * *

Now that we’ve examined the lies companies tell themselves, let’s

look at the reasons why companies don’t reach their full profit

potential.

These are the 12 deadly failures of management:

1. Failure to recognize changing market conditions and

act on them

2. Failure to resolve internal conflicts and resistance

3. Arrogance

4. Overspending during good times

5. Failure to continually rationalize the organization

6. Failure to act on substandard performance

7. Inability to think ‘‘outside the box’’

8. Failure to delegate

9. Failure to define market strategies

10. Failure to demand implementation of marketing plans

11. Failure to tie compensation to corporate performance

12. Failure to plan for the cash needs of the business

These failures spring from some of the lies companies tell themselves,

plus mistakes that I will discuss later in the book.

One of the toughest things for a manager to do is to continually

self-review his decisions and actions to determine if he is falling

into the traps that these twelve failures represent.

As you read through this book, and as you make decisions on

a daily basis, refer back to this list and ask yourself honestly if you

are guilty of any of them. Then consider using the techniques and

solutions I present to work through the problem.

One thing that I do that may be helpful is to take a few quiet

moments at the end of each day to be introspective and ask myself

if my actions truly reflect the principles of management that I espouse,

or if I have lapsed because of inertia or other distractions.

The key to good management is the ability to be self-critical

enough to admit mistakes and correct emerging problems.

"About this title" may belong to another edition of this title.

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