THE ROLE OF THE CEO IN MANAGING OPERATIONS FOR GROWTH
Strategy matters, because without it a firm does not have direction. Consequently, any successes that it may gain will be by fluke. For sure there are success stories that appear to have been achieved by pure chance – or so the stories would have us believe. However, if you get to the core of the success, you will nearly always find that the firm was poised and ready with its capabilities and met a market opportunity. It was able to respond more quickly, or with better quality, or with a greater range of offerings, than its competitors. All of these capabilities are what a firm does, and does via its company wide operations. This ability to learn, adopt and utilize world class operations capability does not come about by chance; instead it comes about by seeking out and accumulating capabilities. If a firm does not do this, there will be a gap between strategic intent and strategic capability. It is this gap between intent and capability that remains a massive hurdle for firms, and it has cost many CEOs their jobs. CEOs in the modern era will be judged on their ability to understand, develop and utilize world class operations in a manner that creates advantage – in other words to use strategic operations. As we shall see in the following cases, some CEOs can do so while others cannot.
CASE STUDY: The role of the CEO in managing operations The following is adapted from the Fortune magazine
What got Eckhard Pfeiffer fired? What fault did in Bob Allen? Or Gil Amelio, Bob Stempel, John Akers or any of the other dozens of chief executives who took public pratfalls in this unforgiving decade? Suppose what brought down all these powerful and undeniably talented executives was just one common failing? It’s an intriguing question and one of deep importance not just to CEOs and their boards, but also to investors, customers, suppliers, alliance partners, employees and the many others who suffer when the top man stumbles….Consider the Pfeiffer episode. The pundits opined, as they usually do in these cases, that his problem was with grand scale vision and strategy. Compaq’s board removed the CEO for lack of “an Internet vision” said USA Today. Yep, agreed the New York Times, which Pfeiffer had to go because of “a strategy that appeared to pull the company in opposite directions.”
But was flawed strategy really Pfeiffer’s sin? Not according to the man who led the coup, Compaq Chairman Benjamin Rosen. “The change will not be in our fundamental strategy – we think that strategy is sound – but in execution” Rosen said. “Our plans are to speed up decision making and make the company more efficient.”
You’d never get it from reading the papers or talking to your broker or studying most business books, but what’s true at Compaq is true at most companies where the CEO fails. In the majority of cases – we estimate 70% - the real problem isn’t the high concept boners the boffins love to talk about.
It’s bad execution. As simple as that: Not getting things done, being indecisive, not delivering on commitments…. It’s clear as well, that getting execution right, will only become more crucial. The worldwide revolution of free markets, open economies, and lowered trade barriers and the advent of e-commerce has made virtually every business far more competitive. When Lou Gerstner parachuted in to IBM, famously declaring that “the last thing IBM needs right now is a vision.” He focused on execution, decisiveness, simplifying the organization for speed, and breaking the gridlock.
Look at Jack Welch from GE - The continual pruning and nurturing gives GE a competitive edge few companies understand and even fewer achieve… Decision gridlock can happen to anyone - The processes have worked, they are a part of the company’s day to day life – so it takes real courage to blow them up. Listen to Elmer Johnson, It is a system that results in lengthy delays and faulty decisions by paralyzing the operating people….” That was during Roger Smith’s troubled tenure and the problem persisted through Stempel’s brief reign. Neither man could break the process machine, and both must be considered failed CEOs. … Keeping track of all critical assignments, following them and evaluating them… Isn’t that kind of… boring? We may as well say it: Yes, it’s boring. It’s a grind. At least, plenty of really intelligent, accomplished , failed CEOs have found it so, and you can’t blame them. They just shouldn’t have been CEOs.
The big problem for them is not the brains or even the ability to identify the key problems or objectives of the company. When Kodak ousted Kay Whitmore, conventional wisdom said it was because he hadn’t answered the big strategic questions about Kodak’s role in a digital world. In fact Kodak had created, not publicize, a remarkable aggressive plan to remake itself as a digital imaging company. Whitmore reportedly embraced it. But he couldn’t even begin to make it happen. Same story with William Agee at Morrison Knudson – plausible strategy, no execution.
The problem for these CEOs is in the psyche. They find no reward in continually improving operations. Anyway you look at it, mastering operations turns out to be the odds-on best way for a CEO to keep his job. So what’s the right way to think about that sexier obsession – strategy? It’s vitally important – obviously. The problem is that our age’s fascination with strategy and vision feeds the mistaken belief that developing exactly the right strategy will enable a company to rocket past competitors. In reality, that’s less than half the battle.