As we move on to a new year, I wanted to take a time out to thank all of you that have supported PMCC Ventures in 2016. I appreciate it. We had an interesting year, and I hope we continued to serve our clients in the exact way they needed support- and to help them create value.
As we committed at the beginning- now 10 years ago, we are once again sharing our reflections on our key learnings from the past year. We share them in hopes that you find them interesting, but more importantly helpful in some situation you are yet to encounter.
Most all of our assignments this past year, revolved around private equity, structured finance or dealing with some sort of performance gap. It felt good to get back to our roots, as we really enjoy working in this space. Not sure if it is our familiarity or the dynamics or both… Each situation was different- and at the same time, they were the same.
In the world that we work in, it is an oft repeated phrase: “But you don’t understand: We are different”. So over the past year or so, we concentrated on understanding differences, but of course to do that effectively, we had to also focus on similarities. We found that there are of course differences—but they are generally rooted in the management team and the backgrounds they brought to the current situation. In the world of underachieving organizations, there are a lot of similarities- about what the company is experiencing- and how they got into the situations they are encountering. Our reflections below will share some of those insights.
We are going to place a lot of focus and intention on underperforming and underachieving organizations in 2017. We know that there is a lot of opportunity created by organizations as they “bounce off the bottom”. We want to work with them, to minimize the disruption and maximize the height of the bounce.
Reflections on 2016
Underperforming and underachieving organizations—similarities and differences-
Conditions that seem to be common:
- Markets in flux… Difficult to grasp meaningful movement and change in direction… differing pace and intensity of changes experienced serve to further disorient and generated confidence in a direction to follow
- Leapfrogging technologies… Shortening product life cycles… Difficulty keeping up with emerging opportunities and disappointments of disappearing opportunities… Uncertainty about where to place bets… Difficult to recover development costs… Staffing and knowledge base challenges…
- Shifting customer needs, performance and loyalties… Customers face similar challenges… The importance of the relationship to weather these challenges is significant… keeping up with the various stages of relationships and lifecycle events was costly and required a lot of attention and time…Not getting it “right” was a death knell…
- Critical resources: time, talent, capital and information are in short supply and not optimally applied… The longer the challenge, the more resources evaporated or became stretched… Market and technology changes make it tough to keep fresh and relevant talent available to pounce on opportunities… Capital or loan opportunities are already stretched, making new sources a real challenge to obtain and likely costly… The lack of relevant information- particularly about changing conditions was the most insipient and critically important… Resources frequently diverted to ministerial matters and strategies that were not promising….
- Shifting contexts are confusing and make it difficult to plan and act- systemically and consistently… Difficulty keeping up with changing situations… Rest of organization characterizes management coping with this poorly, without fully understanding the volume of change, conflicting insights and information that management is juggling….
- Time and focus shifts to dealing with ministerial duties and away from the things that help an organization create value… Increased time dealing with regulators, lenders, investors, lawyers etc.…. less time and energy available to focus on customers, markets and operations… can become a spiraling situation further driving organization from value added thinking and action
- Responses become operational… and less strategic…and less cognizant of the system…. less value placed on thinking and more on motion than forward action… concepts of motion and action became confused… More inwardly focused…. People satisfice and focus on surviving and not thriving
Underperforming and underachieving organizations—Conditions that are different
- Type of presenting issue…Industry wide… or specific to the organization… influences the dimensions and probability of positive outcomes
- Management team Experiences… many teams’ experiences and persona are growth oriented… many individuals and rarely teams have the experiences to manage through the downside… Team members selected for deep functional excellence- when the premium capability… is cross-functional systemic thinking and action
- The starting point… Objectively how deep is deep? … How much effort needs to be extended to get back to “even”
- Recognition and resolution…How well does the team recognize the challenge at hand?… How prepared are they to come to grips with it… Denial,,, Anger… Acceptance… Resolution and Healing….
- Time and what has transpired so far…Passage of time and prior decisions and actions can either negatively or positively influence the outcome and the [re] starting point for any transformation activity
- Capacity and capability… Influence the effort, the timing and the intensity of the change effort that can be applied- and hence the duration of the transformation period
- The ability to execute the steps needed to … gain control and stabilize- what has been done- what needs to be done… when should it happen… distinguish urgent and critical… What might foreclose opportunities to maneuver later….
- Resources… Does the organization have the resources (time… capital… talent… information) or can they be secured or created] to accomplish the necessary changes…. If not, what is a practical level of desired achievement in the best possible timeframe…
Be diligent with diligence
- Set a plan… Execute the plan…completely…. particularly in new or challenged situations… make sure that the basics of the deal are covered…. Risks are articulated and strategies in place to manage them… Know the structure that the new entities need to work within… head that direction… make sure that the inventory of service level and retention agreements are adequate and that they are favorable to provide the time and focus to accomplish “newco” requirements…Don’t assume… focus on key risks… identify transitional resources… remember, you don’t always get what you thought you would buy
Strategy is not just adding and doing new things
- Strategy is about placing resources and bets to win… it is not about adding efforts and requirements without ensuring that key resources are available…. .it is about making choices… overloading (or under-resourcing) an organization is a sure fire way to help a strategy fail…be thoughtful, realistic and practical about what it will take so succeed
Strategic, financial and operational information is not like wine or cheese… the situation doesn’t get better with age when you don’t have them readily available
- Integrated and systemic information is key to success… What insights do you need to run the business…is it readily available… against a context or model that makes sense for the business…Do the timeframes represented make sense…. Is it published in times and ways that can help make a difference… are all of the answers to the repeated or likely questions presented… Can you say immediately….” Now I understand” … Or do you have to do some of your own digging or calculations… Late or incomplete information are bad within themselves, but more importantly point to the existence of other organizational challenges…the organization that invests the effort to do this right will improve performance because of better insights…. And will improve processes and data models that will increase quality of controls… administrative effectiveness… efficiency….
Marketing is a key turnaround tool and weapon
- Getting the basics of marketing straight has never been more important…If you don’t understand your markets, your customers, their needs and wants- cold… be assured that someone else is trying to figure it out…and might beat you to the punch… Whether you deploy it physically, digitally or better- both… the basics are key…. No one has the time or the luxury of getting it wrong with customers today… few have extra resources to deploy in a wasteful way… though this waste is rarely evident- it represents a lot of cash and a lot of unmet opportunity…There is someone out there right now trying to know and attract your markets and customers… they just hired “that person” who knows x, y, or z technique cold—and they are deploying it for your customers…now