February 2024 Volume 6

OPERATIONS & MANAGEMENT

Leadership and Management FAQ Answered By Joel Strom

In this column we have an FAQ about creating a “Gotta Have” company and a second FAQ that is important to creating a “Gotta Have,” innovation. We always welcome any of your Leadership and Management FAQs that you would like answered. Simply email me with your Leadership and Management FAQ. In your book, you talk about creating a “Gotta Have” company. What do you mean by that and how do you accomplish it? A “Gotta Have” company is one that stands out from the others. It’s the one that if I was looking to purchase a company in your industry, there would be no doubt I would pursue. It’s the company that buyers compete for a chance to own. It commands a high multiple and produces a sales price well beyond an owner’s expectations. Even if you are not considering a sale soon, creating a “Gotta Have” makes sense. It means that you have created one of the best companies in your industry. You have achieved benchmark status. Your reputation and status make the best people want to work for your company. You are probably also creating great cash flow and profitability. Defining a “Gotta Have” is one thing, achieving it is another. It cannot be achieved through a quick fix. Depending on your current situation, it could take many years and a good deal of work to make it happen. That’s why there is no better time than right now to begin the journey. Creating a “Gotta Have” is accomplished by maximizing your Strategic Value. Strategic Value is a concept that encompasses just about everything your company does and how it does it. It takes into account your team, your products and services, your operating practices, your culture, your industry, and your financial strength. These and others are all factors in creating and maximizing Strategic Value. They can be grouped into the Pillars of Strategic Value; Financial, Strategic, Operational, and Industry. If you think of these pillars as the legs of a table, each has to be solid and strong to support the table’s load. Just one weak pillar can topple the table or keep your company from becoming a “Gotta Have.” Creating a “Gotta Have” starts with the development of a Strategic Value Acceleration Plan. The plan establishes a Strategic Value vision for the company. Then four separate plans are created, one for each pillar. Each plan establishes the overall goal for a specific pillar. These goals taken together define what is needed to create a “Gotta Have” company. Each plan includes the requirements for achieving the goals of that pillar and the timeline for reaching them. This is a short answer to a more involved question. If you want to learn more about maximizing Strategic Value and creating a “Gotta

Have,” you can refer to my book CEO to CVO, or just give me a call to discuss. I know that for my company to stay competitive and profitable we need to be innovating. I don’t believe we are doing a good job with that. Do you have any suggestions that could make us better innovators? This is an important question and there are a number of approaches espoused on this topic. In fact, we addressed one idea in an earlier FAQ column so we will take a different approach this time. My first reaction to this question is usually to ask whether your company is a great place to fail. In other words, does your culture encourage failure? The response I get from many is “what do you mean, we try to succeed, not fail.” That comment misses the point completely. What I am saying is that successful innovation typically requires many attempts at success with many failures along the way. A few years ago, I was hired to turn a technical products company with a reputation of making old, outdated products into an industry leader. To accomplish this, the first thing we needed to do was think differently and innovate in everything we did, from product development, to manufacturing processes, to marketing, to daily operations. And the only way we were able to make that happen was to move away from a culture that discouraged taking chances and spending money on anything that could possibly fail or not work. We had to establish a culture that not only encouraged failure but rewarded it. From that experience, I can vouch for the fact that it’s not easy to do. My engineers were the hardest to convert because the company had always punished the same behavior we were now rewarding. They got there eventually and we had created an environment that encouraged experimentation and failure. That environment led to us being able to change what we did and how we did it. That enabled us to move from a company stuck in the past back to its place as an industry leader. Innovation became part of our mission. Our team knew that innovation in everything we did was crucial to our continued success and growth. And they now understood how to fail and how to take those failures and turn them into innovations and success.

Joel Strom is the Founder and CVO at Chief Value Officers. He has spent the last 4 decades accelerating manufacturing company value as an owner, CEO, and advisor. His recently published book, CEO to CVO, Moving Your Business from Ordinary to Extraordinary , has quickly become a trusted guidebook for building company value. He can be reached at joel@joelstrom.com.

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