STRATEGIC GUIDELINES - SECTION ONE

1.         Achieve 100% consensus among key equity/management players as to the direction and intensity of the pace for the company. (One heartbeat)

a.               Rate each member by these guideline checklists

b.               Write down all unresolved differences and solve them.

c.               Meet this one guideline and the rest is possible; otherwise impossible.

2.         Study the environment and learn from the outside.

a.               Don’t predict the future. Be happy with uncertainty and as in surfing, play the wave as it breaks for all its worth.

b.               Have contingencies and play what/if constantly.

c.               Work hard for long term effects; avoid quick fix traps.

3.         Have a memorable and operable competitive strategy statement which defines a disciplines scope of customers, products and services to pursue.

a.               Do a strategic development exercise.

b.               Summarize in a few pages, and have a short practical mission statement.

c.               Avoid expensive adventures and inconsistent decisions that spray resources instead of focusing them.

4.         Know your competition and take them very seriously.

a.               Survey all informers regularly.

b.               Keep files and survey comparisons on all of them.

c.               Psyche them out when possible.

d.               Jump on weaknesses quickly. Avoid confronting their strengths.

5.         Have a written plan to fill strategic and growth gaps.

a.               Objectives; controllable tasks; and measurement/reward systems - not always calendar based.

b.               Differentiate between output goals and controllable input tactics.

c.               Review, revise and revive continually.

6.         Business is like a board game (e.g.: Backgammon):

a.               You make your luck by working hard for a position and then jump on opportunities.

b.               When things are good look for seeds of disaster. In disasters look for seeds of opportunity.

c.               Unsolved problems don’t disrupt the routine; they are the routine.

d.               Revenge is sweet, but it belongs to the Lord. Don’t create unnecessary enemies.

e.               Don’t compound risk in too many ways: operational, financial, legal, (business) cyclical, suppliers, customers. Maximize upside and minimize all downsides.

f.                Don’t win too soon or you won’t enjoy the game. Life is a journey with no happy endings or final summits, so enjoy it a little everyday.

7.         Put profit first, not volume. Project, conserve and monitor cash-flow (especially for fast growing firms or anyone in a mature, declining industry).

a.               Cash-flow analysis (on-going).

b.               Retained after-tax ROE ³ growth to avoid growing out of cash.

c.               Minimize debt until pre-tax ROTA > prime rate (i.e.: positive leverage).

8.         Eliminate all inefficiencies on an on-going basis to free up resources to finance targeted growth.

a.               Tackle the productivity plays.

b.               Free time; triple profits; care more for key accounts; boost spirit, discipline and wages.

9.         Expand sequentially from a profitable core base of business.

a.               Identify core base.

b.               Do best, better.

c.               Don’t lose sight of basics, only time to do the basics well.

d.               Make small, related moves with skilled partners.

e.               Maximize profits with least energy and risk.

f.                Increase odds of successful future diversification.

10.      Maintain a commitment to an “upware spiral” - continuous economic growth. This provides future improvements for all stakeholders.

a.               Weed coasters; prime tigers; grow peak performers; and give stretch responsibility.

b.               Renew and revive the firm and keep tigers motivated.

c.               Grow people who then grow the company.

11.      The sequence of winners must (usually) be: 1) employees  2) customers  3) shareholders and suppliers. (Repeat expanding cycle. Enlightened self-interest, not adversarial.)

a.               Achieve and sell service excellence and emotional concern for the customer.

b.               Grow people to top quartile performance and pay.

c.               Teach all partners the value of the company’s profits to their future.

d.               Good sustainable profits come as a by-product of running a good business and achieving stakeholders symmetry.

12.      Define a critical mass of inventory for a target scope of customers and invest to reach it and a 90%(+) fill-rate (situational).
--DO: Ranking reports of SKUs by picks; calculate average order size and extend; and program different fill-rates for A, B, C’s to hit 90%(+).

a.               Avoid expensive back-orders, buy-outs, and expediting on routine orders.

b.               Build average order size.

c.               Out service the competition with least amount of investment.

d.               Maximize economics of: selling, buying, process-delivery and customer’s buying.

13.      Run branches and when possible departments, with de-centralized management.

a.               Hire better managers; train them better; program with FGMM’s incentives.

b.               Develop automated control systems to monitor, measure and compensate.

c.               Respond better to the local customer base, competition and supplier reps.

d.               The best hands-on managers attract and keep good people who provide “service excellence”.

e.               Go with “intrapreneurial” and cheap DP information trends.

14.      Maximize gross profit per employee, because of high productivity marketing and zero errors.

a.               Big order/small order programs, and zero errors.

b.               Lower turnover; high quality performance and motivation.

c.               High wages, but low payroll as % of budget.

15.      Eliminate all politics.

a.               Measure, negotiate, recognize and promote by objective results.

b.               Eliminate secrets; communicate all things to all people as much as possible.

c.               Task and team-oriented employees thrive. Power-oriented, manipulators don’t last.

16.      Human intelligence is replacing capital as the competitive edge. Finding, developing, motivating, using and keeping good people is the name of the game (see Personnel).

17.      Change as fast or faster than the environment or degenerate.

a.               Be a learning, renewing organization.

b.               Foster innovation (see Innovation).

18.      Most strategies fail for one or more of the following:

a.               Too complex; not simple, memorable and operable.

b.               No consensus understanding or emotional commitment.

c.               Under-invest and under-persist. Be in for the long run. Have a budget, but secretly be prepared to go 40 - 100% over for surprise factors. Have sufficient courage.

d.               Too ambitious or risky.

e.               No priorities and too little discipline.

f.                Poor strategy selection.

Strategic Guidelines - SECTION ONE