To understand the S-curve, the first thing you have to do is lay it on its side. Then it looks like what it really is: the ups and downs of product cycles that businesses must negotiate to achieve long-term success and peak business performance again and again.
In their book “Jumping the S-Curve,” Paul Nunes and Tim Breene say that it is not only important that a company concern itself with the point in the curve on which it currently finds itself, but the ones that are coming up.
How should a company do that? By finding what they call “big enough” market insights, reinvigorating the ranks of top executives before a downturn begins, and in the same vein, attracting as much talent as possible. That is the authors”™ theory about how companies can come up with a stream of successful businesses, regardless of external factors.
In a recent panel discussion in Tarrytown sponsored by the Association for Corporate Growth, several consultants and business owners talked about how negotiating the S-curve plays out in real life.
“The whole business of an ”˜S”™ and reinvention reminds me of whether there will be enough fuel to get a tanker across the ocean,” said Jack Gelman, co-founder and managing director of Gelman & Associates, a consultant to CEOs on business transformation and regeneration. “In one instance, it was clear to the CEO that he would run out of fuel.”
The company was Rustoleum, where Gelman engineered a turnaround. “This business was family-owned, in the third generation. A 33-year-old was working under a CEO who was running the company while he grew up,” said Gelman. “The wisest part was having a caretaker CEO. The young guy was smart enough to say ”˜I”™m not the guy, I need help.”™”
James Wood is senior vice president and chief strategy officer for the Clemens Family Corp., a privately held agribusiness and real estate development company based in Hatfield, Penn., with more than $750 million in revenue. He is responsible for leading their strategy, growth initiatives, acquisitions and real estate development.
Upon arriving there in 2000, he said, “The signs were there in the form of diminishing returns. There were 200 shareholders, and we offered them three choices: stay the same, sell the business, or undergo dramatic change, a restructuring. The family wanted a restructuring. It was hard, there was lots of pain.”
What are other signs of trouble in a company?
Tate Pursell is the co-founder of Unlimited Horizons, which invests in manufacturing companies. “Operating margins start to decline,” he said. “There may be an accumulation of short-term debt, and little problems come up, like a company has to restate its earnings, employees leave, and computer problems crop up.”
Gelman emphasized that if a company”™s culture is based on trust, “It has a head start when it comes to change. If there isn”™t, the CEO will be marching up a hill with no one behind him.” Pursell agreed. “You can predict a dip,” he said. “And since people don”™t like surprises, if you can predict a bumpy road, they”™ll go with you if they trust you.”
Elaine Hughes, a corporate crisis management consultant and the CEO of E.A. Hughes & Co., whose specialty is executive search in the consumer products industry, brought a different perspective to the discussion. She does a lot of work in the fashion industry. “I”™m involved in a business that”™s reactive – what should a company do when women are wearing pants, not dresses, or when men don”™t wear suits.”
“My days in the gulag were when Sara Lee owned Coach,” she quipped. “The CEO had failed before, and that made him better. But top talent didn”™t stay, and those people are now the CEOs of places like Warnaco and Burberry.”
Any mention of company rule by consensus elicited groans and laughter from the panel, which saw that as lethal to any hope of change.
“You don”™t change a business by consensus,” said Brad Stackhouse, CEO of SGA Inc., a business consultant and coach to top executives at, among others, IBM, Accenture, and Fujifilm. “You have to isolate those who are going to take you to the next level. You can”™t get there from here if you keep a consensus group that is gelled around an existing idea.”
Sometimes consensus management isn”™t really management at all, “just the appearance of it,” said Gelman.
Panelists noted the importance of cultural factors in today”™s global business environment.
“I”™ve seen European companies hire their perception of U.S. management, and these will be B- and C-level people here, because (European companies”) ideas are very different than ours,” said Hughes.
Gelman said it works the other way as well. At Beiersdorf, a German duct tape company where he led a turnaround in the U.S, “They put in European management, a Teutonic CEO who was gone six months later. People rejected him because of his different management style.”
