Monday, August 31, 2009

The CEO and the Great Recession

When a great CEO mobilizes a company to face a great challenge, he does not just focus on costs or on revenues, on strategies or tactics, or even all of those. He focuses on evoking the very spirit of the organization and on transforming it, knowing that this spirit will do the rest. Great battlefield generals do this also.

While all professional managers know that every company has a unique, motive spirit that generates all its performance - from development of vision to final execution - most are not aware of what exactly it consists of, or how to tap into it, or how to change it. This is not taught in B schools.

Since 1980, however, the make-up of this corporate spirit (call it
Operating Dynamic) has been known and documented. In 1985 the technology to trigger changes in it was developed. It has since been used in more than 200 organizations to transform them even to their intrinsic Will to Compete. No longer is it necessary to be a "Great Leader" to do so.

Our book Fire in the Corporate Belly, now in its second, expanded edition, describes both the makeup of the corporate spirit and the methodology of changing it. The introduction can be accessed here. Summaries of the chapters can be accessed at Fire in the Corporate Belly.

Tuesday, August 18, 2009

What is a Post-Acquisition Due Diligence?

When all is said and done, the fundamental driver of any business is not its finance nor its strategies nor its operations. These together are responsible for no more than 20% of performance.

The real driver of corporate performance is something else. It is its Operating Dynamic. That complex of organizational and human factors that drives/impels behavior, generates performance and is finally responsible for success or failure.

No investor would enter into an acquisition without an in-depth financial and operational analysis. Yet, with almost every acquisition, decisions are made - and have to be made - in almost complete ignorance of that which will be responsible for 80% of performance. Investors must make their acquisition decisions on the best information available and then wait... And wait... And hope... Because understanding what the operating dynamic really is, and the impact it is having on performance takes time.

Until now it has been thought that that was the way it had to be. It was felt that the technology to open the soul of a company to its new owners did not exist. Happily, this is no longer true.

A Post-Acquisition Due Diligence is now possible. A due diligence that will expose to the light of day the real and often hidden drivers of performance, and do so for the company as a whole and for each of its units.

The cost is affordable, the effort required by the acquired company is minimal, the time to do it extremely short. And the ROI remarkable.