In the second of a series of three articles on becoming best of breed, we look at how to redefine your competitiveness by reassessing the measures your company uses. By Leslie L Kossoff, executive adviser.
There is a large and quantifiable difference between being called 'world-class' and 'best of breed'.
Jack Welch, the former CEO of General Electric put the numbers to it. His (paraphrased) dictum was: 'If you’re not first or second in your space, the company doesn’t want you anymore.'
That dictum was established when Welch first took over GE and turned it around – all by the numbers. Welch’s logic was that, in GE at that time, if the division in question wasn’t first or second among its competitors, the company couldn’t afford to keep them. He made that clear to the executives overseeing those divisions, and gave them a timeframe to either solidify their position, get themselves into pole position – or get ready to be sold. And that was what he did. Then he took the company to all the places he wanted it to go.
What’s your competitive position?
Management accountants - who understand the numbers, their implications and their nuances - are in the perfect position to take their organisation to best of breed status. Whether you’re sitting at the top of the finance function or heading up an operational unit, it’s time to take a different look at the numbers that you are working with. It doesn’t matter whether you’re an internal supplier, your company sells into the supply chain, or you have a direct relationship with the consumer. It doesn’t even matter whether you’re a public, non-profit, not-for-profit, or for-profit enterprise. You need to figure out your competitive position.
The easiest way to start is without the numbers. Ask: 'If I had the choice, would I do business with my organisation?'
The answer could be yes and no. Both of those are your opportunity to take a look at how you’re measuring what you do – from the biggest macro to the tiniest micro-measures – to determine whether your numbers are telling you what you need to know.
The next question is: 'Where do we stand in our competitive firmament?' Whether you’re a multi-national going up against international competitors or the local dry cleaner working to differentiate yourself in the neighbourhood, it’s the same thing. How are you performing against your competition? Are you first or second in your space? If you’re an internal supplier – from back office support to hands on manufacturing – check out your performance numbers against the promises being made by companies to which your services could be outsourced for a potentially lower fee. Then look again at your measures to check that you are measuring the right things. If you are not, that is where the opportunity to start becoming best of breed kicks off.
Best of breed measures
Let’s revisit the concept of ‘world class’ for just a moment. That is where you’ll get your hints about what measures you should be using. Numerically, world class is visible based on the company's spending priorities. More often than not, a lot of that spend is on innovation – everything from new products and services to how it attracts and keeps best of breed employees.
The executives at Google, for example, knew from the start that to get the best out of their employees, they would need to spend a lot of money. But they would see a clear and consistent return on investment that would make Google the preferred company for every position in every department.
Now put the numbers to what they do. From the algorithms, search requests and results to the advertising revenues they generate; and from new products in consistently expanding competitive arenas (phones and software suites) to creating new levels of artificial intelligence (Caffeine), Google has defined best of breed for all the sectors it competes in.
That’s where world class and best of breed intersect – and that’s what you need to do. Start by determining how you’re measured then look at what you’re measuring. Have the courage of your convictions to let go of old measures that have passed their sell by date and start measuring what matters.
Then start targeting and making changes – smart, fast and cheap. That is what will make you best of breed.
Links
Lesley Kossoff's management accounting executive field guide
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