Success is Fleeting

Learn how to climb to the next peak and avoid the valley

By Jim Tompkins
President and CEO, Tompkins Associates

Introduction

Is there anything quite like being at the top of your game? It is certainly a wonderful experience to achieve peak performance, but the problem is success is fleeting. More than a decade ago, a study of Fortune 500 companies revealed that six out of 10 experienced threats to their survival, and half of those did not survive at all. In today’s marketplace, threats to survival should be considered just a typical part of doing business.

No one is immune; even the biggest names in their industries have proven vulnerable. GM, once the world’s largest automaker, is now in the number two spot behind Toyota. Yahoo! was once the hot name in search engines until Google. And Sony was the leading seller of portable music players, until Apple’s iPod dulled their edge.

You can change the way you approach doing business by continuously reinventing your company . As CEO of Tompkins Associates since its beginnings in 1975, I have observed the reasons for this all-too-common crash from the top of the peak, and I have discovered the answers on how to avoid failure.

In this article, I’ll describe the four patterns of organizational performance and what they mean for your business. I also explain how to assess and reinvent your company’s valuable core competencies, so you know your business is focused on the right priorities. Finally, I’ll detail the ways you can keep the people in your organization aware and committed to the company’s goals.

It’s All in the Patterns

Understanding the patterns of success and failure is the first step toward keeping your business at the top of the peak. These four patterns are:

Fail/fail: A business has not succeeded, due to execution or a lack of a well-considered business plan, mission, and vision. The people behind the company lose confidence. Although changes are made, the speed to apply a quick fix allows the company’s leaders to ignore the real problems, and still it fails again because its vision and mission were never identified.

A classic example is the dot-com bubble that burst in 2001. The stock values of these companies, at first incredibly high, was worth pennies once the companies failed to profit.

One of these companies, TheGlobe.com, began in 1994 as a vaguely defined social networking site that expanded into online gaming, but there was a lack of direction signaled by its stock price suffering massive losses in 1999. It was then reinvented to provide internet phone calling service, but slow sales and lawsuits have closed the company. (1)

Fail/succeed: A business fails, and the people leading it learn from what went wrong. After reinventing its core competencies, as well as its mission, vision and business plan, changes are made and the business succeeds.

The company is motivated by the underdog role, which is what happened to Virgin Atlantic Airways after a $67 million investment was made to create new seats that reclined at an angle for sleeping in first class. Passengers were unhappy when they found themselves sliding around too much in the seats, and competitor British Airways had just introduced an actual passenger bed into first class.

Despite this initial failure, Virgin doubled their initial investment to create a better reclining seat. It met passenger expectations and exceeded revenue goals. (2)

Succeed/fail: The business is successful, but the company’s leaders become content with success. They stop exploring ways to make the business better. The company sees itself as invincible and protects what it has instead of pushing forward, creating a decline that accelerates, eventually leading to failure.

No one is immune to this scenario, even if you’ve been in business for generations. Swiss watch companies had been known for their product’s high quality for 400 years, but when they decided not to get involved with quartz, they could only watch as Japanese watchmakers used the accuracy and low cost of quartz in wristwatches to take over the market in the 1970s.

Succeed/succeed: A business is successful, but at the same time, its leaders analyze how sustainable it is. The people in the company are dedicated to getting better, and the leaders define new goals.

The goal is not to be the best of the best, but to be a business in a category all by itself. The company continues to succeed. Its leaders believe that success will breed success, as long as they improve and keep their entrepreneurial spirit. An example is G.E., which, in spite of tremendous success, has continued to reinvent itself and carry the organization to even higher levels of success.

Core Competencies

When a business fails after achieving peak performance, everyone asks, “How could such a great company go out of business?”

The answer is that the company’s leaders did not accurately define its core competencies, and the company’s model of success – its mission, vision, and business plan - was not revised to be relevant to its current state. These two concepts are necessary to achieve a peak-to-peak business.

Defining Core Competencies

To move from peak to peak in a succeed/succeed pattern, you will have to make significant changes to the way your company is doing business so that it thrives in today’s accelerated business environment. Your company will have to reinvent itself while it is still at the top.

This means defining core competencies and eliminating those activities that are not value-add activities. They take your attention as a leader away from those functions and processes that give you an edge in the market.

Core functions are an organization’s core competencies, the unique business functions that allow the organization to be successful. They are the critical activities included in an organization’s vision statement that allow it to thrive.

For a research organization, the core function is research; for a manufacturing organization, it’s manufacturing; and for a distribution organization, it’s distribution.

The research organization may do manufacturing, distribution, finance, marketing, procurement, information technology, human resources, etc., but research remains its core function.

Core functions can be divided into two categories: primary core functions and secondary core functions.

Primary core functions are those activities and processes that differentiate an organization in the marketplace. They motivate customers to do business with an organization. For example, a “chic” retailer’s primary focus core functions could be retail stores, merchandising, and branding.

Secondary core functions are those activities and processes that must be done well for the organization to retain market share, but are not visible to customers. For the retailer I just mentioned, the secondary core functions are likely to be procurement, sourcing, and real estate.

The research organization, the manufacturing organization, and the distribution organization may all be in a certain industry such as pharmaceuticals, but their selected unique business functions are determined by how they have defined their primary and secondary core functions.

What is left after that are the non-core functions--the many other functions that need to be performed for an organization to exist. These are split into primary non-core and secondary non-core functions.

Primary non-core functions are those that, although not core, have an impact on a company’s bottom line. For the research organization mentioned earlier, the primary non-core functions would be logistics, information technology, marketing, and manufacturing.

Secondary non-core functions are activities that need to be done, but unless they are done poorly, they do not have an impact on an organization’s bottom line.

For example, in a typical organization, the functions of food service, landscaping, payroll, auditing, or janitorial services are not going to have an impact on an organization’s bottom line. How many companies do you know that have gone out of business solely because of their landscaping?

To demonstrate the differences between primary and secondary non-core functions further, look at the research organization. Suppose it hires outside providers for both food service and logistics. If food service does not work out, the research organization fires the firm, brings another provider in, and apologizes to its staff for the first provider.

If logistics does not work out, the organization has major costs sunk in the transition, it has exposed its customers to bad service, and it may incur serious interruptions in service.

The secondary non-core food service mistake is not good, but it will not really have an impact on business. To the contrary, the primary non-core logistics mistakes will have adversely affected the organization’s bottom line, and it may take years to recover from the impact.

All of this can be illustrated in a simple matrix (Figure 1).

Figure 1. Core Competency Matrix

To help you make the distinctions in your company’s core competencies, you can take the matrix and apply it to your company. For the retailer, the matrix might look like this:

Figure 2. Core Competency Matrix for the Chic Retailer

When the core and non-core competencies are presented like this, it makes it simpler to think about what to keep in-house. Here is the matrix again (Figure 3), this time applied to a manufacturing/distribution company:

Figure 3. Core Competency Matrix for a Manufacturer/Distributor

The company’s core processes are production, product design, production planning and scheduling, procurement, logistics, HR, and maintenance. These functions could probably be kept in-house, but it might not be as profitable as outsourcing them.

The company’s leaders could decide that since sales and marketing are non-core, they could outsource that function; however, that might negatively impact the customer’s perception of the company.

Core Competencies in Hiding

Why is defining core competencies so important? One reason is that you probably don’t feel like you have enough hours in the day. When you sit down and look at what you’re spending your time on, you may see that much of that time is spent dealing with issues that do not necessarily drive the company’s success. Once these distinctions in your core business are made, you can spend your time focusing on what is essential to your company’s customers and what will most add to success.

Another reason why defining core is important is the possibility that the new core competency of your business is already being done by your company, but is hiding as a primary non-core or secondary core function.

Consider IBM’s software unit. Once overshadowed by their hardware unit, the company sold its PC division in 2005. The software unit is now IBM’s most profitable, with sales surpassing those of hardware and chips.

One way IBM accomplished this was by successfully refocusing its efforts towards a new market through partnerships with other companies who use their software in their products, having signed 4,500 such deals in 2007. (3)

The process of defining core competencies and then subdividing them into primary and secondary core, while constantly asking yourself how each function touches your company, is not an easy task. It can be painful.

Often, leaders and managers are afraid to reassess their core competencies, because they are still holding on to the belief that consistency equals success.

The consistency myth is a hazard to success. Many people believe that because consistency often takes them to the peak, then it will also keep them there. Although consistency is necessary to produce a quality product, it does not necessarily allow the agility needed to adjust to changes. It can often drag a company down from a peak into the valley.

A demonstration of this is the case of Polaroid. As digital photography developed and began to revolutionize the notion of instant pictures, Polaroid clung to their instant film photography products and ignored developing digital photography technologies. In 2001, they were in Chapter 11. (4)

Redefining core without overlooking potentially profitable units is critical to peak-to-peak performance. Once you have completed this exercise, you will have a better picture of what functions you should focus on as part of your reinvention.

At that point, it is time to revise your company’s model of success.

Revising Your Model of Success

A successful organization has a clear model of success that defines the following elements:

1. Vision: A description of where you are headed

2. Mission: How to accomplish the vision

3. Requirements of success: The science of your business

4. Guiding principles: The values you practice as you pursue your vision

5. Evidence of success: Measurable results that demonstrate when your organization is moving toward your vision

A study performed by James Kouzes and Barry Posner showed that when a model of success was effectively communicated, significantly higher levels of job satisfaction, commitment, loyalty, spirit, clarity about organizational values, pride in the organization, organizational productivity, and encouragement to be productive all resulted. (5)

The interesting thing about models of success is that a lot of time and energy is used to develop them, but after that, there is a tendency to believe they’re finite. Some companies are operating with models of success that are decades old.

This is what can put you on the path of peak to valley. If the very basic principles of how to succeed in an increasingly challenging and accelerated marketplace have changed, then it makes sense to revisit your model of success. Consider Burt Nanus’s seven special properties of a powerful and transforming model of success:

1. It is appropriate for the organization and the times.

2. It sets standards of excellence and reflects high ideals.

3. It clarifies purpose and direction.

4. It inspires enthusiasm and encourages commitment.

5. It is well articulated and easily understood.

6. It reflects the uniqueness of the organization.

7. It is ambitious. (6)

Do these properties really apply to something finite? The reality is your model of success, like success itself, should be infinite.

The process of reinventing your company before the marketplace reinvents it for you in a way that portends failure involves taking your model of success off the wall, dusting it off (if it has been there for awhile), and working with it so it has those seven properties. You can approach this task as follows:

1. Define who should participate in the model of success evaluation and revision.

2. Conduct a model of success evaluation and revision orientation meeting.

3. Complete and compile a model of success evaluation and revision questionnaire.

4. Conduct a model of success evaluation and revision development retreat.

5. Complete and compile a revised model of success refinement questionnaire.

6. Conduct a revised model of success wrap-up meeting.

7. Achieve revised model of success alignment.

Let’s explore these seven methods of working with your model of success further.

The first step of developing your organization’s revised model of success is to define the top leaders in your organization who should participate in the development of the revised model of success.

These should be the same leaders who help you determine your core and non-core business functions. This group will be known as the steering team because they will be defining the overall direction of your company.

The top person in your organization must be part of this team, and it should not exceed about ten people. The members of the steering team should have a clear understanding of your core and non-core with good insight and foresight and a healthy imagination.

The second step is a revised model of success orientation meeting. This two-to-three hour session should be conducted by an outside facilitator and should define:

1. The elements of the revised model of success

2. Why your organization needs a revised model of success

3. How the revised model of success will drive the process of focusing on core competencies and company reinvention

The third step is a questionnaire that should be given to the steering team a couple of days after the orientation. The steering team should be asked to complete this questionnaire and return it to the outside facilitator within a certain deadline. The purposes of this questionnaire are:

• To confirm an understanding of why a revised model of success is needed

• To stimulate the steering team to begin thinking about their organization’s model of success

The outside facilitator should compile the results of the questionnaire so that the information can be used in the fourth step.

The fourth step is a retreat. This session for the steering team and the outside facilitator should be conducted in an environment where there will be no interruptions.

The retreat should begin with the outside facilitator summarizing the results of the first ten questions of the questionnaire and ensuring that the steering team has an understanding of why the model of success is being evaluated and revised.

After this brief review, the outside facilitator should work with the steering team to define the first draft of the revised vision, mission, requirements of success, and guiding principles.

The fifth step is another questionnaire the steering team members should complete. The outside facilitator should receive completed questionnaires before a certain deadline. The purposes of this questionnaire are:

• Refine the revised vision, mission, requirements of success, and guiding principles

• Obtain a first draft of the revised evidence of success

The results of this questionnaire should be compiled for the revised model of success wrap-up meeting.

The last step in the revision of the model of success is the wrap-up meeting. The outside facilitator should present the recommendations for all five elements of the revised model of success based on the input received in the second questionnaire. This meeting should address all concerns and should answer the following questions:

• Is it doable? Will your employees understand it and will they believe it can be accomplished? Is it realistic? Does the revised model of success uniquely reflect your company’s future?

• Is it authentic? Is it an honest attempt to re-define your company’s direction or is just a marketing slogan or public relations gimmick?

• Is it compelling? Can employees get excited about it? Is it future-oriented, challenging, and aggressive? Is it too ambitious or not ambitious enough? Will it inspire enthusiasm and encourage commitment?

• Is it personally enriching? Will employees understand how their lives will be improved by pursuing it? Does it set forth a standard of excellence and reflect high ideals?

• Is it focused yet flexible? Will it provide the framework for the unification of all employees’ efforts without restricting your company from pursuing breakthrough opportunities and possibilities?

The result of the wrap-up meeting should be unanimous acceptance of the revised model of success. It is important to note here that a revised model of success need not be a total reworking of the original.

In some cases, depending on when you created your original model of success and how much you built into it, you might need to fine-tune it. In other cases, you might have to scrap significant portions but leave the bare bones.

The final step of revising the model of success is achieving broad organizational alignment. This is an extremely important step, because the difference between a successful organization that achieves peak-to-peak performance and the traditional organization that flounders is not the quality of the revised model of success but the quality of the organization’s alignment with the revised model of success.

This is a challenge, because it will rely on your ability to lead during times of change, and there can be resistance in the organization. Demonstrate that you are aligned with the revised model of success and motivate others in your organization with your integrity, credibility, enthusiasm, optimism, urgency, and determination.

Putting It All Together

As explained in the last section, the last step in the process of revising your model of success is achieving alignment. In the case of the model of success, that means getting buy-in from everyone in your company.

The same can be said of defining or redefining your core and non-core functions. You can’t decide that your new primary core function is software development when previously it was hardware manufacturing and expect it to happen if only a few managers know about it. Your employees must first understand your decisions about your core competency and then commit to the changes that must be made.

There is another type of alignment that you must also achieve. This is the alignment of the results of your core competency matrices and your model of success. I recommend that, after you have used the matrices to define your primary core, secondary core, primary non-core, and secondary non-core competencies and you have produced a revised model of success, you hold a meeting that includes everyone involved in both processes.

During that meeting, you should compare the matrices and your revised model of success and try to answer these questions:

1. Is our revised vision in line with what we have identified as our primary core competency or competencies? Will it take us in the direction we need to pursue our new core?

2. Does our revised mission clearly state how we will accomplish a vision that is aligned with our core competencies?

3. Do the revised requirements of success truly address our defined core competencies?

4. Do the revised guiding principles truly reflect the new values our core competency requires we practice?

5. Does our revised evidence of success use measurements that demonstrate success with our new core or new direction?

6. Does everyone in the company understand and commit to our new direction and our new model of success?

If your answer to all of these questions is “yes,” then you are ready to take your re-defined and re-invented company from peak to peak, remembering that this process does not end here.

You will need to re-examine and revise your core competency matrices and your model of success regularly to stay in the success/success cycle. In fact, you will probably have to do this more and more often, given the accelerated marketplace today. You should also keep these questions handy because you will have to ask them frequently.

If your answer to one or more of these questions was “no,” do not despair. All you have to do is adjust your matrices and your model of success. It is doubtful that you will have to go back to the drawing board. Instead, you probably just need a few “aha” moments and some frank discussions.

Once you have worked out the problems, ask the questions again. Most likely, your answers this time will be “yes,” and you can take off in your new direction.

Conclusion

Success can definitely be fleeting. And once achieved, it can lead to failure. Company leaders tend to think that once they’ve reached peak performance, their stay at the top is almost assured. Nothing could be further from the truth. Most likely, what was yesterday’s peak performance is today’s good performance and tomorrow’s poor performance.

The key to long-term success is not the achievement of peak performance but rather the continuous process of beginning anew and climbing to a new peak, and the next peak, and the next peak.

The history of various companies, good and bad, shows us that companies whose leaders achieve peak-to-peak performance are those which benefit from continuous improvement, core competency reviews, and revised models of success to chart their journeys from peak to peak.

Regularly scrutinize your competencies and your model of success to make sure you are focusing your energy on activities that will improve production and profits. The companies that try to maintain the status quo end up lost in a valley, unable to find their way back up.

For more on this subject, see Jim Tompkins' new book, Bold Leadership for Organizational Acceleration from Tompkins Press (2007).

Sources

1. “TheGlobe.com to cut staff, fold sites.” Richard Shim, Cnet News.com  http://news.com.com/TheGlobe.com+to+cut+staff,+fold+sites/2100-1023_3-271110.html

2. “How Failure Breeds Success.” July 10, 2006 cover story, Business Week. http://www.businessweek.com/magazine/content/06_28/b3992001.htm

3. “IBM sees software acquisitions key to profit rise.” MSNBC.com, 18 June 2007. http://www.msnbc.msn.com/id/19286171/

4. Kris Frieswick, “What's Wrong with This Picture?” cfo.com, January 1, 2003. On the Web at: http://www.cfo.com/article.cfm/3007726

5. J. M. Kouzes and B.Z. Posner. The Leadership Challenge (San Francisco: Jossey-Bass, 1987).

6. B. Nanus, Visionary Leadership (San Francisco: Jossey-Bass, 1992), 134-156.

Media Contact
E-mail Myra Schwartz or call 919-855-5533.

About the Company
Tompkins Associates is the leading operations-focused consulting and integration firm specializing in end-to-end supply chain solutions. Customers look to Tompkins' expertise to develop and implement intelligent solutions in distribution center design, distribution network configuration, transportation planning, systems integration, benchmarking and best practices, logistics outsourcing, and supply chain optimization. For more than 30 years, Tompkins has offered a proven track record and deep industry expertise for solutions that reduce costs and improve supply chain performance. The company is headquartered in Raleigh, NC.

This article is available for re-print with attribution. If you would like more information or an interview, please contact Keri McManus, (919) 855-5516.