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#4  Why Chasing Productivity Can Be A Trap

Hugh ran a $75 million manufacturing business.  He’d been running this business for over 12 years.  He worked long hours to keep the business on track, through many productivity improvement initiatives:  customer acquisition campaigns and marketing productivity, pricing, sales effectiveness, employee management, and procurement/manufacturing/distribution cost reduction.  Despite decades in the business, products and quality equal to the leading competitor, and a well known brand, the business was losing revenue and market share, and profit was barely staying even.  Why? 

EscalatorAs a kid, did you ever try to run up the down escalator?

Race up until you make it to the top – or at least close to the top. Do you ever think of your business as an escalator?  It is.  Watch the video – it’s a hoot! Does the video remind you of running a business today?

In a business, each step of the escalator is just like the initiatives tht Hugh, in the above real story, was working on.  They are necessary to staying in the game.  The initiatives Hugh worked on included:

But think about it … is your business an up escalator, where the movement of the escalator multiplies the distance of each step … each initiative?

Or does it feel like you’re trying to run up the down escalator, where it takes a lot of rapid, successful steps just to stay in place much less make it to the top.  In other words, a lot of effort and expense without the return needed to truly lift the business up.  And forbid the thought that you stop, or the business begins to slide.

The real question is what determines the direction of the escalator itself, so that each step, each program, is riding on upward momentum, rather than trying to overcome downward momentum?  The direction of escalator is determined by strategic drivers – those things where it is possible to do better than competitors and makes a big difference to customers. Productivity drivers will not change the direction of the escalator, but can accelerate progress if the escalator is travelling in the right direction.

It’s a very different list.  These are some of the strategic drivers that have the power to change the direction of the escalator.

Advantage drivers

No company should try to be great at all of them.  The strongest companies pick one driver as their primary focus, work on two or three others that are critical to success, and do “OK” on the others.

Hugh eventually was asked to leave the business.  The new leader, Tom, did some exploration and discovered that Hugh had made a lot of progress in productivity, but had not really challenged the business to focus on a specific strategic driver. The business had really focused on keeping up with what the industry was doing. With new focus on being better and different than competitors in just three key strategic drivers (customer knowledge supported by marketing/sales expertise and information technology know-how) in two years the business profit had almost doubled and revenue growth outpaced every other competitor in the industry.

Hugh fell into the productivity improvement trap. Productivity improvement programs, which are more contained and likely to promise more immediate results, often become the focus of leaders and their organizations.   Look what happened to this business and to Hugh. The choice to revitalize a business by challenging it to focus on building strength in strategic drivers can understandably get lost.  There is always the feeling that if you stop running up the steps, that the slide down will begin.

Strategy and “strategic drivers” are vague concepts for most leaders and perceived to be a big risk if they require change.  And tackling strategy often uncovers weaknesses in a business – which no leader with any tenure really wants to do. But we’ll show you in the next series of articles that improving strategic drivers isn’t really any more difficult than implementing productivity initiatives, and in fact, reduces risk, builds support, and makes life overall a lot easier!

Are you attempting to go up the down escalator?  Do you still want to do this?  Watch the video. Try running up an escalator already moving upward.  Big difference.

If you’re curious about the strength of the key drivers of advantage in your company, we offer a free on-line assessment that provides immediate scoring of the strength of your advantage.  Have each team member complete the assessment (it takes about 5 minutes) and then discuss the results.  It will help you and your team determine if a look at your strategic drivers could help your business performance.