The purpose of this article is to examine the key strategic decisions that the best CEOs make. These “key calls” allow their organizations to innovate while at the same time providing stable management with consistency and foresight. Without a “real CEO” making the key calls, most partners have a tough time increasing and sustaining their value.
What are the key calls that CEOs make?
The “key calls” can be framed as a series of six questions:
1 Is the organization complete? What does the organization need to be complete at present and what does the organization need to be complete in 12-24 months?
2 Where should the organization grow or shrink?
3 How should the organization grow or shrink?
4 What product and markets to emphasize?
5 How close to state-of-the-art should the technology strategy take the company?
6 What time frame should be set for change?
An earlier article in this series investigated the problem of incomplete companies and the efforts that top CEOs make to insure that appropriate Functional Underpinnings are in place. Specifically, the best CEOs make sure that their organization have the following in place:
alliance and partnership strategies
appropriate corporate governance strategies
appropriate financial structure and financial strategy marketing and sales strategy
service creation strategy
Which businesses to grow or shrink is a fundamental question of company investment strategy. Should the CEO drive the organization to grow new businesses faster than the historic business? Should the historic business be used to finance the new businesses with both being managed in parallel? Should the CEO drive to exit the historic business by selling off assets or redirecting investment? Should the CEO “bet the company” and throw all the resources of the organization behind the hew businesses? The best CEOs base the Grow/ Shrink decision on their understanding of the opportunities in their markets and the capabilities of their organization and its management.
How to grow or shrink is as critical a decision as where to grow or shrink. Should the CEO drive the organization to reduce its size and scope, perhaps to prepare for future expansion? If growth is sought, should the growth be internally driven (the so-called organic growth) or should mergers, acquisitions, alliances and partnerships be pursued to fuel external growth? Perhaps the CEO should guide the organization to a hybrid strategy with shrinkage, internal growth and external growth taking place simultaneously. The best CEOs know that the various growth and shrinkage options require dramatically different organizational capabilities to enable successful execution.
They make sure that they have the required capability prior to strategy execution. The best CEOs cause their organizations to make clear decisions about what products and what markets they plan to invest in. Nine options exist.
The farther a CEO allows the organization to move their focus from the installed base (Existing Product/Service to Existing Clients), the more resources the CEO commits to future sales levels. For example, generating a dollar of revenue from new clients in new markets with new technologies and new solutions can be 15-20 times more expensive than generating a dollar of revenue in the installed base. The best CEOs balance investment in new technical capabilities with investments in new sales/marketing capabilities. The decisions are made in the context of the CEO’s understanding of the organization’s cash flow generation capability, market opportunity and the strengths of the organization.
The best CEOs challenge their organizations to have clear technology strategies in which they articulate how close to the state-of-the-art the organization will go. They know that running a First-to-Market technology strategy requires much different corporate resources and capabilities than running a Second-to-Market or Late-to-Market strategy. The best CEOs know, for example, that the corporate skill set differences between a partner that runs a Market Segmentation versus a Late-to-Market technology strategy are dramatic. The best CEOs cause their organizations to make clear decisions on where to focus their technical resources and investments.
The best CEOs establish and communicate clear time frames for changes in their organization. They know that time and money are interchangeable resources. With lots of money, changes can be made quickly. With no money, changes take longer. Most of the best CEOs in the business habitually underpromise and over-deliver.
Bruce Stuart, ChannelCorp President, is an international expert in the fields of vendor channel strategy and solution partner profitability improvement.