Today, it has never been more difficult to create a highly successful organization or businesses and organizations are going out of business or dying at record levels. Since 1955 Forbes Magazine has published a list to the top 500 companies in America based on annualized revenue. The list is called, The Fortune 500. Since it was first published 2,000 companies have appeared on the list. The list includes companies from 70 industries. In 2008, Wal-Mart Stores and Exxon Mobil lead the list with $378.8 billion and $372.8 billion dollars in 2007 annual revenue, respectively. In the 499th and 500th positions are Perini and Scana with $4.63B and $4.62B dollars in revenue.
In the first 25 years of the list, an average of 3 companies per year, were unable to post sufficient revenues to stay on the list. In the second 25 years, 1,925 came off the list or 77 per year, a 25 fold increase. Between 2006 and 2007, 31 companies came off the list including Hilton Hotels, Lucent Technologies, and Radio Shack. Since 1980, 71% or 355 of the companies have been unable to post revenue levels sufficient to stay on the list. 43% or 215 have gone out of business, been sold, or merged with other companies. During the recession of 2007 to 2010 107 companies came off Fortune Magazine’s list of Americans best publicly held companies and collectively over 550 billion dollars of shareholder equity was lost.
Over the same period small, medium, and large private companies have experienced a similar trend. Between 1980 and 2007 median EBITDA’s or the profitability percentage, across all industries, has declined by over 35% to 5.1% and the CEO turnover rate reached an all time high. In 2008 the annual rate of business closures increased to 1,555,000. It was 640,000 in 1994.
Since the mid 1970’s, corporate America, governments, academia, and the scientific and consulting communities have sought to identify the primary enablers and inhibitors of world-class organizational and individual performance in highly competitive environments. But despite spending billions of dollars and dissecting every aspect of top performing organizations, workgroups, and top performers the answers to these questions have remained a mystery.
How to achieve world-class results in non- and low competitive environments is well known and documented. How to achieve this level of results in moderately competitive environments, where the number of points of distribution are in balance with the demand to support those points, is clear. But how to consistently deliver world-class results, protect shareholder value and equity, and consistently bring products and/or services to the market that wow target customer groups, until now has not been known.
Although there have been significant advancements along the way, particularly in areas of technology, process management, logistics, customer satisfaction, leadership development, and cultural diversity. The percentage of private companies producing world-class results, equal to greater than 1.5 times the market average, has remained relatively constant, between 2% and 3% and for public companies the figure has yet to exceed 1%.
To the naked eye the best performing businesses look virtually identical to their competitors. They have very similar structures, headcounts, and total compensation packages. Their capital structures are not too dissimilar. Their leadership, management and workforce have similar levels of professional quality i.e. experience, academic profile, companies worked, technical competency and results. They use similar processes, process management systems and technology and in many cases, the same vendors and consultants, so what’s killing over 1.5 million companies per year and enabling top performing private and public companies to produce world-class results?
Your organization and its competitors operate on a business model. That business models is comprised of a strategic platform, processes, and operational absolutes. While processes and operational absolutes can be seen with the naked eye, strategic platforms cannot. Strategic platforms are the foundation, like the foundation on a house, which an organization or company is built on.
In 1998, it was discovered all strategic platforms are identical in form and function to the genetic structure of all living organisms. The organizational genome is comprised of 12 genes or building blocks and 150± nucleotide or primary strategies. While the genes or building blocks of an organization’s DNA are identical the number of strategies of which they are comprised varies by industry, as does their performance capability level.
From this discovery was born the ability to see what previously was invisible to naked eye and the technology to take a living, breathing, and functioning organization and accurately simulate how it would perform under different, more powerful DNA scenarios, without taking it offline or putting it at risk in anyway. This technology resulted in theory of organizational genetics and methodology for reengineering organizational DNA for the consistent production of world-class results in highly competitive environments.
Now after 12 years of organizational DNA profiling across 22 industries, nearly 100 sectors, 300 segments, 1,500 niches, and over 50 markets, comes good news and bad news. The bad news is the virus that is killing 1.5 million companies per year has infected over 96% of all organizations. The good news is the antivirus has been found.
The virus was right in front us all the time. The virus is the highly competitive environment. In the 1970’s virtually all industries, sectors, and segments were technically non-, low or moderately competitive. Only at the niche and market level was it highly competitive.
However, by 1980 the landscape had changed. According to the U.S. Department of Commerce virtually all industries, sectors, segments, niches, and markets were technically highly competitive. As defined by insufficient demand to support the number of businesses or organizations at sustainable financial levels. Competitor entry not restricted. Environmental, organizational, product, and value proposition positions changing frequently and rapidly. Well-defined market segments and consumers separating into one of three value orientations and being experientially and customer satisfaction sensitive.
Over the past 30 years there have been times when the degree of market competitiveness receded, but to date, it has always returned. Today, as we stand at the end of the greatest economic recession in world history, the question is the economic landscape going to be more or less competitive in the coming years and decades?
If it’s less and we’ve seen the last of the highly competitive environment then the anti-virus is not required. But if it’s here to stay, then it’s only a matter of time. It is only a matter of time before your organization’s market share begins to decline, strategic adjustments fail to produce desire results, shareholder value and equity deteriorates, changes in leadership occur, and the owners are forced to merge, sell, or close the doors.
This organizational virus doesn’t have a conscious. It doesn’t care how long you have been in business or how hard everyone has worked. It doesn’t care how much experience the organization has or about the pedigree of its leadership or the academic prowess of its workforce. It doesn’t care how deep the organizations pockets are or that the company was a market leader for decades. It can render any institution functionally obsolete in less than three years and kill any organization or business.
Do the math. If your organization, company, or institution is not delivering market-leading to world-class results, is not producing products that wow their target customer group, or is not largely comprised of individuals that is consistently deliver results in excess of 1.5 times the market average, how long does it have?
Now the good news, the antivirus has been found. Through comparative organizational DNA profiling, the solution to the consistent production of world-class results in highly competitive environments has been found. The DNA of organizations which consistently produce world-class results has been found to have seven characteristics not found in non-top performing organizational DNA. By integrating these seven characteristics into your organization, business unit or department’s DNA it can be transformed into one that consistently produces world-class results in highly competitive environments. The seven characteristics are:
1. A highly competitive market oriented DNA.
All major organizational strategies have a degree of market competitiveness to which they are oriented or designed to produce superior results; non-, low, moderate, or high. Virtually all organizational DNA are comprised of a mix of non-, low, moderate, and highly competitive market oriented strategies, but in organizations which produce world-class results virtually every strategy is highly competitive market oriented.
2. Sweet-spot positioning.
Organizations that deliver world-class results consistently position their products and/services on the best performing positions within their industry; sector, segment, niche, value orientation, markets, and sub-markets within those markets. These positions are called sweet-spots. Sweet-spots tend to produce results in excess of two times the market average.
Driving this positioning expertise are two paradigms not found in the DNA of non-world class performing organizations: The first is value orientation and the second is sweet-spots.Value orientation is a positioning paradigm which holds all consumers, organizations, strategies, capital, processes, personnel, products, and markets all have one of three dominant value orientation: lowest total cost solution, best total cost solution, and highest quality cost solution. The theory of holds the best performing market positions in highly competitive environments are on the centerlines of each value orientation and the best performing organizations are those who’s DNA are in every way aligned with their value orientation.
The second is the sweet-spot positioning. Sweet-spot positioning subscribes to the theory positioning strategies, as defined by their results, may be segmented into five categories: non-performing, under-performing, performing, excellent, and sweet-spot.
3. A highly competitive market oriented set of business avionics and organizational controls or navigational system.
All organizations have a navigational system comprised of reports, meetings and communication strategy, manuals, and employee performance management programs. These navigational systems range from a checkbook to a complete set of navigational data and programs. Organizational navigational systems inform owners, leaders, and managers on the health of the markets in which it the organization operates, how the organization as whole and the departments of which it is comprised are performing, and provide them with the ability to optimize employee performance.
Comparative analysis of the baseline categories of reports in world-class performing organizations and the set taught in virtually every MBA program in America found world-class performing organizations had 12 more categories. Meetings differed in type, frequency, content, duration, and post analysis. Manuals were completely different. They went far beyond typical policies and procedures manuals in both scope and content. They presented the organizational vision, mission, principles, and current focus statements, as well as, the same for each department. They defined what each department and the positions of which they were comprised of were accountable. They defined key performance measures, operational absolutes, and the major processes. Employee performance management systems also differed significantly in focus and style. Their focus was inclusive and style collaborative.
4. A workforce largely populated with “natural’s” and void of employees with problematic sets of life management skills.
Natural’s are a new employee performance category in the workplace, comprised of three levels: talented, natural and developed natural. While the term is new to business, it is common amongst professional athletes, entertainers, and artists.
Natural’s are people who have the natural ability or gift to perform the processes of which a position or job is comprised at levels in excess of two times that of a skilled practitioner in the same position with like experience levels.
Seven visible characteristics of natural’s are:
- Display unexpected knowledge of the position.
- Their performance levels increase the more competitive the environment becomes.
- Have the capability to block out all direct and indirect distraction
- Lose track of time.
- Tend to get to work early, work through lunch, and stay late.
- Visibly enjoy the processes of which their position is comprised.
- Don’t talk shop in the presence of non-natural’s.
Organizations, business units, and departments which produce world-class results in highly competitive environments have been consistently found to be largely populated, more than 60%, with natural’s. Conversely amongst organizations not producing world-class results the level was consistently found to be less than 20%.
In addition to an organizations workforce being largely comprised of natural’s, their workforces had two other characteristics; First, they were virtually void of employees with problematic levels of life management skills. Secondly, their workforces had higher than population estimates of employees in the top two categories of life management skill sets.
Life management skill levels determine the amount of personal problems an individual will have and frequency to which those personal problems will elevate to the point which will impact their performance and the performance level of their co-workers. According to a Gallup/USA Today survey, personal problems account for over 93% of problems in the workplace today.
There are four levels of life management skills:
- Complete
- Near to complete
- Incomplete or normal
- Problematic
Categories of life management skills are defined by frequency personal problems which inhibit performance.
By simply adding a life management skill set filter to the recruiting and hiring process world-class performing organizations are able to create workgroups void of employees with performance inhibiting levels of life management skills. Additionally, by profiling existing employees and providing workshops in this topic organizations are able to significantly reduce the level of problems attributable to personal problems in the workplace and enhance the quality of life of their employees.
5. A highly competitive organizational, business, or departmental performance capability index of 7.0 or higher.
All organizations have a performance capability index (OPCI) relative to the degree of market competitiveness in which they operate. The OPCI is a weighted 1.0 to 10.0 index comprised of the performance capability levels of five variables: markets, business model, leadership, management, and employees.
In highly competitive environments the OPCI of companies that produce world-class results as compared to those that produce market average results were typically equal to or greater than 100% higher than the market average.
6. A sales force comprised of 70%± natural salesmen. Who are led by a natural sales manager, who has produced a top performing team or who could innately express how to do it, what it will take, what it will cost, and how much time is required to build it. Who employs natural’s oriented sales management technology, key performance indices, and training.
In organizations which sell products and/or services, DNA profiling found few performance indices clearer than:
- The difference in results between natural salesmen and sales managers with threshold professional quality profiles and their market average counterparts.
- The percentages of natural salesmen in companies producing world-class results as compared to those delivering market average results.
- The difference in sales training programs and sales management technology.
DNA profiles revealed organizations producing world-class results in highly competitive environments were consistently comprised of at least 70% natural salesmen with threshold professional quality profiles as opposed to the market average of equal to or less than 20%.
They had a sales manager or managers, who on the full employee performance evaluation spectrum, were classified as either talented, natural, developed natural or top 1%. As opposed to the market average companies whose managers were classified as new to the position, not yet skilled, or skilled.
Sales training programs and management technology differed significantly from the widely accepted programs and technology. World-class sales team’s sales training programs and management technology were oriented towards sales process execution and developing talented sales professionals into world-class sales professionals. Conversely, organizations producing less than world-class results were found to have training programs and technology oriented towards administration, standardized sales process, and developing salesmen from just entering the profession to market average.
7. An organization must have a customer satisfaction index equal to or higher than 90% and employ “fit” customer satisfaction practices.
Organizations that consistently delivered world-class results had a customer satisfaction index equal to or greater than 90%.
In addition to the standard program for the achievement of indexes in the 90th percentile they employed three “fit” based practices. These practices effectively prohibited prospects whose value orientation was unaligned with the company’s and its products from becoming a customer of the company. As a result, customers whose innate expectation level could not be met did not become a customer of the company.
A customer value orientation study of a Fortune 500 companies unsatisfactory surveys found in 97% of the cases, customers’ value orientations were unaligned with the company’s and its products value orientation.
An unexpected benefit of the component was it allowed companies to operate their overall customer satisfaction index program at equal to or greater than half the cost of competitors employing only the program approach.
By integrating these seven absolutes in any organization’s DNA it is virtually impossible for an organization, business, or workgroup not to produce market-leading to world-class results.