Directors and boards today need to be more entrepreneurial and operate beyond their comfort zones. By Richard Owens
The high growth levels that many investment funds have sustained to date are clearly pressuring many directors and boards to operate beyond their comfort zones. Critics argue that investors high growth expectations are unsustainable. But are they?
There is phenomenal duplication of time, effort and cost in most private enterprise or public sector production or service-delivery sequences. We have accepted such waste of effort as an inevitable consequence of operating in a democratic, free enterprise, “survival of the fittest” environment.
So, management resorts in the main to achieving growth through individual enterprise cost reduction, by optimisation of what is already being done, or to growth by acquisition.
However, impressive growth does not have to involve multi-million or multi-billion-dollar acquisitions. For most organisations suffering from depressed share prices, the most cost-effective way ahead simply involves capitalising more effectively on what they already have and on their existing strengths.
This is different to incremental improvements in profitability by cutting costs and achieving greater efficiency. Knowing that a company is making incremental improvements may make investors think twice about selling out, but incremental improvements alone are unlikely to bring about a substantial increase in a company’s share price.
The market expects growth through optimisation, and this is usually anticipated and reflected in share prices. So, to re-ignite sharemarket interest, companies need to communicate to investors that they have a dynamic growth strategy.
Where will investors go?
There has been a concentration of national savings in the hands of professional investors who tend not to see themselves as owners and decision makers for the businesses in which they invest. In Australia, for example, look at the superannuation funds.
As a consequence of this delegation of savings and investment responsibilities, the ability of investee businesses to earn acceptable returns by whatever means may become more important to investors than the activities by which those returns are earned.
This suggests that for management it will become progressively more important to be entrepreneurial than to be able to optimise by achieving incremental and progressive improvements in known environments.
For managers to become entrepreneurial, it is essential that they know just as much about what is going on outside their businesses as they do about what is going on inside.
Farming stakeholder relationships
Relationships do not feature in balance sheets, however a company’s greatest growth potential for the least cost is in its existing relationships.
Tactical Alliance Group, for instance, has developed a stakeholder program to help businesses benefit from the collective intelligence, energy, capacity and influence of all their stakeholders, not just shareholders. This does not involve spending lots of money or doing anything radically new or risky, but it does fundamentally change the way management views and relates to all stakeholders.
It also improves the way management deals with information.
The information strategy embodied in the stakeholder program involves systematically identifying an organisation’s stakeholders then understanding their capabilities.
The next step involves networking with stakeholders in ways that capitalise on their combined capacity to receive, process, store and communicate information and knowledge.
Benefits that can put a business in the spotlight
Directors who want to attract more investor attention to shares in their company need to understand that closer relationships with all stakeholders can provide great opportunities for growth.
They do not have to use their own capital because their established base can convert otherwise capital hungry, relatively high-risk ventures into fast-track projects that any number of venture-capital funds would find attractive as investment opportunities.
Businesses that want to grow at a pace that maintains investor interest must be willing to push themselves continually and to lead every one of their stakeholders to perform way beyond their comfort zones.
How not to
How not to respect the law
The prize for best chutzpah goes to the file-sharing firm Aimster. It recently removed from its Web site a program based on pig Latin that enabled Napster users to get around court-ordered restrictions on the popular song-swapping service.
“At the request of Napster, Aimster has removed the Pig Encoder Software from public distribution through its Web site.” said Aimster chief executive officer Johnny Deep.
How not to balance work and play
Japan’s employers must take the award for workforce management. The Japanese often show an unenviable dedication to the office; a typical office worker can leave home at 7am and return after 11pm.
Enter karoshi: death from overwork. In 1996, the Nagoya High Court upheld a ruling that Yoshikazu Abo, a salesman for an electrical company in central Japan, had died from overwork 13 years earlier. In the 17 days before his death, Abo had been sent by his company on 20 sales missions. The last, to South Korea, was what killed him.
Hundreds of civil lawsuits are now being filed every year by relatives of those believed or found by the coroner to have died from karoshi, seeking compensation for the deaths of their loved ones. But Japanese companies have until now managed to escape criminal charges.
Some estimate karoshi deaths run at 10,000 a year.
How not to protect intellectual property
The prize for dumb optimism goes to photographer Peter Kaplan who thought that his portrayal of a businessman about to leap from a ledge high on a Wall Street building should be protected by copyright.
Not so, was the verdict from Judge Allen G. Schwartz of the United States District Court for the Southern District of New York. He dismissed Kaplan’s claims against Rupert Murdoch’s Fox News Network and The Stock Market Photo Agency, finding that Kaplan’s photo “Wing Tips Over the Edge” and the photos assembled by rival Bruno Benvenuto for two ad campaigns were not substantially similar.
Schwartz said: “In designing his photograph, Benvenuto added his own originality to the underlying, unprotectible idea of a businessperson contemplating a leap from a tall building to a street below, and his expression of that idea is not infringing as a matter of law.”
How not to get a good price for intellectual property
On June 1, 1938, the first issue of Action Comics introduced Superman to the world. Superman was created by Joe Shuster and Jerry Siegel. Unfortunately for them, they had sold all the rights to the character they had created for the sum of $US130 $US65 each.
How not to understand (cheap) intellectual property
The prize for the best failure to be like Superman goes to the man shot dead by a fellow villager while testing a magic spell designed to make him bulletproof.
Aleobiga Aberima, of a village in northeast Ghana, asked the local witchdoctor to make him invincible to bullets. After smearing his body with a concoction of herbs every day for two weeks, Aberima volunteered to be shot to see whether the spell had worked. Another villager fetched a rifle and shot Aberima who died instantly from a single bullet.
Angry residents seized the witchdoctor and beat him severely until a village elder rescued him.
The slithershanks file
Slithershanks often reads the classics Homer, William Shakespeare and Woody Allen but, for instruction, insight and penetration, they don’t come near a new book: The Business Pilgrim’s Progress, based on the works of that well-known 18th-century duck hunter and management guru, John Bunyan. Slithershanks awaits the sequels eagerly: One Day in the Life of Ivan the Actuary, Brideshead Correctly Invoiced and War and Piece Work.
“And so it was that our two pilgrims were able to quit the deluded streets and hypocritical shops of the town that would not listen. As they were taken to the town’s limits, posters were being put up proclaiming: Superficial is no place for Self-Reliance, or those that choose to travel with him.
” That was brilliant of you to so confidently propose what you did, said Chris when they were safely beyond the town]s borders. I’m afraid I got so wound up with the whole attitude of the court that I couldn’t stop myself preaching as I did. ”
Not the only one preaching, as it happens.