WV Executive

There has probably never been a time when building value in a business has been more challenging. Yet, never has there been greater opportunity. Technology and other factors have, in the words of Thomas L. Friedman, “flattened the world” and have introduced competitors from around the globe. But these factors have also brought unprecedented opportunity to those who can figure out how to capitalize on them.

Chapter 10 of Friedman’s book, “The World is Flat,” opens with a quote from Albert Einstein: “Out of clutter, find simplicity. From discord, find harmony. In the middle of difficulty, lies opportunity.”

This article, second in the series “The Lifecycle of Equity in a Business,” focuses on building value in a business. There are nearly 50,000 businesses in West Virginia and I believe that the value of virtually all of them could be increased. The problem is that the pace of business, and of life itself, seems to have accelerated to the point that many business leaders feel that just keeping up with daily challenges fully occupies their time. Finding additional time to deal with the more important, but less urgent, question of how to build value in the business seems difficult to come by. Yet, many leaders do it successfully and to the great benefit of themselves and others. In short, it is the difference between working ON your business and working IN it.

Case Study

Systems Learning, Inc., and it’s CEO, Teresa Shelton* were introduced in the previous article dealing with the Exit Stage in the lifecycle of equity. Earlier in its history, Teresa successfully focused on building the value of Systems Learning. She did so by implementing the five strategies set forth below.

*While based on an actual West Virginia-based business, names and certain facts have been changed to mask their identities.

Strategies for Building Value in Your Business

Without question, dealing with the daily problems of business is both time consuming and energy consuming. The late Peter Drucker acknowledged this, but went on to say, “Good executives focus on opportunities rather than problems. Problems have to be taken care of, of course; they must not be swept under the rug. But problem solving, however necessary, does not produce results. It prevents damage. Exploiting opportunities presents results.” Here are five key strategies for building the value of a business.

1. Listen to the Customer – This mantra has been repeated so often it has become a cliché. Yet, who would deny its truth? The difficulty lies in determining which customer to listen to and what to listen for.

Tracy Shelton correctly foresaw a trend towards consolidation in System Learning’s customer base. She shifted the focus of the company to the larger customers, who had somewhat different needs than its historic customer, the small, locally owned business.

It is my view that a business is well served to have in mind a target customer. That is, it should focus on the type of customer to which it can offer the most compelling market proposition. It then must focus clearly on that customer’s unmet needs. And these unmet needs fall into two categories: Current—where the market is today, and Future—where the market will be tomorrow. An entrepreneur, who has a good understanding of the unmet needs of his or her target customer and how to serve those needs profitably, is well on the way to building value in his or her business.

2. Develop a Strategy – Once again, the term “strategic thinking” is often used. (If you want to know more, type the term into Google. When I did so I found more than 63 million hits.) Fundamentally, strategy is simply a plan for converting your knowledge of the market into a profitable business. What must you do well to be successful (your key success factors)? Think deeply and develop a simple strategy that can be easily expressed and understood.

3. Execute! – Ram Charan, noted author, lecturer and consultant to Fortune 500 company boards and CEOs, spoke at the 3rd Annual West Virginia Leadership Conference in May of 2005. He recommended that leaders create an environment in which candid dialogue is the “basic unit of work.” This dialogue is characterized by closure (e.g., people know exactly what is expected of them) and follow-through, which he calls “the DNA of decisive cultures.” The result is an energized, empowered and engaged workforce, and a high-performance organization.

This seems like such common sense, yet it seems that it is uncommonly applied. Tracy Shelton created such an environment within Systems Learning. She has always encouraged candid communications, bold implementation of ideas and accountability. Management meetings feature presentations on key performance metrics and candid discussion on how to improve them. There is little “blame” and lots of “brainstorming” in these meetings.

4. Put the Right People in Place – How many times have you heard that the key to building your business is the recruitment, retention and engagement of high performance people? Certainly, to repeat this is stating the obvious. Yet, many businesses still struggle to do this consistently. Following are a few helpful coaching points:

Select people that buy into your vision. I believe you must engage people not only at the level of their hands and minds, but also their hearts. People want to be proud of what they do and feel successful at doing it. This resonance provides a foundation for consistent long-term success.

Build systems and processes that facilitate repeatable excellence. Train people to perform using such systems.

Define successful performance and coach toward it constantly. Don’t just let people sink or swim; coach them to success.

Prune. Despite your best efforts, you will find people who are a mismatch with your business. If they cannot perform at a consistently high level, you owe it to yourself and to them to make changes.

5. Collaborate with Others – Collaboration is another word that has become much more popular in the last decade or so, for good reason. I believe the benefits of true collaboration can make a very significant difference to businesses. It enables small companies to bring big capabilities to market and expand their markets well beyond traditional borders.

Teresa Shelton realized the importance of collaboration in the 1980s, and it became a hallmark of Systems Learning, and a competitive differentiator. She was instrumental in creating a joint venture comprised of similar companies. By combining resources they were able to land some domestic and international contracts that no member would likely have obtained on their own. This joint venture has enabled Systems Learning to extend its reach, not only nationally, but to many parts of the world.

Conclusion

I think it is worthy to note that building the value of a business is not a selfish act benefiting only the owners. On the contrary, when a business prospers, all of its stakeholders benefit. Its customers benefit because their needs are being served well and in a cost-effective way. Employees benefit because they become part of a winning team and prosper, both financially and emotionally. The community benefits from having another vibrant part of its economic infrastructure.

Building the value of your business is best done by intention and consistent effort. West Virginia has many wonderful success stories, including that of Systems Learning, Inc. In fact, the pages of each issue of West Virginia Executive are filled with the stories of such companies. Finally, building a business is fun! Just ask those have a done it.