Right Away and All At Once

Five Steps to Transform Your Business and Enrich Your Life

RosettaBooks

Step 1

Have a Plan and Track Your Progress

Take the first step in faith. You don't have to see the whole staircase, just take the first step.

Dr. Martin Luther King Jr.

One of my good friends, Erik Weihenmayer, often tells me, "Great plans allow you to accomplish difficult tasks with measured risk." He should know, because he's constantly off somewhere in the world on some amazing adventure — and without a plan, he probably would have crashed and burned a long time ago.

Erik has climbed all seven of the highest summits in the world, including Everest, Denali, and Kilimanjaro. He's climbed the rock wall of El Capitan in Yosemite National Park, one of the toughest in the world. He paraglides. Last fall he finished a 277-mile kayak voyage down the Grand Canyon, including all its dangerous rapids. He also climbs ice waterfalls while hanging hundreds of feet in the air.

And did I mention that Erik is blind?

Erik is now in his mid-forties and every year adds to his long list of adventures. That he's still alive is a testament to his superb planning.

Erik and I first met at a Pepsi CEO event in Venice, where I heard him speak along with a lot of other top-shelf communicators including Tony Blair, Deepak Chopra, and Newt Gingrich. Erik topped them all, by far. By the time he finished his talk, you could have heard a pin drop.

Erik had synced his speech with a video playing behind him. I'll never forget the scene shot in his own backyard in Golden, Colorado. He set up a ladder a foot above the ground and then practiced walking across it. He fell down a lot, got back up, and continued to practice. Suddenly the video switched to some dramatic footage of his climb over the Khumbu icefall on Mt. Everest. He had to walk on rickety ladders across deep crevasses plunging thousands of feet. I watched, almost breathless, as Erik slowly made his way across those shaking ladders, loaded down with his massive backpack. And I kept thinking, he's blind!

A short while later, at my invitation, he and his ski guide came up to Beaver Creek and we skied together for a day, in the process becoming fast friends. Ever since, he and his family ski with us a few times a year.

Erik has been a huge inspiration to me. Not only does he humiliate me into embracing a no-barriers mindset — last summer we climbed three 14,000-foot peaks together in one day — but whether he's skiing, kayaking, or presenting, I've never seen a guy work harder on developing a sound, well-researched plan. And yes, that includes surrounding himself with great teammates and guides, such as Eric Alexander, who led him up Everest, and Jeff Ulrich, who guides him when skiing. Erik does this because he knows that if his plans fail, he may not make it. And so he always has a rigorous plan.

The same is true in business. If you want to make it, you must have a solid plan.

The Importance of a One-Page Plan

It's critical that you develop a very simple, one-page plan to help you reach whatever business destination you have in mind. This is the all-important Step One of my five-step process.

When I worked at Continental, we used to tell our pilots, "We are going east today. East is 090 on the compass. You could go 070 to 110 (directionally east) and I'd be okay with that. But if you decide to go 270, you'll have to turn your butt around."

Stephen Covey emphasized a similar principle in his book The7 Habits of Highly Effective People. He insisted on the importance of "beginning with the end in mind." The main point of developing a one- page plan is that it helps you to begin with the end in mind. It permits you to say with utter clarity, "This is where we want to be three years from now with our company." In a powerfully succinct way, it lays out how you intend to get "there."

Where to begin? First you need to identify the three to five critical levers that drive your business. (I'll talk more about this important concept in a bit.) If you require more than one page to lay out the key parts of your plan, then you'll have almost no chance of actually executing it. You must pinpoint the key activities that, once accomplished, will take you most of the way to becoming a great company. Many call this the 80/20 rule, where 20 percent of the identified actions yield 80 percent of the results. In most businesses, I think it's probably more like 90/10.

Every year, I sit down with CEOs of the new businesses we buy and ask them to bring me their strategic plans. Most of the time, they bring one of two things: either a huge, thick document with enormous detail that requires a forklift to move (which you know hasn't come off the shelf since it was written), or four to six pages of tiny script filled with long lists of to-do items. Neither is a strategic plan. Nobody in a company can communicate, action, or track that many items.

Studies show that our brains are pretty good at remembering three or four major categories and then recalling three to five elements categorized beneath each of those categories. If we try to remember fifteen to twenty strategic goals without any categories, or without subdividing them, we almost always fail. Your one-page plan should be so clear, so condensed, and so potent that everyone in your company can remember these key items and take appropriate action on them.

Let others help you develop your plan. Invite your board and management team to comment on it, discuss it, and change it. In the end, they need to own the plan too. Their input will make it better. I'd even encourage you to ask some of the younger, high-potential men and women in your company to give you feedback. You will be surprised by the fresh perspective that they bring. If you're not the CEO, no worries. A one-page plan can be applied to a division, department, or function to achieve similar results.

Once you finish, assign each item on the one-page plan to an executive or a team, who creates even more detailed plans about how to achieve that particular objective. They should also develop a target and a "stretch" goal so you can measure progress. I ask them to develop a plan for the first one hundred days to make sure they get off to a fast start. As Peter Drucker said, "what gets measured gets managed." Measurement is critical.

You'll see a good example of a one-page plan later in this chapter for a company called Generac (and another in the appendix for Continental).

The Necessity of Identifying Value Drivers

The key to being able to get your plan on one page is to thoroughly understand the value drivers of your business. What is a value driver? You already know of about a million tasks you could pursue to improve your business. These are actually pretty easy to identify. It's difficult, however, to boil down that long list to the three or five actions that really matter, that really drive profitability. When I talk about value drivers, I'm talking about that short list.

Do you have businesses, for example, that are losing money? Stop doing that. The fastest way to make money is to stop doing things that lose it. Do you have businesses you should acquire, businesses that fit perfectly with yours? By all means, pursue them. Are you providing your customers with the type of service they want and will pay for? If not, figure out how to do so. You must be able to clearly identify the levers that, once pulled, will make your business hum. Sound easy? It really isn't.

To help you identify the correct value drivers, I'll recommend some strategic planning tools in a bit. If this reads too much like a trip back to business school, then just skim the material. But remember, your plan has to be right or you may end up destroying your company.

I began learning how to identify value drivers for businesses at Harvard Business School, where I pored over hundreds of business cases. I received seven additional years of excellent training at Bain, one of the top consulting firms in the world. I then spent several more years leading a succession of high-profile turnarounds and did a very similar thing on boards. My last seven years at a large private equity firm have further sharpened my proficiency at this skill — and yet I still struggle at times to identify this or that company's key value drivers.

Think of the Domino Theory you experimented with as a kid. The key value drivers are like the lead domino in a complicated design. When the lead domino falls, all the other dominos fall, in order. If you get the value drivers right in your company, it's like knocking over that lead domino and watching all the others fall. It's a beautiful thing. If you get them wrong, however, it's like having spent hours setting up the dominos individually and knocking them over one at a time. Not so beautiful.

Let's start by examining the value drivers of two very different companies: PricewaterhouseCoopers Consulting (PwCC) and Generac.

PwCC: Two Levers and a Quick Sale

PricewaterhouseCoopers Consulting found itself battling gale-force headwinds in 2002. As the information technology consulting industry contracted, three external factors caused the firm to lose a full third of its business in just a few months.

First, Y2K had ended (and the world did not come to an end, despite many projections to the contrary), and focus on the worrisome change from 1999 to 2000 was over.

Second, the original dot.com bubble burst.

And third, the implosion of companies like Enron, Global Crossing, WorldCom, and others prompted the SEC to require companies to get their consulting services from anyone but their auditor. That meant that the audit clients of PricewaterhouseCoopers had to stop using PwCC's consulting services — and almost half of PwCC's business came from those audit clients. Without a dramatic turnaround, the company's very survival seemed in doubt. Its dire situation became even more difficult when the SEC started breathing down the firm's neck, requiring it to fix the business in just three months.

I had been brought on as CEO to apply the five steps. We managed to do the heavy lifting in just a month. The process ended not in an IPO as planned, but in a very attractive $4 billion sale of the company to IBM. Ginni Rometty, the current chairman and CEO of IBM, did a great job navigating the deal and successfully integrating the two companies.

To get to that point, I had to sit down and very quickly figure out the key value drivers so I could write a one-page plan and lead the PwCC partners toward the planned IPO. Almost immediately, I found two primary value drivers that would allow us to take the business from a 4 percent margin business to a 12 percent margin business (nearly matching the margins of Accenture, our largest competitor), which would allow the company to go public.

The first value driver allowed us to get PwCC to the appropriate number of partners it needed to support its smaller business. I looked at revenue per partner in 1999 — right before Y2K, the dot.com boom, and the fraud that prompted the SEC changes — and then at revenue per partner in 2002. I found that we had about a third too many partners, some of whom were attached to business lines that were losing money.

I asked Tom O'Neill, a very senior partner at PwCC and my predecessor as CEO, to stay on as chairman.

"Tom," I said. "I have a job for you."

"What's that?" he asked.

"You're going to be a working chairman, not just a pretty face. We have a third too many partners here, judging by revenue per partner. The problem is, I don't know which third of the partners should go — but you do. You've been here a long time. I need you to identify that third and develop a process for how to reduce our number of partners. And we have to do it in a few weeks."

Tom was like everybody's grandfather. People widely respected whatever he said and would willingly work with him. I had been there only a couple of weeks, and if I had let that many partners go, I would have sparked a revolt. Tom's word, however, was like gold. He did an amazing job, and we quickly removed a third of the partners, including those attached to money-losing businesses, taking care to treat them all with dignity and respect.

The second value driver involved reducing overhead costs, specifically advertising. We typically spent $80 million a year on advertising. "How much of this advertising brings us real value?" I asked myself. "How do I calculate its value to the company?" To make simple a very complicated story, I learned that every partner at PwCC had managed to squirrel away some marketing funds for his or her favorite golf tournament or charity outing. Our CFO, Frank Sowinski, and I went through the line items and asked, "What amount of this really adds value to our business? What part generates revenue?" It turned out only a quarter of it did. It took us about two days to make that determination. We removed $60 million in nonvalue-added marketing cost.

So in just two weeks, we had identified two key value drivers and pulled them. We pruned the organization so it could grow again. We reduced the marketing budget by three quarters, from $80 million to $20 million, and we let go a third of the partners, amounting to several hundred individuals. My good friend Frank Brown — at the time an audit partner in charge of the sale from the tax and audit side — agreed with these decisions, and together we took the necessary action to get us ready to go public.

Soon thereafter, I left for a partner meeting in Amsterdam to explain our Go Forward plan and how the IPO would work. I got a call from Sam Palmisano at IBM. "Greg," he said, "we really need to buy PwCC, but we need to do a lot of diligence."

"Sam," I replied, "we're going to start our IPO road show in a couple days. We're ten days from our financials going stale. We simply can't wait another quarter to separate from PwC, because our revenues are dropping too quickly. We don't think we have time to sell it to you. Besides, we've already filed four S-1s with the SEC to take this public. You don't need to do much diligence. Every Wall Street proctologist in the world has peered at us."

"No," he said, "you don't understand. We really need to buy it."

"Okay," I said, "it's Friday. Why don't I put my guys on a plane and they'll meet with your guys over the weekend? They'll present a proposal to us on Monday and we'll see what they have to say."

The two groups did a magnificent job and gave a terrific presentation. I looked at the IBM team and said, "You're going to have to buy this thing."

"That's what we've been trying to tell you," they replied.

We settled on a price, got some accounting firms, lawyers, and bankers together, and we all went to Armonk, New York, to IBM's training center to finalize the deal. The whole thing came together in three or four days, and we announced it in six: a $4 billion purchase of PwCC by IBM.

We never could have reached that place without first identifying the two key value drivers, completing our one-page Go Forward plan based on those value drivers, and then swiftly executing against it.

Generac: Four Levers and Tripled Profits

In 2006, CCMP bought a company called Generac, the market leader in the home standby generator business. The company enjoyed more than 70 percent market share.

We purchased Generac from the founder, Bob Kern. Bob was among the first inventors of both portable and home standby generators. He recognized the benefits of standby power for households and created the category.

When big storms hit and the power grid shuts down, your whole home goes dark. The air conditioning or heat quits working, your refrigerator stops, and you stub your toe on your way to the bathroom. It's miserable. As our CEO, Aaron Jagdfeld, says, "Life gets primitive real fast without power." Some homeowners put standby generators on the sides of their houses to quickly restore power as soon as it goes out. Generac had tremendous growth potential when we bought it, because only about 1 percent of the homes that really needed a home standby generator actually had one. Just growing penetration from 1 percent to 3 percent would make us very successful.

The year before we bought the company, the Western Hemisphere suffered through the most active Atlantic hurricane season in recorded history. Monster storms with names like Katrina, Rita, Wilma, Emily, and Dennis killed almost 4,000 people and caused nearly $160 billion in damage. Home generator sales went through the roof. The founder of the business, then in his eighties, said, "This is a perfect time to sell," and we bought it. While we knew the business had just enjoyed peak sales, we also knew it had tremendous growth potential. We promoted Aaron Jadgfeld, then in his late thirties, from CFO to CEO.