Executing in a world economy

Wisconsin companies are on a "learning curve" in discovering how to compete in a global economy, according to business consultant Ram Charan.
Having sound strategies for survival will not guarantee success. Without executing, evaluating and following through on those strategies, Wisconsin companies will be doomed to failure, Charan says.
Charan, a world renowned business consultant, is the co-author of "Execution: The Discipline of Getting Things Done," (Crown Business).
He has been of counsel to Fortune 500 companies and startup firms. The India native has taught at both the Harvard Business School and the Kellogg School of Northwestern University.
Charan recently spoke in Milwaukee to members of the Wisconsin chapter of the Association for Corporate Growth (http://www.acg.org ), the global association for professionals involved in corporate growth, corporate development, and mergers and acquisitions.
Shortly after his seminar in Milwaukee, Charan spoke about the core principles of his book with Small Business Times executive editor Steve Jagler. The following are excerpts from that interview.
SBT: Your book on execution – It seems so much of the philosophy of execution must come directly from a company’s chief executive officer, a CEO who is actively involved.
Charan: "Every leader should be actively involved. The key is active engagement. Every leader has to be actively engaged, not just the CEO."
SBT: That means all of the subordinate leaders, as well?
Charan: "They all have to be engaged. Get to know the business. Be aware in the business, how you make money in it. Get to know your people. Have the habit of follow-through. Every leader has to do that, at all levels."
SBT: What are some of the first steps a company can take to making every leader involved?
Charan: "I think they key here is a corporation is made of leaders. So, you’ve got to communicate what your values are, and you’ve got to communicate that discipline of getting things done is a value, and you’re going to recognize that. You’re going to reward that. When you do your reviews, you want to follow through and get this thing going."
SBT: Accountability is critical to that process, isn’t yet?
Charan: "That’s how you see the accountability. When you see it follow through. When you see they’re taking accountability seriously, that’s when it comes."
SBT: In your experience, what’s the one major downfall companies have, as far as not implementing a system of accountability?
Charan: "I think the most common cause for failure is the leaders don’t deal with the people who do not perform."
SBT: Conversely, in another part of your book, you mention rewarding the "doers," the people in a company that perform well. How important is that?
Charan: "That’s it, dealing with the performers. It’s very crucial. Differentiation is the mother’s milk for high performance."
SBT: What kinds of things should a CEO look for in hiring the right vice presidents, managers and other personnel to execute the company’s strategies?
Charan: "Two things. Either you hire or you get some other help that is available. A simple one is initially you recruit people who have been there, who have been recently retired. They know something about your industry and would be very happy to work with you. There are a number of people like that available. The key is to have a knowledge base. It’s not just intellect. You’ve got have a knowledge base. You’ve got have experience base. So, think about experience."
SBT: Of course, here in Wisconsin, we have some fluid dynamics with manufacturers trying to compete in a global economy. So many companies are outsourcing. So many others are asking themselves, "If I’m not going to outsource, how can I compete in a global economy?"
Charan: "You need the skills that will take you to where the best opportunities for competitive costs are. If you don’t know how to do that, you’ve got to recruit some of the skills that will help you.
SBT: I hear from manufacturers all they time that don’t want to outsource to cheaper labor overseas, but they say they can’t compete with companies that do. Is it getting to the point where manufacturers have to explore that option?
Charan: "Well, they’ve got to figure out what is the reality of competition."
SBT: Do you have any words of advice for a Wisconsin CEO grappling with this issue?
Charan: "See, you’ve got specific situations. The key thing here is you’ve got to know your competition, where it is going. Then you’ve got to take the proper kind of alternatives."
SBT: How important is to document how you measure success? Is the first step to identify what is success and how you measure it?
Charan: "Well, first you’ve got to have people to buy in. They’ve got to understand it. Documentation is a record. If you don’t have people emotionally connected, you’re not going to succeed. Then you do what you need to do. So, the first thing is you engage in a dialogue and engage in the conversation and get an agreement on what you’re going to do. Then you can document anything you want. The key is then the follow-through."
SBT: Is an important part of that process identifying exactly how you’re going to define success?
Charan: "Yeah, you’ve got to have those key elements, but you have to first work it through to say what they are."
SBT: What are some of the most effective things you’ve seen companies do to understand their customers’ needs?
Charan: "There’s nothing like visiting the customer, observing it. If you are a person who produces detergent, you’ve got visit the customer and learn the habits. You look at the water. You look at the times, the convenience, the washer machine. You’ve got to see the experience. Look at Lexus. Those guys observe the people and created a new distribution system. Totally a different way to go at it.
"Look at McDonald’s in the early days. You say, ‘Is the line going through, or are people totally frustrated?’ You watch. You go into McDonald’s and observe, like sometimes I do. This was three of four years ago. You say, ‘How many people are coming in and ordering a salad?’ And they don’t like it. And they buy french fries at the same time. So, wait a minute. Something is wrong here. The experience is more critical than just asking questions. That’s why we take photographs, why we take videos. We look at the unconscious motivations of consumers. It’s all there."
SBT: You did some consulting work for GE Medical, now GE Healthcare. Can you share what you advised them about?
Charan: "I worked with them on globalization."
SBT: Are American companies figuring out how to compete in a global economy?
Charan: "I think the key here is that the American companies have been competing for a long time, but this is a learning curve. Conditions are changing. But you see the movement. They are moving. The key here is the motivation for profit and success is very high. They’re going to go where they need to go."
SBT: Can American companies, with higher labor and environmental costs, compete in a global marketplace where labor is so cheap and the quality of life is so much less?
Charan: "The No. 1 thing that is very important is competition is among people. The United States has people and leaders who will compete anywhere, any day. There is no issue about ‘can.’ We will."
May 28, 2004 Small Business Times, Milwaukee, WI