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Compusearch (now Unison) was a visionary company with visionary goals. But, as often happens with visionary companies, focus on a long-term strategy to revolutionize a market can mean that near-term execution and operationalization can suffer, creating barriers to growth.
From its founding in 1983, the company used state-of-the-art software design and development to provide solutions that streamlined and automated key steps in government procurement, purchasing, and contract management.
In 2005, the company arrived at a strategic decision point. The company’s team of owner-operators decided to sell the company and retire. The new owner, private equity firm The Carlyle Group (Carlyle), saw immense potential in the company and its pedigree of quality innovation.
But Carlyle also saw that the change in ownership was an ideal time to assess how the organization operated and to upgrade to more effective strategy execution and operations maturity. Maturing operations turned out to be essential to achieving the goal to double revenue and increasing margins to realize a 4X return on invested capital within five years.
Highly innovative companies often suffer from a lack of focus on operating fundamentals, which becomes an impediment to growing to the next stage of maturity. Carlyle saw evidence that Compusearch could benefit from a renewed and refreshed approach to turning its vision into action.
Carlyle and Compusearch engaged IntelliVen to assess the company’s operational maturity, develop a plan to implement strategy, and generate more effective performance to drive growth.
Like many visionary companies, Compusearch had become a decisive market leader with a strategy of continuous innovation and breaking new ground with its solution offerings.
By 2005, the company had reached $15 million per year in revenue. Its procurement and purchasing solutions were operating in nine cabinet-level departments and related agencies across the United States federal government.
It had achieved this leadership position by continually updating and innovating its solutions as software design and the underlying system capabilities evolved over two decades.
The company’s newest solution was web-based software to support government contract officers who procure, contract, and requisition the spending, granting, and moving of public funds in compliance with mandated government rules, transparency, efficiency, and control.
IntelliVen guided the company’s top team through its structured process to get aligned, on track, and then grow. Alignment came from the clarity reached by the team jointly making explicit what they each saw, and what they were each thinking, so they could then work together to come up with a consolidated view of where things were and what they needed to do.
Compusearch had reached a leadership position in its industry by pursuing a vision with continuous innovation. But oftentimes this approach can cause a company to become distracted. It ends up chasing the new technology and functionality without tuning its operations and processes to generate the most value from the innovations it has already brought to market. There were many more opportunities for the company to extend and expand the value it provided to current customers with its existing solutions at existing customers.
2. Lack of coordinated direction and team alignment
The executive team in Compusearch was made up of highly experienced managers who knew the market and their functional domains of responsibility. But there was no consistent melding of vision and strategy coordinated across functional teams, to ensure everyone was always rowing in the same direction. As a result, the company found itself often in reaction mode, not effectively promoting its current offerings to customers to generate more business. Key items fell between organizational units, resulting in unmet client needs, as well as confounded employees. In some cases, initiatives were confined to a particular unit, such as the development team, without the full benefit of coordination with other groups such as those providing customer services.
3. No clear process for strategy operationalization
Like many companies, the corporate vision for revolutionizing federal government contracting was well understood by top executives. But exactly how that vision translated into individual goals, commitments, and resource allocation was not all that clear. Each executive had to decide for themselves how best to support overall corporate goals.
4. Inconsistent and ineffective use of metrics for tracking and accountability
Compusearch executives collected and studied metrics that were relevant to their own functional domains. But they were not as effective at combining and assessing these metrics in terms of the story they told for overall corporate performance and strategy implementation. A sales leader would announce a customer win that generated widespread acclaim in the company. But it was rare for anyone to ask whether the price was aligned with the firm’s strategy or if the licensing terms would generate the most value over the long term.
Peter introduced the W-W-W model – the exercise in which senior managers gain great clarity on
WHAT they are selling.
WHO is buying it.
WHY they buy it.
By working together to reach a common, crisp and simple understanding of the overarching purpose of the company in this way, the company core leadership team instantly become more closely aligned in terms of strategy and action. As Peter describes it, nailing down the W-W-W is the first step any organization needs to take to enable a team to, “Get clear, Align, and Grow!”
The Initiative-to-Action template helps ensure that strategic planning session outcomes are acted upon. It requires managers to connect the dots between corporate strategy, the case for change, individual goals, resource allocation, performance metrics, actions, timetable, accountability, and outcomes.
2. Core leadership team alignment: set direction, execution focus, incentives
The new model for the executive team featured cross-team communication and cross-organizational performance tracking. That way, each executive knew what was required of her/his group and, in turn, could clearly identify the needs they had for others. The resulting cross-team dependency tracking set the direction for the team and focused the executives on execution. The new accountability was enhanced by tying executive incentives to hitting cross-group targets in addition to individual performance goals to align resources.
Clarity on strategy and aligning the team in the same direction allowed the Compusearch team to then explore executing more effectively on the overall strategy.
For example, the team saw new opportunities for revenue expansion in existing customers with solution refinements, such as offering new billable services that previously had been a support expense.
Knowing who to count on for what made it possible to also introduce new responsibilities such as account and project management. Every employee could see clearly what s/he could do to step up to and help identify, develop, and deliver on every opportunity to provide more value to customers.
Lastly, the new approach to operationalization created a framework for accountability and governance. Now each executive and each member of the staff understood what was expected of them and performance against these requirements was easy to measure and track.
4. Metrics to drive and track effective operationalization
With the newfound accountability and alignment of goals and dependencies, the executive team had the ability to use key metrics to track and improve execution and operationalization.
The performance of every department – product engineering, customer support, professional services, marketing, sales – could be tracked and evaluated using metrics and benchmarks that guided team decisions and next actions.
When these metrics indicated a problem was arising in a given area, the team could readily see how each member could contribute to address the problem. The approach promoted accountability for execution and brought leadership together as a high-performance team that worked to make each other – and the company as a whole –successful.
The Outcomes: Compusearch’s organization evolution and growth
With the IntelliVen best practices guidance, Compusearch embarked on a transformation that resulted in much more effective execution and strategy operationalization.
The results were dramatic increases in top-line revenue, growing more than 200 percent in four years. Other impacts included:
Driving the EBITDA-margin plus growth-rate to over 50.
Increasing recurring revenue to more than half of total revenue.
Shifting from selling one product in a narrow market to selling multiple products into multiple markets while at the same time maximizing revenue from existing customers.
Compusearch had achieved a much more advanced stage of organization maturity. After four years of growth, the company sold for a ~4X multiple of invested capital. The company was eventually renamed Unison and, over the past ten years has successfully executed its business and financial plans, completed a handful of accretive acquisitions with more on the horizon, and is on track to exceed $150 million in annual revenue. All-and-all a great win-win-win-win-win: for the company, its customers, employees, investors, and the community in which it operates.
After reviewing the draft news release announcing my latest promotion (many years back) and offering her congratulations, our press agent exclaimed with some dismay that: “…now you’ll have even LESS time than ever!”
I remember remarking smartly in reply that she was wrong,and that I still had just as much time as I’d always had. In fact, I had the same amount of time each day that both Da Vinci and Einstein had, and that my job, same as ever, was to make the most of it!Continue reading How Top CEOs Manage Their Time→
When it is time to start planning but the top team is maxed-out just keeping up with operations, outside help may be just the thing. But what kind of help is best to get? Continue reading Four Kinds of Help→
Business school students have to decide their course of study from day-1 … and the choice makes all the difference. The first decision almost always comes down to operations vs finance:
The allure of finance is working with money to buy and sell companies. Success is when a small stake in a large transaction generates a healthy payday in a short time.
The attraction of operations is working with people to build and run something of value that is eventually realized through a sale, financing, or public offering.
Finance looks like the fast track to great wealth and has attracted top MBA students for decades. Operations looks like a long, hard road with a massive payday only for the few with enough dedication, talent, time, and luck to pull off a successful start-up from scratch.
While the economy needs both financiers and operators, the promise of quick and large returns has left the world short of the talent it needs to drive growth of quality organizations.
Top operators get clear about what they seek to accomplish, build and align a team to achieve specific goals, and provide governance and drive over a sustained period to accomplish them. Those who master the art have a high probability of creating wealth for investors, founders, and top teams responsible for the success.
The operations path should be of interest to more top students but it may not be because few understand how it works and where the payoff comes from.
Financiers make multiple bets hoping one will pay off big. Whether one does or does not, the odds of eventual success are good relative to those who start their own ventures and essentially put all their chips on one bet.
A clever and capable operator can improve the odds by throwing in with:
An early-stage venture that is ready to get past the squirrel-cage of a startup and positioned to grow.
A going concern that is underperforming relative to its potential (i.e., most organizations!).
Both courses of study prepare the student to create value in which investors, operating leaders, and their teams participate as summarized in the figure below.
Successful operators take an equity stake in ventures in which they know they can add value and where there does not have to be a grand slam to get a decent payday for those who helped make it happen.
While the payoff is likely not as glamorous or quick, it has higher odds of occurring for operators who know how to build organizations that reliably grow and perform over the long haul.
The best and brightest MBA students should seriously consider operations as a path to help the world, and to help themselves, get on a fast-track to creating value by building, not just financing, organizations, jobs, and people who perform and grow to their full potential.