The news from Washington certainly isn't very good. Intransigence and partisan politics are really just distracting us from what's really important — our lack of competitiveness in the world. Have we lost our edge?
Michael Porter, Jan Rivken and Rosabeth Moss Porter seem to think so. Competitiveness at a Crossroads is the result of a 2012 survey of U.S. competitiveness released last month and published by the Harvard Business School. I was introduced to the survey in an article written by Steve Denning, The Surprising Reasons Why America Lost Its Ability to Compete. I’m inclined to agree with Denning when he suggests we “forget the U.S. budget sequester. Set aside the financial bubbles on which the economy rests. Pay attention to something much more fundamental: America has lost the ability to compete in the international marketplace.”
Denning, and the report, argues that we probably should have seen this coming for some time. Job creation stalled around 2000, wages have been stagnant for more than a decade, and most new jobs are in government, health care and retailing “not exposed to international competition. That was a sign that the U.S. businesses were losing the ability to compete internationally.”
After surveying 6,000 people “from every sector of the economy nearly a third of the 2012 respondents reported a title of chief executive, chair, president, founder, owner, managing director, managing partner, or a similar title at the very top of an organization,” most of these business leaders don’t think the way we manage our companies is the problem ahem.
In fairness, the genesis of these problems really goes back a few years. Denning suggests the late ’70s and early ’80s. I agree with Denning that a big part of the problem started with boardrooms more focused on quarterly results and an ever-increasing shareholder value at the expense of the customer. When short-term objectives hijack long-term strategy, executives’ focus on today often hurts competitiveness down the road.
For example, a sales team, driven by a mandate to close as many deals as possible to push up an end-of-quarter earnings report, will say or promise almost anything to close the deal today — even at the expense of a long-term customer relationship. When a CEO is too motivated by short-term growth to initiate a conversation with someone willing to provide an early out, product quality and usability suffer because those initiatives take too long to come to fruition and are too expensive.
I’m not naive enough to think that profitability isn’t important. I’m simply of the opinion that ramping up unsustainable growth to chase recognition that will entice a buyer is a different thing than creating products and services that offer sustained growth, happy customers, product innovation and long-term viability.
I know an actuary whose job requires him to evaluate and acquire smaller insurance companies for his employer. We were talking about this one night when he said, “I never buy a company looking to be acquired. I look for companies with sound fundamental business practices, a great management team and happy customers. I then make them an offer they can’t refuse.”
He argues that you can’t trust the data when talking to companies that are looking for a buyer. They “spin the books” and artificially make their organization look better than it is to make their situation look as good as possible. I can’t begin to count the number of times I’ve been asked to “spin up” a press release or announcement because what was really news didn’t sizzle enough. Fortunately, I don’t have to do that today.
I know of one company that was making short-term decisions with negative long-term consequences in preparation for a sale about the time the bottom fell out of the market in 2008. When they weren’t purchased, they spent the subsequent years trying to course correct because those short-term moves were hampering their ability to maintain a happy customer base and sustain growth.
As a teenager driving my dad’s delivery truck, it was ingrained in my mind that my job was to make sure our customers had the best experience I could deliver — even though my job was limited to packaging and delivering our merchandise. I was responsible to make sure the truck was clean, my appearance was presentable, and everything was delivered on time. My dad would often say, “Ty, for many of our customers, you are the only representative from our company our customers will see on a regular basis.”
Denning asks, “Why do business leaders focus on the stock price and the short-term with such disastrous consequences for management, innovation and competitiveness? Where does this thinking come from?”
I’m afraid it’s exactly what we’ve trained them to do.
As a Main Street business evangelist and marketing veteran with more than 25 years in the trenches, Ty Kiisel writes about leading people and small-business issues for Lendio (lendio.com).
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