Monday, September 29, 2008

High-velocity execution.

"Fasten your seatbelts. The turbulence has scarcely begun. With accelerating speed we've transcended boundary after boundary of diversity and complexity. The past is ever less predictive; the future is ever less predictable and the present scarcely exits at all" - Dee Hock

In the current fast-moving business environment, companies have to move faster than the rate of change and faster than the competition if they want to stay ahead. The longer it takes to implement strategy, the more likely it will be out of date by the time it’s in use. Murphy’s law warns that the more time it takes, the more likely something will go wrong. We also know that the quicker the implementation moves, the less opposition it’s likely to encounter. Today, it’s better to be 80% right fast than 100% right slow. However, there’s a conflict here between going faster on the one hand and going into more detail and involving more people on the other.

769 CEOs from different countries reported in a recent Conference Board survey that their number one strategic concern was excellence in execution. Over 80% said they’ve failed to effectively implement important strategic initiatives even after spending considerable time thinking about and planning how to introduce them. However, it doesn't have to be like this, as the following case study illustrates.

Weyerhaeuser is a proud sponsor of ABC television's hit show, Extreme Makeover/Home Edition. Every week Weyerhaeuser's products go into creating a new home for a richly deserving family. Ironically, the deserving families on the show aren’t the only ones in need of a major renewal. Weyerhaeuser needed one too - an extreme makeover of one of its key businesses.

For many years the residential wood products industry seemed immune to the significant changes driven by technology and consolidation experienced by other industries, and was able to get along with business as usual. In 1997, that began to change, and the changes started with its customers. 

In 1997, the top 100 builders accounted for 18% of all housing constructed in North America. By 2005 that percentage increased to 37%, a doubling of market share. The growth of larger builders helped fuel the US real estate boom because of newer, faster ways to build homes.

These new approaches also brought dramatic changes in expectations for construction suppliers. Larger builders wanted to exploit their size and scale to create far more efficient ways to build houses, while also dealing with a shortage of skilled labor. Builders achieved significant improvements: The time required to frame a house dropped from three weeks to just five days for the most efficient builders. They increased their use of prefabricated wall sections, roofs, and floors delivered directly to the foundation site, ready to install. All of this required suppliers like Weyerhaeuser to do things very differently.

Their strategy was to target large builders with a set of experiences that would make their jobs easier, delivered through a network of big dealers and distributors. This was done by creating the "iLevel" brand. This new brand consolidated five product-line businesses into one new business. The goal was to increase the percentage of iLevel product that went into the construction of every new home built in America. The result: In its first year, 2006, product penetration grew by 5% (this was the single biggest jump in a decade). 

Five critical success factors helped to make this transformation happen very, very quickly – in 90 day segments. These five factors were: 

1. The new organization was designed around the needs of the customers. 

2. The transformation was executed with high velocity. 

3. It engaged a critical mass of key leaders. 

4. There was significant investment in training and communication. 

5. The cultural aspects of the organization were given the highest priority. 

I’ll continue this case study tomorrow.

1 comment:

cukie6 said...

Very interesting indeed!

I love that show.