The THIRD Commandment

Focus, Focus, Focus

Concentrate all available resources on accomplishing two or three specific operational objectives within a given time period.

Enterprises have finite resources. A smaller company achieves competitive advantage when playing for limited, explicit gains in a marketplace of its own choosing. Specialization breeds an organization sensitive to opportunities and quick to act. But any advantage withers if follow-through is weak. It will be weak if resources are dissipated. Resource dilution is a sure formula for mediocrity, a state of being that aspiring growth businesses cannot afford.

MBO (Managing by Objectives) has been a popular phrase since the 1960s when the acronym and practice were gradually assimilated into the inventory of management techniques. In effect, when working with objectives, an entrepreneur or manager determines what he or she wants to accomplish, by when, and strives to reach that objective. The individual involved focuses on the end result and tries to make it happen. The alternative, working without objectives, typically leaves an individual engaged in day-to-day activities; she or he works hard, perhaps, and hopes everything turns out all right. There are four major variations on how to manage a business without using objectives:

Managing by Extrapolation (MBE)

Users of this system operate as though the future will be an extension of the past. They tend to keep on doing what they have always done, and they often try to do it better and better. Sales and profit lines jog slowly upward and to the right in the planning documents. Some great businesses that are now defunct were probably victums of MBE. For example, what ever happened to Western Union? Encyclopedia Britannica? Pan Am?

Some entrepreneurs use extrapolation to show how their business will grow, but they often overlook challenges of scale. A young aquafarm company in Hawaii found that growing and selling a million abalone a year is quite different than dealing with "just" 100,000 abalone in a year. Extrapolation can be dangerous. Users of MBE typically pay a lot of attention to becoming

more efficient. Prolific management thinker, Peter Drucker, observed that business leaders need to strive for effectiveness, as well as efficiency. Effectiveness has to do with doing the right things, e.g., selecting the right markets, products, and processes for the times. Efficiency, then, has to do with doing those things right.

Managing by Crisis (MBC)

This system, long the specialty of the entrepreneur, has picked up a larger following in recent times for two reasons. First, business life is much more complex than it used to be. Thus there are more crises to be handled. Second, there are a great many technical people in positions of management responsibility today. As a group, technical people tend to be great problem solvers. Give them a crisis and they will smother it with energy and innovation. Should there be a gap in the flow of problems, chances are good that one can be invented—something nice and tangible that a manager can get his or her arms around, or teeth into. Management by crisis is

popular. At the end of any given day, no one can say the boss didn’t earn his or her pay!

Managing by Subjectives (MBS)

A dictionary definition of the word, subjective, is: . . .existing or originating within the observer’s mind or sense organs and, hence, incapable of being checked externally or being verified by other persons.

As the cat said to Alice as she hesitated along the path to Wonderland, if you don’t know where you are going, any road will take you there. There are companies that operate successfully this way, i.e., with very few people knowing where the is headed. Everyone does the best he or she can to accomplish what he or she thinks should be done. Somewhere up in the organization there is presumed to be a guiding star. And there could well be. As long as a given business lends itself to masterminding or central processing by a single individual or a small team, implementation is relatively straightforward and not much talent is needed below the top level.

People just do what they are told to do. MBS may work satisfactorily as long as the business is simple. For a growing company, however, complexity is a price that must be paid as the enterprise expands into new market segments and product lines. MBS can be a real limitation. In particular, a subjective approach to building a business makes it difficult to attract and hold the caliber of people required to capitalize on a competitive advantage.

Why? Because superior performers want to know: What are we out to accomplish? How are we doing in our quest? How am I doing? What's next? Almost by definition, early-stage companies seldom can do more than one thing really well. All available resources need to be focused on that one thing and the results expected. The presence of overriding business objectives can serve as a rallying point, if people know what they are. People tend to rise to meet expectations they understand and support.

Managing by Hope (MBH)

Most readers over forty years of age seem to agree that the pace of life in the corporate world has increased markedly in recent years. Each major business decision— a senior promotion, capital investment, addition of a new service or product category—to name just a few, seems to have many ramifications as we plow through the early years of the 21st Century. Certainties are hard to find. These uncertainties have led some management teams into willy-nilly diversification in the hope that by going in several directions at once, something will work out. These same uncertainties have led other management teams into bureaucratic analysis in the vain hope that with enough study, Aha!s will turn up to point the way for the enterprise. MBH is, essentially, a form of reacting rather than acting, of letting events control you rather than vice versa. It is the other end of the spectrum from MBO, managing by objectives. Sound operational objectives help entrepreneurs. A sound objective is one that is measurable, dated, and vital as a stepping stone, at a given point in time. For example, for any given week or month or quarter or year, objectives can be formulated for sales volume, profitability, cash flow, staffing, product development, production, or margin improvement. Business judgment, based on a combination of facts, advice, and intuition can guide people on the entrepreneuring trail via the process of setting objectives. Creative conflict among primary participants should ideally lead to agreement on the measures to be taken, by when, and and also on accountability, that is, who “owns” each objective.