There has been the occasional business leader whose reign has been magical (Welch and Jobs come to mind).  Yet their business often fall to sustaining enterprise value after they leave. GE’s revenue and stock appreciation has been stuck in neutral since Welch’s departure, as the 20^th century’s most profitable company tries to find its way.  Apple has been trading all over the map in the last few weeks as the market tries to reconcile a world without the imagination of Jobs and his fancy gadgets.

A systemic problem for private companies is that a lack of management and bench strength.  This dearth of talent goes deeper then inhibiting productivity in the short term; it is a significant barrier to value creation for the entrepreneur.  If an exit is an objective (as is often the case), buyers generally want to see a strong management team and bench that can support future growth. If it is the business owner and his brother-in-law that possess all of the tribal knowledge (intellectual capital) about how a business operates successfully, the enterprise can lose luster with investors.

There are similar problems when one or two employees within a company are technically superior to those around them. Often, feeling their power and value, they are unwilling to teach, document, and delegate. When management and boards allow such conditions to persist, they are doing a disservice to the shareholders and are putting the company at risk.

Organizations should:

1. Require that every manager have a delegate – Identify and develop strong number twos that can eventually step in and take on the job duties of every manager. If people can’t attend conferences or go on vacation, because no one else can cover their desk, it is a sign that they have not developed the talent around them. To develop others takes time and investment including focus on performance reviews, career pathing and training.
2. Institutionalize activities, duties and best practices – Develop thorough documentation. Companies must maintain policies and procedures if they are going to be operationally excellent. When a supplier errs, it is usually because an inexperienced junior staffer doesn’t do something the way his senior counter-part would have. Often the junior staffer is criticized, even though it is their management who put them in position to fail.
3. Teach - Great leaders are usually great teachers; they aspire to develop others through daily interaction, and the sharing of information. The inability to teach is often a sign that a manager views themselves as the only person competent enough to complete certain tasks, and makes excuses as to why they can’t find other people to step up.  Great companies have development plans for every key employee, and make resources available for their continuous improvement.

Organizations that formalize these practices in their companies will maintain a long term strategic advantage over those who do. The talent war has only just begun.

There is an old saying in poker; if you can’t see the sucker in the room…it is probably you.  The same can be said of advancements in technology. Forrester’s recently forecasted increases in IT spending of 8% in 2011 and 2012[i]. Recent M&A activity suggests the sector is heating up.

In many industries, market leaders create proprietary technologies and information systems that improve the customer experience directly or indirectly through information flow, efficiency, cycle time, etc.  At the current rate of change, a company either realizes a technological advantage, or is likely at a competitive disadvantage.

We have numerous clients who are either in the midst of ERP implementations, or considering similar upgrades to their systems. At some point the business owner must ask the strategic question; are our technology improvements truly game changers, or only an enhancement to existing ways of doing business?

More than 90% of ERP type systems are delivered late, and their implementations can be taxing to small and mid-market businesses. It is not difficult to spend $1 million+ (in hard and soft costs) in such systems, which is a drop in the bucket compared to the cost of disappointing customers due to errors or missed timelines.  If entrepreneurs are going to expend valuable resources (time and money) on technologies, they had better select the right ones, and prime their organization to implement them seamlessly.

I find there are often two extremes during such implementations.  In some companies, functional department heads (such as sales, engineering, design) lack experience in software integrations and do not become invested in the deliverables until it is too late. Other times, companies become so fascinated with perfection, they lose sight of the objective, and become paralyzed in analysis. If a company’s enterprise system becomes dated because of their inability to act, competitors can seize the upper hand.

If you are considering such upgrades to your technology, it is often sensible to take the aggressive but measured approach. In other words, the strategist is always looking to leverage technology that reshapes the customer experience, improves efficiency or reduces costs in some material way while simplifying or automating processes.  Such decisions should not be left to the technologists, but shared by the leadership team who must be equally responsible for selection, scoping and integration.  Failure is not an option as an unsuccessful project can put a company years behind.

Don’t be the sucker.

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[i] Source: Wall Street Beat: Underlying Confidence Marks Tech Sector IDG News