Oct 212014

Dr. Earl R. Smith II

I was recently working with the senior team of a mid-sized government contractor. They had built the company nicely to just over thirty-million dollars in annual revenue. The customer base was tight and well focused. They had good client intimacy and acceptable pipeline velocity. An initiative to move into a new agency seemed to be going well. From the outside, the company looked fine.

Internally, the landscape looked quite different. Management was having an increasingly difficult time controlling operations and keeping costs under control. A proposal had been muffed – submitted without adequate red-teaming – and the result was a loss that they had counted as a win. Two key team members decided to move to another company. A review of their books showed a significant financial control problem. What was all growth and sunshine on the outside was stormy and gray on the inside.

The Story Continues: During my interviews with both the senior management team and the decision-makers within their customer base, I became aware that there was a fairly toxic mix of trends developing – some of which were in full flower. I broke them down into five major areas. First, there was an increasingly dysfunctional attitude permeating the management team. Second, the value proposition of the company had become diffuse. (One of the its strengths in the early going was a finely focused value proposition) Third, professionalization of the culture was not keeping pace with the company’s growth. Fourth, effective management oversight was needed but lacking. And, fifth, there was no shared vision for the future of the company.

In Part One of this series I described the initial steps that I took. Part Two describes the culture of hubris that had evolved within the company. Now I would like to turn to the developments that had significantly blurred both the value proposition and the branding of the company.

Exactly Who Are You? Like many government contractors, this one had gone through two stages of growth. When first founded, it was presenting itself as being capable of a wide range of services – the ‘all things to all people’ approach. This phase did not last very long; mostly because of a series of relationships that one of the founders had with key decision makers in what would become their initial major client.

The value proposition and branding of the company had rapidly focused. In the early years the company benefited greatly from this focus. It was seen as the ‘go to’ company when certain problems had to be met. The reputation of the company was based on the ability of the team to deliver solutions reliably and consistently. It got very high performance marks and developed strong client relationships.

Things started to change in two ways. The first was that management had become concerned that they were ‘rooting the pot’. The CEO particularly was concerned that growth could not be sustained at historical rates based solely on the value proposition and business base they had established. The second was an addition to the senior team. In response to the CEO’s concerns, they brought on a very experienced senior vice president of business development and tasked him with expanding the company’s business base.

The concerns and management’s approach to meeting them were both very logical. Every company that establishes early success in government contracting faces them – they are linked and the standard response to the first is to do exactly what this company did. But nothing in life is a simple as that. The question that management faced – but did not completely appreciate – was ‘who are you?’

Sharp Turns, Irrational Rationality and Arrogance: The management team organized a strategic planning retreat to discuss the future of the company. They spent three days in a ‘remote location’ seeking a way forward that would allow the company to keep up its growth by remaking its value proposition and broadening its branding. The approach that they took was ‘let’s identify where we want to go and then lets chart a course that will get us there.’

If you’ve read Part Two in this series, you will already have anticipated part of the problem they faced. With hubris in full flower, there was a sense of manifest destiny that dominated the retreat. (BTW, a friend of mine is fond of observing that the only destiny that is truly manifest is the grave – but that is another story) Hubris colored the proceedings in a predictable way – “all we have to do is say it and it will become so”. Without an outside facilitator to reign in this irrational rationality, they spent most of the three days in Never-Never land.

The second problem that they faced was that the team member who would bear the major part of the resulting burden was the newest and had very little experience with the company. This was not unique to this company. Many government contractors do the same thing – they bring in business development types who, although highly competent, are not part of the culture that established the company’s early success.

Now it would be easy to vilify the senior vice president of business development, but (and, if you have read the first two parts of this series, you will not be surprised) that was not my diagnosis. It was unreasonable to expect a new team member to bear such a burden. The Board of Directors and CEO essentially took a leap of faith that things would work out and ignored the need to integrate the new team member into the culture of the company. In other words, they decided to take a causal stroll through a dense minefield. They also shifted the major challenges that the company was facing onto the back of its newest senior team member – an imprudent act of cowardice.

Quo Vadis? The ‘strategic plan’ that resulted from the retreat was an exercise in irrationality. It was doomed to fail partially for the reasons that I described above but mostly because the company and its team were simply not capable of making the journeys that successful implementation of the plan required. There were a number of reason why this was the case but the core one dealt with the inability of the company to morph its value proposition as radically and quickly as the plan called for. Two reasons underlay this inability. The first was that the company’s branding was tight and well established in the minds of their existing and past customers – they knew what the company did and when to call it in. The second was that the existing team and staff was not capable of implementing the changes – they simply did not have the necessary experience, knowledge or contacts.

The planning retreat had focused on identifying substantial and growing areas of business that the company could tap into. In other words, they chased the money. The problem with this was that they quickly lost sight of what was possible and focused on what was desirable. The resulting new value proposition was considerably more diffuse and created several islands of expertise. They intentionally planned to build silos. Their mantra was ‘they know us and that we are good at what we do – they will trust that we will be just as good in these new areas’.

Close Your Eyes and It will Go Away: The response to the new value proposition was not what the senior team expected. Their existing clients became confused and began to worry that the company was drifting away from its core competencies. Potential clients simply ignored them – the company was, after all, branded in their minds as well. Management and the board seriously underestimated the difficulties of re-branding a company in full stride.

The initial response to these developments was disbelief. That turned quickly into passive aggressiveness – particularly with the existing client base. Strains developed within the team. The senior vice president of business development began to have second thoughts. Had he joined a team of amateurs who could not deliver on what here was trying to sell? The rest of the team lost faith in him. The CEO and Board of Directors went on an Egyptian Cruise – they were in de Nile!

If you don’t remember who you are, how will you know when you get there?


© Dr. Earl R. Smith II


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