“Lary, give this customer a call. We’ve just received an unauthorized return, and I want these shoes sent back. Funny how the green shoes don’t fit and the red ones fit perfectly.”

It wasn’t uncommon for the chairman of company North (remember, “N” for “Nasty”?) to stop by my office with a message like this. His remarks were actually a code: “The red shoes sold well but the green ones the customer bought aren’t selling ... so now they’re claiming they don’t fit so they can return them. We’ve had no other such complaints. Tell them we won’t accept them and ship them back.”

I made a note to contact the customer, figuring I’d call them after lunch when I would be more likely to catch them three time zones away. No e-mail back then. Unexpectedly, the chairman returned to my office 20 minutes later to ask, “What did they say?” The first few times this happened I asked, “Who?” ... failing to make the connection he expected. While I learned the nuances of merchandising economics with these examples, what I finally realized was that the chairman expected me to drop everything and call them immediately. He wasn’t happy -- “What else are you doing?” -- and after a few unpleasant encounters, I finally caught on.

In the last few columns, we’ve been talking about equally successful financial results that can be produced from radically different cultures like those of companies North and South. We’ve seen the difference between loyalty and fealty and the cultural differences that distinguish conscientious cost management and contentious cost reduction. Until now, however, we haven’t discussed the common business principles that underlie their success.

Simple hard work is one of them, although as I’ve illustrated, company North fused that notion with the sense of urgency that is missing in so many organizations and employees. I’m not sure that this sense of urgency is easily taught, but I do know that it’s a powerful performance driver whose absence is equally enervating to otherwise vital organizations.

Flexibility is one of the cornerstones of business success. Both of these companies championed the power of flexibility that a low fixed-cost structure offers.

I know of no business, particularly in a punishing economy like the one we’re in, where the future is certain and their value proposition is unchallenged. While we’d like to think the future is predictable and that our product and service offerings are indispensable, the business landscape is always changing and what worked yesterday is probably old news today. Low overhead, cross training of employees, outsourcing, diverse vendor sources and minimal customer concentrations that handcuff pricing and product changes are some of the features of this fundamental concept.

Innovation is another powerful engine, one which middle market businesses often think is a fancy term best deployed by large companies with vast resources and deep talent pools. Wrong.

Innovation doesn’t require a lavish think tank or a formal R&D department. Simple changes to product features and service offerings, particularly when enhanced by vibrant pricing and refreshing marketing, qualify as innovation.

You must be eternally vigilant about changes demanded in the market and constantly update your value proposition. If you accept the premise that the principal focus of business strategy is to gain a competitive advantage, you understand that differentiating your company’s product and service offerings through innovation is one valuable way this can be accomplished.

Accelerated revenue growth is another hallmark of most successful companies, usually demarcated as something above 15 percent compounded annual growth. It’s true that unharnessed growth without the proper foundation and capital energy to propel it can be a treacherous path.

Yet, there’s no question that in the long term, the absence of meaningful growth will not create opportunities to build an organization of high performers because they won’t stay. Stagnation also stifles innovation and reduces the financial rewards expected by shareholders and other stakeholders to achieve the ROI commensurate with the risk they have assumed.

There is no single path to business success, and there are many less traveled roads that successful companies have traversed. Few of them have been achieved, however, without the integration of most of these core principles: 1] a sustained cost-containment culture, 2] a flexible organization built on low fixed costs, 3] a sense of urgency coupled with hard work and 4] innovation.

Check yourself and make sure these qualities are embedded in your organization’s DNA.



Lary Kirchenbauer is the president of Exkalibur Advisors Inc., providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses at the intersection of leadership and business strategy. Lary also hosts a CEO Round Table for leaders of middle market companies in the North Bay. Please visit www.exkalibur.com for a library of valuable resources, articles and insights, or join the Exkalibur fan page on Facebook.