CHAPTER 5
Vision: Seeing the Future of Winning
“If you don’t know where you’re going, you’ll end up someplace else.”
—YOGI BERRA
This is one of our favorite Yogi Berra quotes. Like many of his unintentionally humorous sayings, it reveals a deeper truth, in this case about the importance of having a sense of purpose. In TTW, that sense of purpose is found in what we call a vision or governing statement. It serves the same purpose as highway guardrails that keep us on the straight and narrow.
Developing a vision marks the first phase in the bottom of the hourglass and begins the transition from convergent to divergent thinking. Similar to the top of the hourglass, crafting a successful vision depends on asking the right question, which is: How do we position ourselves for success?
While the situation assessment in the upper part of the hourglass provides a panoramic view of the present, the vision gives a view of the desired future—what success will look like. It helps clarify what we intend to do in order to move forward.
Simple, Concise, Clear, and Compelling
It was a simple but precise vision that guided Keurig as it expanded from solely selling single-serving coffeepots and coffeemakers to businesses to entering the home market with a range of brewing systems and beverages. Keurig’s vision: A brewer on every countertop, a beverage for every occasion.
“The clearer the statement is, the simpler it is, the more compelling it is, and the more memorable and more inspiring it will be,” says Keurig Green Mountain board of directors’ member Dave Moran. “One of the key things that has driven our success is the tremendous clarity around our vision of how we would approach growth. We boiled it down to one sentence that everybody could remember. And then made sure it was understood by all. Everyone here, regardless of their function or level in the company, knows that sentence, and knows that is exactly what we are trying to achieve. The statement was really descriptive of how we intended to grow the business.”
To be effective, a vision must be unique, memorable, and free of jargon. And it should point the way forward to specific strategies, initiatives, and plans. Importantly, to be best of class, vision must tie closely to our SWOT and SCA from the top of the hourglass, being very actionable and realizable, utilizing our strengths and opportunities and acknowledging our threats and weaknesses.
At the other end of the spectrum are visions that may be very aspirational and even inspirational in their rhetoric, but are totally disconnected both from the reality of the marketplace and the nexus of our SWOT and SCA. Soaring sentiments unrelated to facts never translate into anything but trouble.
Let’s see how formulating a vision can actually unify a company and shape its values and culture. When WhiteWave Foods was established as a division of Dean Foods prior to its spinoff in 2012, it was an organization with no common processes, structures, or culture.
While part of Dean Foods, the various WhiteWave units operated very separately. “Horizon, the country’s top selling organic milk, and Silk, the leading brand of soy milk, had been two Colorado start-ups,” recalls Joe Scalzo, then WhiteWave president and chief operating officer, “and they were still being run like start-ups. We also had a coffee creamer business with two brands—International Delight and Land O’Lakes. They were three different businesses, with very different cultures and no one way of doing anything. There weren’t even three ways of doing things. Whenever we launched a product, for example, the process was completely ad hoc. And on top of everything else, none of the units really liked the others. There was great disharmony.”
Scalzo’s first priority was to meld the three disparate pieces into a cohesive, cooperative whole. “We described the path the company had been on; then we asked everyone in the organization to help us answer the key questions: Who are we? What do we believe in? What do we believe about making money for our community? What do we believe about being profitable, and growing, and supporting sustainable agriculture? The answers that came back affirmed how deeply committed our people were to sustainability, to playing a positive role in the community, and to corporate responsibility. We then identified seven core values that became the linchpin to change and unify the company. Our vision statement of our purpose became To be the Earth’s favorite food company, which pointed the direction for our growth.”
Since WhiteWave went public, it has followed its “good earth” vision with great success as both profits and growth have risen to levels that are far superior to its former parent, Dean Foods. WhiteWave has come out strongly against genetically modified organism (GMO) foods, not just for its own products but for agriculture as a whole. It has switched to sustainable palm oil for its plant-based creamers. It also focuses on feeding the hungry, reducing its water use and greenhouse gas emissions, and increasing its use of recyclable packaging. Meanwhile, the market has rewarded the company for its ability to think strategically, its enthusiasm, its principles, and the consistency of its vision. WhiteWave became the fastest-growing food company in North America.
So visions really do matter. And so do governing statements, which is what we call a vision when it applies to part of a company—like a division or subsidiary—rather than the whole. It definitely mattered for Ed Shirley as he devised a governing statement for P&G’s grooming and beauty group that would tie back to its umbrella statement, flow from a rigorous situation assessment, and guide its future growth activities in developing markets.
Ed’s umbrella statement had identified the need to jump-start the group’s stagnant performance by showing ways to accelerate growth in developing markets where results had been very inconsistent. Ed’s governing statement gave definition to the ways.
Going into a developing market with just one product at a time diminished P&G’s likelihood for significant penetration, impact, and success, and it failed to leverage P&G’s product breadth.
“As we made our assessment, we thought about our prospective consumer, a woman getting ready to face her day. Stepping into the shower, she would use bar soap or body wash. She would wash her hair and maybe condition it; she would shave her legs. When she got out of the shower, she would put on body moisturizer, deodorant, facial moisturizer, cosmetics, maybe use a hair styling aid, and then she would finish with fragrance.
“Those are all things that a woman would do. Those are all products that we make; products we could sell her. But we weren’t selling them all within the same markets. In some places she’d be able to buy body wash, but not deodorant, or vice versa. In other places she could buy hair products, but not razors or blades.
“The same was true of products for men. We were all over the body, just like we were all over the map. We were missing the chance to sell consumers a suite of products from P&G because we weren’t looking at the daily regimen; we weren’t looking at people holistically.”
But going into more than a single developing market at a time with new product categories would diffuse P&G’s efforts. So Ed’s governing statement tied together all the elements: Grooming and beauty products would drive accelerated growth for a range of product lines—for both her and him—in high growth, developing markets through coordinated action that would use P&Gs scale to make a difference.
Ed and his team ultimately agreed on Brazil as their initial market. “Instead of going to Brazil as separate units,” he says, “we went in as Procter & Gamble. We brought hair care, cosmetics, deodorants, skin care, body wash, wet shaving, and dry shaving. We brought everything to Brazil. Basically, it was an invasion and our competition was unable to defeat us piecemeal. They couldn’t shift resources from one category to another, because we were everywhere.
“Our commercial team in Brazil was thrilled that it finally had one voice and one plan—one coordinated plan. When I came back to our headquarters in Cincinnati, I shared this with our P&G leadership team. Our CEO thought it was a big idea, so he asked the laundry & household care group to do the same thing, followed by the health & well-being group. And wouldn’t you know, all of P&G went to Brazil.
“Now, for the first time, we played a company game, and we leveraged our competitive scale. And our first-year results were 30 percent growth.”
Governing Statements—Restraining but Not Restrictive
At times, a governing statement of purpose and position (see Figure 5.1) can, and should, serve to restrain actions. That was the case with Braun, the global leader in electric shavers. Although Gillette acquired Braun for its razor business and shaving expertise, Braun also used its electric small motor skills to produce a vast array of appliances and gadgets from food processors and meat grinders to alarm clocks and wristwatches that it tried to market around the world with poor results year after year. In fact, Braun hadn’t made a targeted budget for close to a decade.
FIGURE 5.1. WHAT IS OUR PURPOSE AND POSITION?
So the governing statement developed by and for Braun was straightforward: Braun would focus on dry shaving and ensure that each product line would minimally return greater than its cost capital. It was fine for Braun to sell meat grinders in Russia, but only if it would cover its costs and then some.
Yet governing statements also can be, or can become, too restrictive and narrow as market dynamics change, opportunities emerge, and threats become clearer. WhiteWave Foods provides an excellent illustration. When WhiteWave formulated its 2007 governing statement, Silk was the best-selling soy milk in the country with a leading market share. So the governing statement was straightforward: Deliver double-digit revenue and profit growth by driving Silk to be a mainstream brand via adult health benefits through soy-based products.
“In hindsight, our governing statement was too narrow,” Kelly Haecker, chief financial officer of WhiteWave, says. “Rather than limiting our focus to soy-based products, we should have broadened our frame to encompass plant-based products in general. Once WhiteWave moved into almond-based milk and other plant-based beverages, stunning results followed. Its overall sales growth accelerated, and Silk is now the number one plant-based beverage in the United States in the soy milk, almond milk, and coconut milk subcategories.
Similarly, the governing statement for Horizon Milk posited “expanding leadership in premium dairy categories” rather than encouraging a broader scope of innovation in nondairy alternatives that would be nutritious, better for you, and appeal to Horizon’s consumer base. And the governing statement for WhiteWave’s dairy and nondairy creamers evolved from a focus on new creamer flavors to include new beverages with iced coffee as a new addition to the product line.
With the TTW process, recurring use of the situation assessment can quickly identify changes that create new key issues and implications that call for revised governing statements and action.
WhiteWave checks its guardrails on a regular basis. The company revisits the situation assessment every year, focusing on what’s different, what has changed. It then adjusts its key issues and brand-specific governing statements as needed. “The process forces us to challenge assumptions in a more disciplined way than we might have otherwise,” says Kelly. “There are always little tweaks from one year to the next given the changing dynamics in the marketplace.
“Up until now, for example, we’ve been in plant-based beverages, with the emphasis on beverages. Alpro is our European equivalent of Silk. Going forward, Alpro is starting to teach us to think beyond liquids—to be about plant-based foods and beverages. I think that’s the next thing here, too. There’s a whole plethora of food opportunities for us—anywhere there’s the potential for a dairy proxy,” Kelly says.
As with everyone in health services in the United States, a major healthcare insurance provider had to adapt to changes that resulted from the Affordable Care Act. To be responsive to these changes, the human resources function within the company realized it also would have to evolve. The newly appointed chief HR officer saw the need for human resources to transition from a reactive to a proactive role that would better serve its “customers”—other functions within the organization. It needed a new governing statement.
While the HR function had already come a long way from being just the “personnel office,” the question was what HR’s new role would be, and how best to strengthen and enhance its capabilities.
To define this new participation, the chief HR officer assembled members of her management team and began collecting data and building a SWOT matrix. After looking at both their internal and external environments, they found a number of implications and came to a number of conclusions. Among them was the idea that HR needed to do a better job using data and analysis to inform decision making. It needed not only greater access to data, but also improved analytical capability. The group also identified HR’s need for greater efficiency and improved communication, both within the function and with other parts of the organization. Determining that talent management had to become a higher priority within the company, the HR team spelled out a need for greater accountability and for explicit performance and reward standards.
With these and other key conclusions and implications clearly defined, the group was able to put forth a new governing statement that reflected how HR would position itself to its internal customers. It was, in fact, a declaration of intent to become fully integrated into the lifeblood of the company as a whole. It defined its governing statement as: Deliver world-class HR capabilities through a streamlined, user-friendly model that enables our associates to achieve their business imperatives.
Getting the Right Balance—Goals Flow from Vision and Governing Statements
Governing statements can be created for teams or working groups of any size and are helpful in unifying a team around a common sense of purpose. During the process, the most important TTW guiding principles we keep in mind are scope (addressing the issue in the appropriate scale) and linkage (connecting the governing statement back to the situation assessment, and forward to goals and measures).
Visions and governing statements respond to the question, How do we position ourselves for success? Goals flow from the answer to that question and the next logical question, which is: What should we aim to achieve? (See Figure 5.2.)
FIGURE 5.2. WHAT SHOULD WE AIM TO ACHIEVE?
It’s been our experience that organizations are too often preoccupied with financial goals and focus on them to the exclusion of all others. Yet the most successful companies have balanced goals that address four elements common in virtually every business or institution: people, organization, marketplace, and financial. In Figure 5.3, quadrants 1 and 2—the left side of the matrix—are internal. Quadrants 3 and 4—the right side of the matrix—are external. Both sides should have equal weight.
FIGURE 5.3. BALANCED GOALS MODEL.
Adapted from D. Ulrich, J. Zenger, and N. Smallwood, Results-Based Leadership, Cambridge, MA: Harvard Business School Press, 1999.
These examples will help clarify the need:
1. People:
Improve engagement score of all people in our organization by 10 percent next year.
Reduce turnover of employees in our company next year by 2 percent.
Maintain zero overhead growth in our expenses associated with selling, general, and administrative items on an annual basis.
Build our sales organization to double our distribution reach next year.
3. Marketplace:
Increase our market share next year for Brand X from 25 to 30 percent.
Grow our international business next year by two times.
4. Financial:
Grow revenue by 10 percent a year to $XXX million.
Achieve 15 percent contribution margin next year.
Reduce our costs by 5 percent a year.
Rather than placing a priority on financials, we actually should start with people. If the right people are in place, they will build the right organization, which will ultimately delight customers and consumers in the marketplace. If all those quadrants are well developed, the money will come—the financials will be in balance. Quadrants 1, 2, and 3 are leading indicators. Quadrant 4 is a lagging indicator. So financial goals should not take precedence over the other three quadrants.
But in our experience, many companies, public and private, small, medium, and large, still focus heavily on that fourth quadrant. That was the case at Gillette before new leadership took over. The company didn’t have a strategic plan for the better part of a decade. It did, however, have annual financial goals—with targets that had not been hit for four consecutive years. Gillette was beset by what some described as a “parade of uglies”— 14 straight quarters of missed sales and earnings; constantly declining market shares; drastically curtailed spending on advertising; increased price discounts; excessive cost structure with high and growing overhead, and an insular culture and behaviors.
While many factors perpetuated these uglies, paramount was the top-down declaration of financial goals—goals that were completely divorced from reality. When those financial goals weren’t hit, the shortfall was simply added on to the next year’s target. As a result, the goals became more extreme and even more divorced from reality year after year. By the time new management came in, they were pure fiction!
The 3Ms: Measures, Metrics, and Milestones
At the time goals are developed, the means by which we will gauge our progress also are established. Some goals can be easily quantified. Others, even if they are less quantifiable, can still be assessed. We refer to these gauges as the 3Ms: measures, metrics, and milestones. Each has a role to play:
Measures. These relate to what is involved. It could be that we will gauge our success based on sales, or perhaps earnings will be more important.
Metrics. These will tell us how much we must achieve to be successful. Is it 5 percent in sales growth? Or $2 million in increased earnings?
Milestones. These tell us by when we must act. Fifteen percent increased sales in six months. Or $2 million of increased earnings by year end.
In the same way that we created balanced goals in four quadrants, the 3Ms should likewise be distributed among four quadrants to form a balanced scorecard. An example is shown in Figure 5.4.
FIGURE 5.4. THE BALANCED SCORECARD.
A goal must be clear and unambiguous, and the 3Ms also must be explicit. If a goal is vague or if it is described in amorphous terms like “coordinate” or “consider,” it will be hard to assess whether it’s been attained.
A goal must also be challenging. It should be a stretch, but something that is achievable with excellent effort. The idea of all-out, excellent effort is key. Let’s say that one of the fourth quadrant metrics is sales volume. It may be important to guard against a practice that is all too common. In establishing goals, those who will be held accountable for reaching them should have input, but not sole discretion. If the sales organization is unilaterally allowed to declare its own goal, there can be a tendency to set the bar just high enough that it can be achieved with moderate effort. This is an all-too-human tendency. As Michelangelo put it, “The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark.” Setting the bar too low undercuts the essence of a goal—which is that it is something worth reaching for—and the act of reaching is an important part of the motivation process.
Goals that are set too low may produce second-rate effort; goals that are set too high, on the other hand, may yield no effort whatsoever. Impossible goals are demotivators. When people are confronted with them on a regular basis, the incentive to excel disappears and is supplanted by discouragement, often also accompanied by high employee turnover.
Chapter Summary
While the situation assessment in the upper part of the hourglass provides a panoramic view of the present, the vision gives a view of the desired future—what success will look like. It helps clarify what we intend to do to move forward and keeps us from losing our way.
To be effective, a vision must be unique, memorable, and free of jargon, pointing the way to specific strategies, initiatives, and plans. Importantly, to be best in class, vision must tie closely to our SWOT and SCA and be both realizable and actionable.
Governing statement is what we call a vision when it applies to part of a company—like a division or subsidiary—rather than the whole. It also is a guide to the future.
Visions and governing statements respond to the question: How do we position ourselves for success? Goals flow from the answer to that question and the next logical question: How do we define that success?
Balanced goals are best. Too often we get preoccupied with financial goals and focus on them to the exclusion of all others. Yet the greatest success comes with balanced goals that address four elements that are common in virtually every business or institution: people, organization, marketplace, and financial.
Goals that are set too low produce second-rate effort; goals that are too high tend to demotivate and may yield no effort whatsoever.
As goals are developed, the means for gauging progress toward reaching them also are set. Some goals can be easily quantified. Others are less quantifiable, but can still be assessed. The key gauges are the 3Ms: measures, metrics, and milestones.
Chapter 5 Exercises
What Is Our Purpose and Position?
We need to focus on governing statements.
Mastering Governing Statements
The governing statement is the overall objective for the business. It helps to set the scope and parameters of “where the business operates.”
A governing statement should ask the following:
Where is our focus?—direction of energy; where the organization should “play” (operate).
How/where should the business competitively position itself in the marketplace?
What are our guardrails? What we are not going to do to compromise our competitive advantage?
Creating Governing Statements
Step 1: Review the context:
Individually reflect on the context: Ask yourself: What do I know? What is most important? How are we unique? What differentiates us?
Step 2: Draft your statement considering the following (note: this should be no more than two sentences):
What is our overarching objective?
What is our position? (Where do we play? What is the role we play?)
Are we providing a clear point of view?
Place it on the wall for all to see.
Step 3: Share your statement:
Read your statement to others.
Questions that seek to clarify are the only ones that should be asked at this point: “What does that mean?”
Step 4: Dialogue:
Collectively ask, What do we see?
Where are there similarities? Differences? At this point we find that there are pretty similar statements—it is not brainstorming but a convergent exercise.
Identify and circle key words/phrases.
Step 5: Work from the statement that most closely represents all points of view:
Align on the statement that represents the best point of view.
Assign two or three people to draft the final statement for others to approve.
Tip: Ask an unbiased source to read the statement without any context and ask that person to define the issue. If the statement is clear enough, he or she will be able to identify each element and understand what needs to be addressed.
What Should We Aim to Achieve? How Will We Know If We “Win”?
We need to create and master smart goals.
Mastering Smart Goals
There are two principles when it comes to developing goals: SMART and balanced.
SMART is an acronym for significant, measurable, achievable, relevant, and time-bound. The best way to make sure goals are well written is to focus on the “M” in SMART. We expand this through the 3M methodology: measures, metrics, and milestones. Ask the following:
Measures. What must we identify: sales, profit, market share, turnover, and so on?
Metrics. How much? What is the metric? Numbers? Percentage increase?
Milestones. By when? When should this be accomplished (months, years, and so on?)
We believe the best way to achieve this result is with what we call a balanced scorecard. Ask the following:
Are we too preoccupied with financial goals? Are we focused on them to the exclusion of all other goals?
Do we have balanced goals that address the four elements common to virtually every business or institution: people, organization, marketplace, and financial? These elements are illustrated in Figure 5.5.
FIGURE 5.5. BALANCED MATRIX.
Exercise: Creating Goals
This exercise can be done at an individual or group level.
1. Create a goal statement for each quadrant of the scorecard.
2. Using the information provided, determine the appropriate measures, metrics, and milestones for each goal by answering the following questions:
a. What is the correct measure?
b. What are realistic targets?
c. What is the appropriate timing?
3. Hold a discussion with key stakeholders for:
a. Clarity
b. Aligning on goals
The deliverable will be balanced goals with measures, metrics, and milestones identified and aligned.
Organizational Assessment
Use the following table as a checklist for identifying TTW principles and practices. This will help you to better understand where you and your team need to focus your energies. To get an idea where you believe your organization stands, read through each statement and jot down a rating:
Review individual items. Look for items on which you scored lower (3 and below) and think about the following questions:
What do I believe is driving the score?
What do I need to stop, start, or continue doing?