There are executives who rely on their ability to move quickly. They are often the ones who loudly declare that if we sit around analyzing things to death, we’ll never get anything done. Sometimes, they’re also the ones who are willing to bet the farm before the analysis has been thoroughly completed.
I love working with these high-velocity types, but they often need someone like me watching their back. Someone with a strong business sense and analytical capability who doesn’t slow down the process.
Here are some examples of how things can go wrong:
Catalogue Stores
A well-known retailer operated discount department stores nation-wide. To reach a wider customer base, they also operated a successful chain of catalogue stores in communities too small to support a full-service store. A customer would place his order at a catalogue store, and the item would be delivered within a week.
Meanwhile, changes in technology and inventory management techniques had resulted in a substantial reduction of inventory carried in the full-service stores. These were large stores, so quite a lot of physical space was freed up.
A senior executive came up with the idea to put catalogue stores in the available space in the full-service stores. His analysis showed that not only would the new catalogue stores add substantial revenue and profit to the existing outlets, but they could easily be placed in the least desirable selling areas, often in store basements.
There was much fanfare as the project was launched. The executive in charge even ran afoul of his boss and colleagues when newspaper articles praised his brilliance beyond their comfort level. Then the catalogue stores were abruptly shut down as a disastrous failure. Why would a customer walk through the store, passing by the merchandise he wants to buy, only to order it in a dark basement for delivery a week later? Hmmm… didn’t think of that.
Paper Shortage
A young warehouse worker at a large office supplies distributor showed such ability and intelligence that he was rapidly promoted to be the company’s purchasing agent. This was a long time ago, in the mid-1970s, when the oil crisis resulted in chronic shortages of a surprising range of products.
One day, the purchasing agent called to place a routine order of reams of 8 ½ x 11 inch printer paper. “6 months’ delivery” he was told, and he realized he would be unable to fulfill his customer orders for much of that time.
He was a smart kid, so it didn’t take long to figure out that when the shipment did arrive, he could be looking at another 6 months for the next delivery. Of course he didn’t ask for advice. He started placing orders every couple of weeks, based on historical usage, fully expecting to be back on his regular schedule at the end of the 6 months. Yes, he was a smart kid.
The only problem is that it was a big company, and after a while, the orders accumulated into a quantity large enough to justify an entire separate mill-run by the manufacturer. There were delivery trucks at the door for days on end, and you had to walk sideways through the warehouse to get past the stacks of paper. Hmmm… didn’t think of that.
Demographics
A retailer launched a new business based largely on demographics. It was the early 1980s, and the Baby Boomers were just starting to have children of their own. It was the beginning of a huge increase in births that the industry was calling the Echo Boom. What better time to start a chain of stores specializing in children’s apparel?
After establishing a solid base in California, the plan was to follow the demographic projections that showed high percentage population growth in the southern states. The company made an aggressive move into Texas, and suffered from an economic downturn and some bad real estate decisions, resulting in the prompt closure of about half of the new stores. Still, the roll-out through the south remained the CEO’s plan.
This is the only example in this article in which I was able to play a part, so of course, I’m the hero of this story. I pointed out that the southern states were in fact projected to grow at high percentage rates, but the population density was insufficient to achieve the economies resulting from tight clustering of stores. After all, 10% of nothing is still nothing. Hmmm… didn’t think of that.
The management team listened to my presentation, and we headed instead to the northeast, where large populations were already in place. Our strategy shifted to taking business away from the department stores.
Does your CFO sit in on strategy meetings and tactical problem-solving sessions? He might just bring an important new perspective.
Bruce Critchley's CFO Thoughts 