Introduction to Ruthless Execution: How Business Leaders Manage Through Turbulent Times, 2nd Edition
Ruthless execution is the term we use for the methods and strategies business leaders employ to break through performance walls and manage through turbulent times. We first employed this term in 1996 when we were doing work for Hewlett-Packard (HP). During the research process for this and our first Ruthless book, it became clear that the same term captured the essence of the strategies that business leaders execute to overcome tough or turbulent times.
Few books have focused on how companies navigate tough times and how these same companies have come back stronger and more nimble from that experience. Books on American corporate life have tended to proffer advice on how to steer a business during good or “normal” times. As we’ve witnessed over the past decade plus, leaders are realizing they need to plan for more of a roller coaster ride than a rocket ship. A new fact of life in business has become clear: Invariably, business leaders are going to experience tough or turbulent times. Accordingly, this book tries to prepare companies for taking advantage of the “ups” as well as offers practical ways to build corporate resilience to manage through the “downs.”
Hitting a Performance Wall
We define hitting the performance wall as a rude awakening that occurs when a company has enjoyed consistent high-level performance and then experiences two or more years of flat or declining growth. This flat performance can be driven by different factors: a downward turn in the economy, a lack of product innovation, growth that occurs too rapidly, a missed market opportunity, or, as is most often the case, ineffective execution. The awakening is typically “rude” because most business leaders don’t see it coming, and it is often preceded by strong performance.
In this book, there is no attempt to explain why companies hit a performance wall. That sort of analysis has been the subject of a number of other books and articles. More important to note is that what causes reversals is most often controllable. Irrespective of cause, almost always it is an inability to focus and execute that is at the heart of the problem.
Indeed, if hitting a wall has become a new business norm, if the potential for a business reversal haunts the leadership of companies more now than at any other time, it makes sense to offer urgent guidance on how to navigate a path of success, or how to recover after hitting the wall.
From 2000 to 2003, we investigated companies in this predicament, companies that over the long run had been strong performers, but from time to time had fallen into periods of stagnation. From our research, we came up with a way of looking at these companies that we found extremely useful.
The long and the short is that it’s becoming more and more difficult to be a successful business leader. Given the quickened pace of change in the last few decades—changes wrought by major waves of technology innovation, sharper competition, empowered customers, and “smart” products—the business environment is confusing, complex, and uncertain.
A way forward exists that requires doing nothing more than studying business leaders who have gotten themselves through these difficult situations. The leaders who have pulled themselves through these tough times share certain behavioral patterns, exhibiting “ruthless execution.”
In 2000, watching companies struggle with the collapse of the “New Economy” and ensuing economic downturn, we became interested in uncovering the ingredients that leaders who overcame these struggles shared. That became the thrust of three years of research, which eventually made it clear that the notion of ruthless execution could serve well as a powerful and overarching framework for guiding business leaders through turbulent times and performance uncertainties that inevitably occur.
The research examined companies that had at one time or another suffered setbacks. The goal was to discover what practices these companies employed that helped them break through the performance walls and manage through these times. The means was to study a diverse set of industries and companies, large and small, using surveys, company documents, research reports, publicly available financial data (10-Ks), and, where possible, interviews with key business leaders. At times, we served as a consultant to these companies, enabling us to build case studies of these enterprises.
What we learned is that ruthless execution means that business leaders take the time and opportunity to study the issues—and then act on them. During tough times, leaders do not have to rush into making decisions, but just the opposite. They have predefined strategic and operational methodologies that allow them to uncover issues early and react prudently, focusing the company’s efforts to drive through the wall. Indeed, business leaders who have broken through performance walls have tended to be very fact based, team oriented, and analytical in their approach to problem solving.
Exhibiting patience is a definite requirement for making decisions in uncertain times, because the last thing you want to do is to suggest that it is easy to revitalize an organization.
To be clear, this book is not about fixing companies in crisis. This book is about learning from leaders who were able to manage through the turbulent times and perform again. The plain truth is that most large corporations—more than 90 percent of all public companies—suffer rude awakenings from time to time; indeed, setbacks happen to these large enterprises frequently. Large, established companies can become complacent; they may become too bureaucratic to innovate. Also, innovative enterprises may favor hyper-growth at the expense of discipline and rigor.
To highlight the challenges of consistent performance in these turbulent times, we researched the financial performance of the Fortune 500 over a 12-year period (2001-2012), removing the Great Recession years of 2008-2010 given the exceptional challenges of these years. Over this period, not a single company in the Fortune 500 had consecutive years of revenue and profit growth. Lowering the bar even further, only 3 companies were able to achieve revenue and profit growth for all except 2 years during this period.