Bold Exec

The Tale of Two Ideas

After losing share to imports, General Motors under then CEO Smith launched a revolutionary plan--the Saturn car accompanied with breakthrough ideas; no haggle pricing, no-work-rules union environment, singular dedicated production facility, promises of evolutionary design, friendly dealer customer service, and a cult-like individuality. It was loved by the public: this small-car business plan was a good idea! But there are a million good ideas in the world. What separates good ideas from meaningful results is the attention to execution, and in this specific case within the mind-boggling bureaucracy and old-think atmosphere of GM, a ferverent dedication to continued isolation. GM had a good idea, and-not unexpected-lousy execution (more on this on page 2). Tata has a great idea in the launch of it's $2500 Tata-nano. I'm willing to bet that the clear thinking Tata company will radically outperform GM's execution; they'll stick to their plan, improve it incrementally as is appropriate, and be highly successful.

Double Your Results by Isolation: Part II

The technique of Isolation works wonders to double-up on improved results. When we acquired Paradyne, among many, many issues to deal with were two that benefitted from isolation. We previously discussed the aged accounts receivable; the second is this resale product.

The only growth within Paradyne over the previous several years came from a product (call it X) manufactured by another company and resold by Paradyne through the Lucent (another separate company) sales force. Although this situation was locked in via long term contracts, the value added by Paradyne was virtually non-existent. Regardless, this had been the only growth area and so every department and most individuals found a way to attach themselves to it. Everyone talked about product X, how they were helping, what they were contributing. It was like a cancer, preventing everyone from putting their energies and efforts into the current and developing products of the company. So we isolated. All functions of product X, including order placement, supplier and channel interface, scheduling, the little development there was, billing, and collections were isolated into one teeny department of about 8 people: and that was their only and full time job. The other 792 people in the 800 person organization lost their product X distraction.

The isolation of the aged accounts receivable, described in a previous posting, plus the isolation of product X allowed the full energy of the remaining organization to go where it was needed; two years later we had a successful IPO.

Double Your Results via Isolation

The technique of Isolation works wonders to double-up on improved results. When we acquired Paradyne, among many, many issues to deal with were these two; both of which were optimized by the technique of isolation. The first was a portfolio of aged accounts receivable from equipment previously sold on perpetual leases. The second was the resale of a product to Lucent; that product developed and produced by a third party. This week we'll discuss the lease issue; next week the resale product.

The collection procedures for these aged leases was co-mingled within the company's accounts receivable department. While the normal accounts receivables from current product sales and these lease receivables for aged leases technically fell under the same organizational category of accounts receivable; the techniques, considerations, servicing, and attitudes required to optimize both were very different. And results for each category were sub-optimal. So we created a separate subsidiary for the collection of these lease receivables with its own management, objectives, and performance criteria. Results for the standard new product accounts receivables radically improved: results for the aged lease receivables radically improved. Isolation of issues that, while on the surface seeming to be categorically linked, have in fact sufficiently differentiating characteristics, can achieve dramatic results.