How do you begin thinking about planning? For many chief executive officers, the process starts with broad questions: How fast should we grow? What's our risk exposure? What business are we in? What business do we want to be in? Why do our customers buy from us? Who is our competition? What are we doing right?
Here's how some companies have gone about that process:
Check Your Focus. When George Patterson, co-founder of City Gardens Inc., asked himself what business he was in, he discovered that, deep down, he wasn't at all sure. He and his partner had begun their Boston-area business in the mid-1970s. But by 1983, the original focus -- selling and maintaining plants for offices -- had become muddled as City Gardens opened a retail flower store in Boston, a garden center in Washington, D.C., and a branch office in Atlanta.
"We lost a lot of money and we were going nowhere," says Patterson, 41. "Until we wrote things down, we were tempted by little and big opportunities whenever they appeared."
What business were they in? "Plants" seemed the only way to describe it. What business should they be in? The answer, they decided, was interior landscaping. "Our edge was knowledge of the local market," Patterson says. So they got rid of their far-flung operations and acquired a Boston competitor to help consolidate their position.
George Lukowski, on the other hand, checked his focus and decided to broaden it. "In 1980, we looked around and saw how dependent we were on our major customers," says Lukowski, president of $9-million Yarema Die & Engineering Inc., in Troy, Mich. Concerned that his company's fate was far too closely tied to those of the auto companies, for which it makes a variety of metal parts, he changed Yarema's focus from "supplying the auto industry" to "metal fabricating."
Lukowski's 23-year-old company still makes auto parts; it also makes aluminum dog houses and church steeples, and it survived what Detroiters now call "the Depression" while a number of its competitors went under. The new products don't produce more than 10% of revenues, Lukowski notes, and "we lost money for three years -- but we're here today."
Check Your Pulse. In some cases, planning for growth simply means asking financial questions. Pacific Envelope Inc., an $8-million Anaheim, Calif., manufacturing company, grows as fast as its revenues allow; by the time it fills the capacity of its newest machine, it has already done cash-flow projections for the next one. But the company is also careful to grow no faster than revenues. "We don't like to have more than one machine being financed at once," says CEO Bob Cashman."We don't want to have more payments than we can handle during the worst downturn."
Financial considerations were not so crucial at Au Bon Pain Co., a Boston-based company that operates a chain of about 40 French bakery cafes from Maine to Colorado: People were the limiting factor. After more than doubling in size every year for two years, says executive vice-president Leonard Schlesinger, "we saw tiredness, burnout, and all sorts of details falling through the cracks."
Au Bon Pain's answer is to slow down the rate at which it is opening stores. "Building stores is a lot easier than finding the right people to run them and getting them up to speed," Schlesinger explains. "In a service business, you can't be piggish about growth, or you'll pay for it."
Check With Your Customers. It's hard to plan when you don't know why people buy your product. Until recently, for example, Everett Jewell, founder and CEO of Jewell Building Systems Inc., in Dallas, N.C., assumed that customers bought his prefabricated steel buildings because of their price. For nine years, after all, selling small structures at relatively low prices had been a very profitable niche.
Recently, however, Jewell's customers began letting him know that prices are a lot less important than they used to be.
"If you are a reliable, on-time supplier," he says, "people will even pay a premium to get rid of the headaches. We're at a point where we don't just sell buildings. We sell solutions to problems." Jewell is now getting more and more orders for larger, more expensive structures -- and he is planning for his company's future accordingly.
Check the Competition. It's also hard to plan when you underestimate the opposition. Houston-based Kelley Manufacturing Co., a wheelbarrow manufacturer with sales in the $50-million range, thought it had a pretty good fix on who its competitors were. To keep costs as low as possible and to provide protection from offshore price-cutters, CEO Donald E. Lambert was buying some of his key components from the Far East. What nobody at Kelley saw coming last winter was an invasion -- from Taiwan and Korea -- by a dozen or more wheelbarrow manufacturers at once. They first appeared on the radar about two years ago, Lambert says, "but we didn't imagine they could gather momentum as quickly as they did."
Once the market was flooded, Kelley was forced to slash its prices to minimize the damage. "We've also altered the quality standards on some of our products," says Lambert. "We didn't know that customers would accept an inferior product."