May 2004
Volume II, Issue 3

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Velocity Made Good There is no reason for any individual to have a computer in his home.     - Ken Olsen, CEO of Digital Equipment, 1977

In the Spotlight Warren Buffett

In April 1997, my teammates and I were racing sailboats in Punta Gorda, FL, at the US Championship for the Soling Class. We were in year three of our quest to qualify for the US Olympic Sailing Team, and in the final race of the regatta we were still in contention for a top spot overall. On the first leg of the race, we were lined up next to a rival boat. Our two boats were solely focused on speed in an attempt to gain advantage over each other.

Eventually, our boat gained the advantage and we were clearly ahead. But then, when we looked around at the rest of the boats on the course, we realized that in our singular focus on our closest competitor we had ignored a significant wind shift. The rest of the fleet had seen it, we had not, and we were now hopelessly behind. We had won the battle against our rival, but we had lost the war.

Direction also is vital. In any goal-oriented activity, a sense of direction and a focus on the objective is essential. But direction and dedication to the goal, without speed and advancement, can lead to stasis. What is the point of heading in the correct direction if you don't have enough speed to ever get there?

Speed without direction is wasted. Direction without speed is ineffectual. The point is this: In any competitive endeavor, it is the combination of speed and direction that creates success. The fast, stupid teams and the slow, intelligent ones may win an occasional battle. But the teams that are fast and smart almost always win the war.

In sailing we refer to speed and direction with a single term: velocity made good, or VMG. VMG provides you with an absolute measure of your progress. If you and I are racing against each other, I might be moving over the ground slightly faster than you. But if your direction is pointing closer to the mark, then it is possible that your VMG is better than mine even though I am faster. In business, just as in sailboat racing, the concepts of speed and direction should always be inextricably linked.

The technology industry is filled with examples of companies whose focus on speed, rather than VMG, caused some questionable decision making: Digital Equipment, Wang, Apple, Bell Labs and Prodigy immediately come to mind. A focus on speed arguably caused Digital to miss the rise of the personal computer, Wang to miss the importance of word processing, Apple to let Microsoft own the network, Bell Labs to pass on developing the Internet and Prodigy to be the first to market but unprepared upon arrival.

Are these the sole causes for the setbacks of these companies? Certainly not. But the point is that speed reduces the time available for thoughtful decision-making. Business, especially in innovative industries like technology, can be a series of sharp turns, occasionally 90 or even 180 degrees. A singular focus on speed can send a company careening into the wall on a hairpin turn. The company focused on speed and direction will see the hairpin turn coming, and will adjust their speed accordingly.

Managing Your VMG
In successful, functional organizations, everyone has a job to do - some have responsibilities focused on the short term, others on the long term. And it is the coordination of these short-term and long-term responsibilities that leads to teamwork and effectiveness. If the focus is on speed and direction, the business VMG, the organization will always attempt to have a balance between today and tomorrow, the short term and the long term. The organization will pursue today's sale AND always be laying the groundwork for tomorrow's sale.

The reality in the modern business world is that many businesses focus too narrowly on the short-term future - today, this month, or this quarter. The things immediately around us and in front of us receive the vast majority of our attention. There is always the next fire to put out, the next client meeting, the next product launch, the next quarter's results... Speed and short-term results are the priority. And if the focus is on speed and the short term, you are likely to miss the big picture. Think again about some of our earlier examples. Digital was focused on more immediate issues, and the rise of the personal computer would have been difficult to identify with the organization moving quickly and focused on the next quarter's results.

For many organizations, this focus on the short term becomes even more overt in times of uncertainty, stress, or limited cash flow. Organizations tend to become task oriented and focus on the immediate issues of operations, production, or budgetary constraints. The individuals or teams that normally perform long-term tasks often are reduced, eliminated or re-assigned to short-term tasks during periods of stress. But while seemingly logical, this is not advisable. These moments of stress are often exactly the wrong time to narrow the organizational focus solely on the short term.

Returning to the sailing anecdote from the opening paragraph, during the race we had all three members of our team focused on the same thing - the short-term goal of passing the boat next to us. There are times when it is appropriate, and even necessary, for the short-term goal to be the dominant goal. But there is never a time when the long-term goals should be completely ignored. Even in those times of organizational stress, it is critical to keep certain members of the organization focused on long-term issues such as relationship management and client acquisition.

I have repeatedly suggested to you that the most successful and effective organizations train and empower their people to interact with their customers, the market- place and the competition with strong sales and communication skills. It is critical to effective Client Relationship Management and new business development. It also is central to increasing your company's VMG.

There are three things organizational leaders can do to build these essential  skills for success:

1. Execute consistent branding throughout the organization;
2. Invest in effective sales training; and
3. Encourage an environment that looks beyond the immediate short-term result.
    

You can increase your company's VMG by empowering individuals throughout your organization with the sales skills and tools that will allow them to brand themselves - through their words and by their actions - in ways that are consistent and enhance the company brand and the company message.

In the last issue of The Beacon, I submitted to you that the best teams have always been the ones where both strategic and tactical thinking were present and encouraged throughout the entire organization. Additionally, the most successful organizations always keep one eye on today and the other on tomorrow. The most successful organizations are focused on where they are going and how quickly they are getting there. They are focused on their Business VMG, both the short term and the long term.

Especially in times of stress and limited cash flow, the best organizations continue training and preparing their people for today and tomorrow; they keep an eye on the competition and the marketplace; and they constantly renew the prospects and sales opportunities flowing into the pipeline.

Dean M. Brenner President

In the Spotlight Warren Buffett

© 2004 The Latimer Group. All Rights Reserved.
Dean M. Brenner - The Latimer Group: 203.265.4344.
Feedback or comments: dmbrenner@thelatimergroup.com.
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