The clarity of the order book

Founder's MentalitySitting in the airport at the end of my third trip to South America this year, I found myself musing about the many companies I’d visited—80% of them founder-led, and about half still family-run businesses.

The stories that second- and third-generation leaders tell of their ancestral founders are inspiring and tend to share certain themes:

  • “My grandfather [or great-aunt, or great-grandfather] started this business 50 years ago and bet everything. He quit a good job that put food on the table and worked like a dog for a decade, barely scraping by. Every centavo mattered.”
  • “I remember as a kid sitting with my great-aunt and being so proud. She loved the business, and even though we didn’t have any money, we all felt we were part of something special.”
  • “While the first generation struggled, I inherited a business with a good foundation, good ethics and good mission. I was able to build off this base, but we owe everything to my great-grandfather.”

When I probed further on the foundation they inherited, they talked about the sense of mission, the owner mindset, the obsession with the frontline… all the characteristics we now know to define the Founder’s MentalitySM.

What surprised me was how often they talked about the order book. Across all of these companies, from retail to auto parts to engineering, the leaders referred to the founders’ obsession with the order book. Here are some examples:

  • From a retailer: “What I remember most is that the founders didn’t care so much about growth or market share, they cared about daily sales and cash numbers. Could we pay the bills? Were we making more or less money per square foot of space? Could we survive? Were things getting better? They were obsessed by those numbers. And I’ve kept that obsession. I get sales and cash figures delivered to my Blackberry hourly. And then I ask, ‘Can I pay my bills?’ and, ‘Are we getting better?’”
  • From an auto-parts supplier: “I know market share is important, but it is not the most important thing. Focusing on growth and market share can make you do foolish and unprofitable things. What I really care about is the quality of our order book. When one of our divisions signs a deal with an auto supplier, I ask, ‘Was it a good contract? Are we going to make some money on that deal?’ Because what is the good of revenue growth if it is the sum of dumb contracts that lose me money? What is the point of market share if it is a big share of an unprofitable market? What I care about is whether or not we are signing a good deal, with healthy margins.”
  • From an engineering company: “My grandfather[‘s] obsession [was] with our pricing strategy for each engineering proposal. He had so many simple rules. We had to make a minimum margin on each proposal, unless we were entering a new line of business and we knew more deals would follow. We had to work with partners and suppliers that offered not the best price, but a fair price—it was equally important that they were reliable. He’d rather have a slightly higher-cost bid that he knew he could deliver than to always be low-cost with sleepless nights about whether he and his partners could pull it off. He told me, ‘You can delegate a lot of things, but never profit margins. Control the order book and sign off on final pricing.’ And I still do!”

Founders obsess about the order book. They are masters of micro-strategy. As one Brazilian company leader told me, “My father was a simple man, but in his simplicity was genius. He always told me, ‘If you make sure you make money on every transaction, every day, every week, you can be confident the big-strategy issues will sort themselves out. If you start getting too clever and lose sight of the order book, allowing yourself to be distracted by the big picture, the one thing I can guarantee is that big picture will fall on your head.’”

Amid all the complexity in businesses today, these masters of micro-strategy have clarity. There’s something beautifully simple about the way they teach the organization to obsess about the daily order book.

This entry was posted in Frontline obsession, The paths to Great Repeatable Models by James Allen. Bookmark the permalink.

About James Allen

James Allen is a senior partner in Bain & Company's London office and recognized as a leading expert in developing global corporate and business unit strategy. He is co-head of Bain’s Global Strategy practice and a member of Bain & Company's European Consumer Products practice. He is co-author, with Chris Zook, of Repeatability (HBR Press, March 2012) and Profit from the Core (HBR Press, 2001 and 2010).

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