The articles in this collection, 3.020504 and 3.020505, provide a framework to evaluate a company. The suggested technique involves assigning a grade (zero thru five) to seventy different categories that cover a wide range of factors regarding the structure and performance of the company. The approach is most applicable to companies that are well past the startup stage and have a complete management team and are steadily generating revenue from a stable product or servicer. There is a far less rigorous approach that can be applied to virtually any company that, if followed objectively, can be very revealing and help to prioritize activities. That approach simply divides activities into three categories. The categories are taken from the 1966 Clint Eastwood movie, “The Good, The Bad, and the Ugly.”
By their very nature, the three categories are subjective in nature. By “forcing” one to rate each activity or issues into one of the three categories, an overall picture of the business can be quickly made. Activities or issues can move between The Good and The Bad categories quite easily. These two categories share one common characteristic; the company has control over the issues. The third category, The Ugly, is characterized as being not in the control of the company. Essentially, issues in The Ugly category “are what they are.” Paraphrasing a famous quotation from Winston Churchill: “I may be drunk, but you are ugly. Tomorrow I will be sober, but you will still be ugly!” Perhaps, socially unacceptable today, the point he made was that there are some things that one cannot change.
Some examples of items that can fall into the three categories are:
Examples of The Good or The Bad Items
- Prospect identification
- Customer conversion
- Product/service availability
- Customer churn
- Recruiting effectiveness
- Product cost
- Distribution scalability
- Distribution effectiveness
Examples of The Ugly Items
- Market disruption
- Large capital needs
In an ideal world, the company should work to move “good” items to be even better (great), and “bad” items to “good.” Realistically, every company has limited resources (time, people, or money) and cannot address all of the issues simultaneously. The company needs to consciously prioritize items, first by making sure that “bad” items do not get worse. The company must consciously exercise control of its actions. Striving for perfection, once a noble quality goal, has given way to the reality of finite resources that in some areas, good enough is good enough.
By definition, the company cannot control items listed in The Ugly category. Frank Wapole, a retired Motorola Executive and the author of the book “Power of All: The Answer to the CEO’s Dilemma” introduced a powerful notion (paraphrased): For items that are not within the control of a CEO or company, they can still choose how they will respond. As captured by the notion of risk: more bad things can happen than will happen, not all of The Ugly items will happen and negatively impact the company. Just as a company can develop tactical and strategic plans to address The Good and The Bad items, they can plan how to respond to The Ugly items if or when they occur. Unfortunately, many companies take the approach that they “hope” The Ugly items do not happen or if they do, they revert to a “victim” mentality.
The article in this collection, 5.060601, “What Just Happened,” discusses a simple technique to help a company “choose” where to concentrate their efforts if an Ugly issue occurs. The technique is simple; assign a weighting to both the likelihood and the impact of each item that could occur. A scale of zero to 5, with 5 representing the highest likelihood or risk can be used. After the weightings have been assigned, multiply the two items together. The items with a high likelihood and the most severe impact will bubble to the top of the list. For those items, the company should then develop a response plan. This process avoids the tendency to be surprised when a situation does occur and the corresponding development of a reactionary plan instead of a well thought out response plan.
The suggested Good, Bad, and Ugly assessment approach may seem to be overly simplistic. However, it can be completed quickly and, in most cases, very revealing. Most of us do not want to focus on negative outcomes. This is especially true of optimistic, visionary entrepreneurs and new, highly energized startups. Accurately assessing where you are, and the potential roadblocks up ahead are the only way to plan your route to your ultimate destination.