Article
If soft sales following a year of chaotic growth have your company whipsawing from expansion to layoffs, you'll appreciate the insights of 451 senior executives from around the world who responded to Bain & Company's 8th annual Management Tools Survey. This year, respondents opted for "tried-and-true" tools to manage the fundamentals of cost and corporate direction. Meanwhile, executives defected - at up to four times the mean - from new economy tools like Corporate Venturing and Customer Relationship Management, once thought to provide quick and easy paths to growth.
The survey examined the usage, satisfaction and effectiveness across more than 30 industries, of 25 management tools widely used in 2000. Sixty-one percent of respondents reported, when they cast their votes in early 2001, that they were concerned about an economic slowdown this year. Within this context, responses show executives continue to focus on improving the financial performance of their companies. But four-out-of-ten companies that set up Corporate Venturing funds (often to take stakes in, or create Internet startups) abandoned the tool.
The most widely used tools by senior managers in 2000 remain the same as in 1999.
- Strategic Planning - 76%
- Mission & Vision Statements - 70%
- Benchmarking - 69%
However, senior executives widely endorsed all of the top-ten tools. (See "Management Tools 2001: Global Results" and Top of Mind below.) Each of these tools has been used by nearly half the corporate population in each of the eight years that Bain has captured data on their use. It's clear that when times get tough, we trust the familiar. Managers are falling back on widely understood tools that have helped them in the past. And all tools fare better when they are part of a major corporate effort. Ninety percent of managers agreed that tools need top-down support to succeed.
"New Economy" Tools Falter
Meanwhile, only a third or fewer respondents adopted the "new economy" tools most frequently cited in the press, including:
- Market Disruption Analysis, used to identify where to launch new businesses to compete with startups,
- Corporate Venturing, used to build those new businesses with venture capital disciplines, often in hopes of creating a public spin-off,
- Customer Relationship Management (CRM), which aspires to turn Internet technology toward identifying and retaining valuable customers.
These three also posted the lowest satisfaction ratings and among the highest defections. For example, 42% of users abandoned Corporate Venturing in 2000, versus an 11% defection rate from tools on average. Thirty-nine percent of users dropped Market Disruption Analysis, and 18% defected from CRM. Follow-up interviews with survey respondents showed that these tools proved tricky to implement. In the case of Corporate Venturing, respondents said their companies had trouble mastering the venture-capital disciplines required to succeed, including managing a swift exit from ventures that failed the test of progress.
But Hunger for E-Commerce High
Despite dissatisfaction with trendy tools, 73% of respondents said they wanted to stay on the cutting edge of tools and techniques, even though 77% felt most tools promise more than they deliver. This seemed particularly true in e-commerce. Although new economy tools netted low ratings, sixty-two percent of executives said they felt their company was not taking full advantage of the Internet. Only 11% agreed their company had spent too much money on e-commerce initiatives, while 69% disagreed. Forty-nine percent of respondents said they were aggressively expanding their e-commerce offerings. Meanwhile, only 23% of managers agreed it was "fun to watch the dot-coms fail," and 44% disagreed that "almost all young entrepreneurs lack the expertise necessary to build great companies," versus 34% who agreed.
If this means there's still a place for young visionaries to create radical offerings, please note they'll be wanting cold cash for their efforts: Fifty-nine percent of executives said their managers want cash compensation - not more stock options - versus 21% who disagreed. And executives would like to hedge their bets, too: 39% said their company would deliver better long-term results as a private company - without pressure from shareholders over quarterly earnings.
Right Tool Can Net Results
Meanwhile, executives said satisfaction with tools varied with the job. Much as hammers are effective tools for driving nails, but poor at trimming hedges, different management tools proved more and less useful at achieving different goals. Tools generating the most satisfaction for achieving financial results (the no. 1 goal of 64% of respondents) included Pay-for-Performance, Shareholder Value Analysis, and Cycle Time Reduction. Tools best at growing customer equity included Customer Satisfaction Measurement, Total Quality Management (TQM), and, despite eliciting high dissatisfaction overall, CRM. To improve competitive positioning, those surveyed vouched for Strategic Planning, TQM, and Strategic Alliances.
To bolster long-term performance, respondents expressed highest satisfaction with Strategic Planning, Cycle-Time Reduction and TQM. And to strengthen integration efforts across an organization, executives voted for Strategic Planning, TQM and Mission and Vision Statements.
Overall, executives are focusing on slightly fewer tools this year than last. The average number of tools employed has decreased slightly to 10.6 from 10.9. Still, executives' aspirations for using tools remain high.
And well they should. Only 25% of respondents thought today's market leaders will still be leaders five years from now. By this score, turbulence is poised to become the steady state of business, and executives will need all the sound, navigational equipment they can muster.
Bain & Company Director Darrell Rigby founded and directs Bain's Management Tools Survey.