Anyone who has successfully turned a company around is good at strategy.
Do some people get lucky and successfully turn a company around from being unsuccessful to successful? Sure, but most people who have successfully turned a company around did so because they understand the value and process of developing a new, winning strategy for the company.
The myth is that underperforming companies are so because of a lack of execution. This can be true, and often execution improvements are needed as part of a turnaround, but more companies fail because of a lack of or a bad strategy than they do because of bad execution. Furthermore, execution is a management issue, which is easier to correct than a lack of or a bad strategy. Strategy is about what a company will do, and execution is how it will do it. Being clear and focused on the will do is eminently more critical in a company that isn’t succeeding than the how.
Turnarounds are particularly challenging because the absence of a sound strategy will cause damage to customers, team members, and partners. It takes time to reestablish trust with a company’s stakeholders and to be informed of, understand, and buy into a new strategy. An often overlooked aspect of an unsuccessful company is the distrust that is created among the company’s stakeholders for leadership. The trust isn’t recaptured overnight and without a well-thought-out and articulated strategy.
Private equity firms often get a bad wrap for trying to squeeze costs and maximize returns from a company they invest in or acquire. What gets lost is that reduction in cost and efforts to improve a company’s financial performance are the outcomes of a different and presumably better strategy for a company in trouble. No company has ever cost-saved its way to long-term success. Many private equity firms do look to invest in or acquire under-performing companies. Still, they do so knowing full well that a new strategy for the company will have to be implemented. The new strategy is getting formed as a private equity firm evaluates a company. The due diligence period is not only to inform a private equity firm of how the company has been performing but also to identify challenges and opportunities for a company to perform better. Partners at private equity firms are some of the best strategists…