2/28/2010
Private Equity Practice
Private equity, venture capital
Who do even apparently high-flying private equity companies fall over? When I was chatting with Mark Stone, the Gores Group senior managing director responsible for the worldwide operations, he gave his "three reasons" for under-performance by some companies:
1) Lack of focus
2) "Noise levels" which obscure and distract
3) Inability to face reality and take action based on reality
“Everything is a priority, so nothing is,” Mark says. “There is a noise within the business that really drowns out reality. And when you go in to engage with management of an under-performing business, you find that they don’t get what needs to happen within the company – they cannot mobilize the organization to execute on the very things that will generate success.”
He adds: “Anybody can say, ‘Here are the five objectives I need to achieve and I can do it in eight weeks. But in reality only 2 percent of people accomplish those goals. The rest tell you all the reasons why they didn’t or couldn’t.”
Mark says that when clarity is achieved, it is possible to double or triple the value locked inside a business: “You find the three to five things that represent 20 percent of all initiatives but unlock 80 percent of the value. Then you continuously and maniacally deliver on those things without being distracted by the other 80 percent of the initiatives that don’t matter…they are the noise.”