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DRIVING GROWTH AT STONE FINCH

How Jim Billings can manage the delicate balance of sustaining a
mature business while funding innovation necessary for survival

Nancy Sagar

Individual Case Writeup

Management 469, Professor David Lewin

May 20, 2011

Why? Using an “inventive” leadership style [Ancona’s Leadership Compass. Eli Saunders). and “falcon” culture with the rest of the long-tenured employees. overcome cultural inertia and inspire his organization to travel the transformative path together. dissolve high cholesterol (e.for a mature company in a mature industry to stay alive and grow. Stone Finch certainly falls within this category. reference 1]. family-founded water/wastewater product manufacturer. In just four years.g. lead the organization to change. a mature. subsidiary structure. Billings is following the right strategy – driving innovation to create new. morale had plummeted. he had tripled revenues to more than $5 billion by spurring innovation that led to exciting new products. And it is incredibly difficult to 1) successfully inject Stone Finch Case Analysis . or attempt to align his new strategy.Executive Summary Jim Billings has led a phenomenal growth spurt since taking the CEO position at Stone Finch. The problem: he failed at “visioning” and “relating” [both Ancona] to the 20. and he cannot allow the Water Products division to sink any further. the most critical action Billings can take is to carefully implement Kotter’s “Eight Steps to Transforming Your Organization” [2]. high-potential products -. The problem is not Beth Suarez – the blame belongs to Billings and his lack of leadership through massive organizational upheaval. Billings had formulated and executed major organizational changes with the support of the board. Blending old and new: the delicate balance Tushman and O’Reilly[3] remind us that a successful organization is naturally larger and older – variables that contribute to cultural and structural inertia. Management 469 page 1 .Nancy Sagar. But he still has a $2. To plug the talent drain. A-level talent was suddenly leaving. Yet instead of celebrating success. He didn’t sell his vision.000 “domestic fowl” in the company.2 billion cash cow to milk.

As a fast follower. and the quote provided in the case only refers to a goal of creating additional revenue streams for growth. risk-taking.” Billings’ appointment as CEO in 2004 Stone Finch Case Analysis . Shift in competitive strategy requires different core competencies This change is also difficult because it shifts Stone Finch’s competitive strategy from that of a fast follower to a product leader. 1. But before he can manage.such an organization with a new innovation mindset and 2) manage that organization once it is competing in different markets.in the order presented below. Goldfinch Technologies. and a high volume of high-quality ideas. Stone Finch’s expertise is in quickly improving the innovations of competitors. Management 469 page 2 . then beating them through cost advantages borne from expertise in large-scale production and distribution. speed. The “Eight Steps” framework: Analysis of Billings’ previous mistakes and recommendations to implement now Before launching into his next transformation effort. especially in a company whose board calls it “complacent. potentially with different customer bases and different value propositions. Establishing a sense of urgency Billings was handicapped from the time Richard Stone acquired his company. He should then implement the concepts that he missed – faithfully and persistently -. The organizational skill in that model is completely different from a product leader. Billings would be wise to stop blaming Beth Suarez and analyze what he did well and what he missed in leading change at Stone Finch to date. Stone surprised his entire executive team and family with the move. Billings needs to ambidextrously manage both groups.Nancy Sagar. Growth is great. but it’s not a powerful sense of urgency. a model that requires creativity. failures. he has to keep his top talent and energize the organization to change.

Nancy Sagar. this sense of urgency can be even more powerful today since the Water Products division is suffering and morale is low. But “numerous discussions” doesn’t create a powerful team with a shared vision and commitment – a team that will keep the urgency high and their employees engaged. and once again. He should have championed his cause with the stories of other mature companies that marched along until an innovative young competitor came along with a disruptive technology. The urgency is to regain leadership and to catapult the company into new categories to achieve X goals by Y time. but one that relies on its adult parent (the Water Products division) for expertise and support as it grows up. Management 469 page 3 . successful transformation (like Billings’ goal to build a culture of experimentation among a staid group of comfortable “lifers”) requires the coordinated efforts of many people. 2. Billings just ran the numbers. Stone Finch Case Analysis . Fortunately. got board approval. and they must have a powerful motivation to change. the rationale was given as “profitable growth and diversification.was another surprise. Perhaps Billings didn’t think he needed such support. Instead. since he seems to lack Ancona’s visioning and relating skills. Billings doesn’t appear to have attempted to communicate the importance of innovation to ensure a continued bright future. long-term employees who may be relying on their stock for retirement.” As Kotter points out. and made his deal with the EnzaClean engineers with no explanation to the rest of the employees. Forming a powerful guiding coalition Based on Eli Saunders’ email. Billings can also make the urgency more personal by tying success or failure to stock price. which offers even greater motivation for older. it appears that Billings did seek the support of his senior management team for the subsidiary concept. He could have rallied the company around the “solutions” concept as the next generation.

Billings should create a team of at least 50 people representing all major groups in the company. identify barriers. 4. and driving solutions. especially when the “fowl” see the “falcons” disappear to create new products and then reappear as millionaires. The case offers powerful evidence on this topic: Eli Saunders’ complaint that “using my manufacturing division as a cash cow to feed a proliferating number of subsidiaries is an unsustainable strategy. Stone Finch Case Analysis . It should include all of the VPs. A vision is useless unless the entire organization understands it. the director of technologies and product engineers.Nancy Sagar. No wonder his salespeople are leaving. his Water Products division certainly won’t either. and the company’s best “superconnectors. understand and overcome the difficulties that come with implementing change. Billings needed to find a simple. clear way to explain the concept to employees in straightforward English – something they could truly grasp and support because they understood the urgency (step 1) that was being well reinforced by the powerful coalition (step 2). marketing and salespeople from both divisions.” Apparently Saunders hasn’t looked the company’s financials – his “cow” is smaller and less profitable than the rest of the organization. researchers. Communicating the vision Billings should plaster Kotter’s page 7 on his desk and study it each day. But it’s not too late – he needs to do this now. Management 469 page 4 .” Billings must lead this team to consistently communicate the sense of urgency. 3. But the subsidiary concept is confusing. why it’s important. Creating a vision Billings had a vision of Stone Finch’s future as a diversified. If an SVP doesn’t understand his relative financial contribution or share the CEO’s vision. several subsidiary presidents. highly profitable product leader. and how their role supports it.

achieving certain milestones. and if Stone Finch allows the urgency to dissipate or the vision to become muddied. Billings didn’t fail at this step in his first transformation attempt because he never declared an urgent vision and drove the organization toward it. perhaps showering them with stock to help spread the wealth and keep focus and energy high. Planning for and creating short term wins Continuing the previous analysis. Billings should also specifically create achievable short-term wins for the Water Products division as well.5. Billings can’t let rich new employees sour the environment. Billings did well here. Empowering others to act on the vision The subsidiary structure is an excellent solution that eliminates barriers for engineers to develop innovative products for Stone Finch. subsidiary successes like launching a new venture. and reacquisition by the parent are all short-term wins that the entire company can celebrate. their fellow employees are creating exciting new products for new markets. Consolidating improvements and producing still more change Innovation isn’t a destination but a journey. Management 469 page 5 . the structure creates an incredible motivator for engineers to collaborate and work on side projects that could be accepted into the program. thereby bolstering the stock price and employees’ portfolios. processes. driving. But looking ahead. if he had effectively executed steps 1-4. structure. The HR team could also support the consistent communication of the clear vision and help Stone Finch Case Analysis . 6. After all. In fact. the company can easily slide back into the situation it faces today. 7. He doesn’t appear to have a VP HR. employees would better understand how subsidiary success was worth celebrating.Nancy Sagar. the mystery and jealousy experienced by the rest of the organization is an obstacle to the company’s success if the culture becomes so stratified that employees leave in droves. and evolving the organization alongside the rest of the senior management team and innovation coalitions. even people must constantly evolve. and he would be wise to have an HR team tasked with monitoring. he has to recognize that his organization’s systems. However.

routine communications. “The Sloan 4 Capabilities Leadership Framework.under less important. 8. [3] Tushman. so Billings must engage Eli or replace him with someone who can apply the appropriate elements of the Solutions Group innovation model in his division. they took the first step in institutionalizing Richard Stone’s idea to innovate for growth. nor does it indicate whether the market for those products is growing or contracting. Billings took another step to institutionalize innovation through the subsidiary concept. [2] Kotter. number 4. people and processes support the strategy that Billings and his guiding coalition have defined. and Charles A.Nancy Sagar. “Ambidextrous Organizations: Managing Evolutionary and Revolutionary Change. “Leading Change: Why Transformation Efforts Fail.” Harvard Business Review. volume 38. Management 469 page 6 . More simply. John P. By doing so. they have to connect the dots for employees.. this step requires consistent. clear communication about the vision and how structure. O’Reilly III.eliminate the rest of the noisy company messages that bury the most critical concept -- future vision -. task-oriented.” aka “Acona’s Compass” from Leadership Foundations I. It’s the perfect opportunity for Stone Finch to test job sculpting based on DELIs! References [1] Deborah Ancona et al. Yet the cultural divide that has emerged between the Solutions Group and the Water Division demonstrates that these changes aren’t “anchored” into the organization – they’ve just been planted in half of it. Stone Finch Case Analysis . Institutionalizing new approaches Stone Finch’s board made the right decision to select Billings for the CEO. Once again. It’s still worth over $2 billion in revenue with 10.” California Management Review. January 2007.6% net margins. summer 1996. The case doesn’t provide any detail about the slide in the Water Division’s market share or brand equity. Michael L. Could the Water Division evolve from a fast follower into a product leader? Or could some additional engineering prowess improve their “me-too” products so that they offer even more incremental performance improvement and thus higher margins? Certainly they can find a way to motivate certain engineers to work on water products innovations.