Two men and a truck. A garbage truck, that is.
Former TEC member Joe Tate may have originated the concept in Fort Atkinson when he started Valley Sanitation with his uncle in 1967.
They generated first-year revenue of $40,000. Valley Sanitation grew in Fort Atkinson through the years. Most independent waste handling companies did the same in small towns throughout Wisconsin. They had contracts. They were well-connected with local politicians. They were making a little money. Life was good.
The problem was 1,000 miles south. By the late ’80s, Waste Management, headquartered in Houston, was at the Illinois-Wisconsin boarder. They were coming. The little Wisconsin independents were going to be squashed, and then smashed to smithereens by the behemoth.
Tate came up with the idea that if he could convince enough of these small town operators to merge under one corporate umbrella, they might have a chance to survive. In 1993, he created Superior Services with 10 other independent operators and 12 locations throughout southern and south central Wisconsin. Joe became CEO and chairman of the board.
Imagine those board meetings! Eleven independent (emphasis on independent) operators and more than 130 shareholders. With the 11 companies, however, Joe had attained the critical mass necessary to make a significant strategic move. He bought the Emerald Park landfill in Muskego.
In an instant, The Band of 11, which had been marginally profitable at best, became highly profitable. The company was no longer paying tipping fees to a landfill owned by another operator. The savings went directly to the bottom line.
In 1996, based on the significantly improved profitability, Superior Services conducted a successful initial public offering that raised $35 million. The proceeds were used to retire debt and make additional acquisitions. Shareholders were able to take a few chips off the table, as well.
A secondary offering raised $110 million in 1998. More acquisitions. More chips.
In 1999, Superior Services was sold to Vivendi SA for $1 billion. By then, Superior Services had 23 company-owned landfills and was the fourth-largest waste management firm in the United States. According to the proxy statement, Joe owned 8 percent of the company at the time. You can do the math.
While inspirational, the story is about the pre-eminent power of strategy. To be sure, Joe and Superior’s management team had to execute the balance of the plan to realize the return on the landfill strategy. They brought in several professional managers from outside the company to make some of the necessary changes. It was hard work. But it was the brilliant strategy that allowed the company to execute aggressively and effectively.
How do you find a landfill? And why is it so difficult? Here are four ideas.
1. Focus on execution.
Most CEOs got to be CEOs because they were good at getting results. They also learn quickly that the majority of CEOs fail because of bad execution. They know their primary obligation is to protect the mother ship…to survive. Certainly poor execution, being indecisive and not delivering on commitments are serious problems that will lead to failure.
The issue for the CEO is a single-minded focus on getting things done versus a balanced approach that leads to sustainable competitive advantages in the future. Effective CEOs do both. The CEO’s job description is probably the only one in the company that includes the phrase “develops effective strategy.” Someone has to do it.
2. Threats are not imminent.
For most organizations, The Hun is not at the door. Joe Tate had the advantage of a real threat on the border that had already destroyed most of the competition. The threat was imminent enough to convince 11 independent operators to give up their cherished independence, becoming immediately interdependent.
Some TEC groups work on making threats real with an exercise called Put The Member Out of Business. Members play roles in sub-groups as competitors, employees and investors. They brainstorm blind spots and opportunities. The member on the hot seat gets a killer reality check.
3. Weak management teams.
There is a direct and inverse relationship between the amount of time the CEO spends on developing strategy and the effectiveness of the management team. That is, weak management teams force the CEO to work “in the business.” Strong management teams allow the CEO to work “on the business.”
Success often leads to failure.
TEC resource specialist Adam Hartung says companies like Microsoft develop both behavioral and structural lock-in. Steve Ballmer, for example, spent more than a decade as the CEO at Microsoft developing operating systems that no one cared about. Bye-bye Steve.
Hartung suggests the following to avoid lock-in. Don’t fear disruptions. Embrace them. Plan for the future, not from the past. Obsess about the competition’s lock-ins. Create “white space” to innovate.
In short, disrupt yourself.
No need to wait until your very own Waste Management arrives. Find the landfill. n
Dennis Ellmaurer is a management consultant working primarily as a TEC chairman, leading three CEO mastermind groups in southeastern Wisconsin. He is also a speaker and executive coach. He can be reached at (414) 271-5780 or firstname.lastname@example.org.