Strategy for Small and Medium-sized Companies

Markus Westerlund: Hey, Kari Mäkleä. Welcome to this summit! It’s fantastic that you got the time to join the summit. Kari and I have been working several years together and I know Kari as one of the CEO who has the “straightest back” as we say in Finnish. Your crew knows when you have it. You always come very frankly with your opinion. And I really think that’s great, great, characteristic to work with. Thank you Kari for joining here!

Kari J. Mäkelä: Thank you Markus, thank you for having me! Well I, your kind words wasn’t tell all of those things what I have done. Actually I have been in many companies, and made many things in there. But to lift some issue there, I have made nine successful exits, and if I can count them. Furthermore I have been involved in two IPO exercises and one-two mergers. Quite many things I have been involved in these companies. But, you are right, I’m an active investor, advisor and management consultant, and board member. Yes, I’m also acting as a chairman in one company.

Markus: Yeah, so you have a really view over the companies, small and medium-sized companies where you are mostly active here. So, Kari, how did you evolve to this position you are today? How did your career start?

K: Well, actually, my roots are in the software industry in which I have been operating almost 30 years by now. So, I have co-founded companies, managed them on the C-level, grown, and taken them to the international markets, and most of these cases, the story has ended to an exit. So, as I said earlier, so I have made 9 exits so far, and actually every company that I have been involved, the software business has been in the board.

Markus: Kari, what is the number one situation where you got the most kicks in your career, what do you remember, what is the super story?

Kari: Well I would say that this complete transformation of Opus Capita is one of those great stories that I have. Of course, there are many of those, that’s clearly one of those.

Markus: That’s where we met.

Kari: Exactly.

Markus: That’s where we met. So, what do you remember about Opus Capita? The situation you were in when you realized that you have to crystallize a strategy?

Kari: Hmmm. Well this Fintech company as people call these financial industry related companies now a days. Ah, had revenues, some 10 million (€), and it was basically a family company. Everybody knew each other, were godfathers and godmothers, to others kids, you know. Everything was calm, predictable, and to some extent stagnated until a loss-making year was faced. And that triggered a need to have a big change in the company. And at that time, I was in the board of directors and I was asked to take the reigns of the company as a CEO. And, I kicked off a complete transformation process and I executed that in three and a half years together with my executive management team, or actually together with everybody in the company. We basically changed everything in the company, that one can imagine. The transformation included of course the strategy formulation and crystallization on one-page, actually.

Markus: Yeah, I remember that the first year when you started there, so you were forced to do some kind of basics work. Wasn’t it like that?

Kari: Yeah, well actually we didn’t kick off this strategy renewal, or strategy formulation and crystallization in the first year. I thought that there is so much things to do first.

Markus: Yeah.

Kari: And then only after a year or so I thought: “Ok, now we have put some things in place and now we have time to look into strategy side as well.”

Markus: But what was the kind of need? What pain did you feel there when you made this decision to start the strategy?

Kari: Well, there was no clear direction for the company. Nothing that everybody knew, where we were going. What was our purpose? What was our mission, vision? All those basic things were missing.

Markus: Yeah, and how did you do the transformation. How did the process go?

Kari: Um, so at that time some by some ten years ago, I was not that experienced in formal strategy work. I had done it, but not in a certain way or format. More or less with homegrown or cowboy way, if you know what I mean. But luckily I met you as you already said, and you introduced me to your ideas and the way to crystallize strategy on one page. And, that was the starting point to a process which basically ended when the company was sold in a trade sale.

Markus: Yeah, it was quite nice. And I remember that you were so eager to involve the whole group.

Kari: Yeah, that’s true. I involve them a lot and I personally communicated on the process, achievements, challenges, you name it, continuously. Every note from me and every company get together included something related to the strategy. The strategy was including or strategy including values was continuously present in everybody’s day or life, work life so to speak.

Markus: Kari, do you still remember the values that you crystallized then?

Kari: Yeah, actually, I was actually about to come to that by saying that: Even I created some giveaways like this pocket mirror, and some presents that had a meaning such a this clock that you see here. And luckily it has the brand name, which holds the first letters of our values. I-C-E – ICE. So, that was made to me to communicate and maintain the strategy and the values present on daily basis. No one basically was able to escape or hide from the strategy work.

Markus: And I stand for… I in the I stand for? I was what, C was what, E was what? Do you remember?

Kari: Hehe. Good question! Let me try. Innovation, umm… courage, and experience.

Markus: That’s it! And you had the word courage there.

Kari: Yes.

Markus: And I think it was an important word that there was brave attitude. That we have to change. How did you use the mirror? What was the idea with the mirror?

Kari: The idea was, because so many things needed to be changed in the company. So, it basically required looking at mirror by everybody, including board members, owners, existing management team members, everybody in the company. They needed to do a change. And the kind of main tool for the changes to look at the mirror first. What you have done. What you haven’t done. And what you could do and in which weather?

Markus: Yeah, ten years ago we didn’t have all the IT tools that we have, communication tools, that we have today in place. But now when you are working, you are the Chairman of the Board of one IT company and we did a strategy there also, but now we are using much more communication tools. Can you little bit, Kari, tell about that experience?

Kari: Yeah, exactly you are referring to another company, which was to some extent in similar situation as this earlier one. This fintech company and even though the size of the company was much more larger grown company, larger international brand name, companies as customers, excellent and robust technologies, underlying, and so and so forth. And, the founders and the team at that time had done a good job, but obviously that wasn’t enough. And this path faced growth challenges. So, there was again a clear understanding and something needs to be done among the founders and owners. But no knowledge, no experience, what and how take the company to the next level. And we again kicked off the strategy implementation and we took a very modern approach to strategy implementation. We used various digital tools such as Zoom for online video communication and online Trello boards for presenting, documenting and voting and so and so forth. And basically everybody in the company was involved and contributed with these tools.

Markus: Yeah, we had also the ZEF as a survey tool. And we did all that. And I remember that you said that one of the reason for the strategy is that they tried to make an exit, but the valuation was quite too low. That could be interesting, Kari.

Kari: Yeah, true, so, but that also relates back to the kind of transformation that the company needed. I don’t know whether the companies who did all the potential candidates, did require this company, whether they need that thorough DD (due diligence) that they realized that actually there are some challenges in this company and needs to be transformed before this kind of ready to be taken over. So, yeah. I think that was the conclusion. But there were many, many, reasons explained by the buyer candidates, but I think the main reason underlying was there that the company was not ready to be acquired. It wasn’t kind of matured enough.

Markus: Yeah, that’s true. Yeah, and then the question was that should we just give a makeup and try to sell it, you know, put shiny papers around the package or should we really try to make the company better, to be more ready to be sold. Yeah, ok. And, so, if we talk about this company, now, the second one. Kari, so, can you comment the way, the whole process, when we did the Strategy 1Pager? How was that?

Kari: Yeah, basically, involved everybody in the company with these tools that were mentioned. It took a couple months. There were different workshops and sessions. Smaller groups, entire company involved, and we documented everything. We got lots of feedback from people in terms of pulse comments about the process, but also lots of feedback what should be done, what is not working, where should we go as a company, (and) so on. So, it was a really, really, good process.

Markus: And, how many persons in this company?

Kari: Was it 45 or something like that? Less than 50 people were involved in this.

Markus: And internationally they were located in different countries also.

Kari: Yeah, exactly. There were people from at least one time there was one guy from Japan, one guy from Italy, those Danish guys, and at least from two sides in Finland. So, that’s not an issue if you have these tools.

Markus: If you remember, what I learned from that process was that in the beginning, for instance, when we start, tried, to articulate the purpose of the company, and I remember that there was quite long technobabble involved. Do you remember that size? And then when we tried to go the benefit beyond the technobabble technique. Could you comment Kari that? Might interest.

Kari: Yeah, it was really difficult for people to get or get out of the technology-base, so to speak. So, they, everybody was just discussing about the products, and technologies, and all those things involved in product, but there are so many other things related to customers and markets and competitors and so on, if you are formulating strategy.

Markus: Yeah.

Kari: And so, yeah. It was big learning process for the people as well, to think about things, not only technology.

Markus: What is your view about how many focus areas or must-wins can you have in a company? What is your experience now? You have done many of these.

Kari: Mmm. Well, one of those traps that people normally kind of fall into is that they try to do too much.

Markus: Yeah.

Kari: So, that’s clearly a thing. Less is more. I mean, select only couple of those focus areas. Max three I would say. Four if you really need that. But three is kind of the right number for those. Don’t take too much on your plate. That’s clearly one of those kind of recommendations what I have.

Markus: Kari in the first company where we met, this Opus Capita, do you remember how many focus areas and goals below the focus areas we had the first year? Do you remember?

Kari: First year we had four focus areas. We had four underlying goals under each. So, basically 16 all together.

Markus: Yes, and then when we updated the next year the strategy. Do you remember how it went then?

Kari: So, we reduced the focus areas by one, so we had only three focus areas. And was it nine or ten all together.

Markus: No, nine, it was nine!

Kari: Yeah.

Markus: Yeah. And first year I remember that I tried to, you know speak, speak very warm about: “Hey guys, it’s too much!” But the management team, they didn’t accept that. No, they said we have to do all this.

Kari: Yeah, yeah, but that’s the normal situation within these companies. So many things need to be done. But I mean, less is more. I mean… Do first those things that you really can finalize and then move on. And, yeah, you can have only those one quarter projects or two quarter projects and so on. Don’t try to have long projects and too many at the same time.

Markus: And then we did that resourcing map. Do you remember Kari? We took all key persons and we see how much of that person’s time does this goal take? Do you remember that?

Kari: Yeah, I recall that. And it was good eye-opening exercise, because we saw that… Yeah, people had double the load that they possibly could carry.

Markus: Yes, but this super guy, this Janne, I remember. Janne, he had 420% need.

Kari: Yeah, even that extreme one.

Markus: Yeah, and then that opened up the ice. And then we saw: “No, we have to do that lesson.”. And the next year we came down something that is optimum. But that is a learning curve.

Kari: Yeah, of course. But that’s clearly one of those traps that I have encountered in other places as well.

Markus: Yeah. But hey, then because you are very systematic and you are very straightforward in your personal approach. I think that you are one of the best guys I met ever in this, that you put the focus and you go and everybody knows that that guy stands behind these decisions. So, you are so very trustworthy and I think they love you because of that. So, you are a very strong kind of father figure. But you also listen, you take your people, and you listen to them, that, I admire that. But now let’s talk about the implementation Kari. We had this year clock. Do you remember?

Kari: Yeah, implementation in general, it’s very, very, important topic in strategy work. People tend to think that when the strategy is formulated, the job is done. But actually it is just, it’s like an iceberg. That’s the kind of… part of the iceberg that you can see. And the implementation part is the part of iceberg that you don’t see. That’s the big part of the work.

Markus: Yeah.

Kari: And, yeah, and if you don’t calendarize or make a clear year clock for your job, I think that’s, that is, much more difficult to execute the job.

Markus: But then the years came and we went more and more to this agile type of strategy with the sector, and that kind of linear dots where you have to be. And so, the development went then that the year clock somehow become less needed and more this kind of agility. What is your experience about that?

Kari: Yeah true, so in the beginning, uh, we had this strategy period of one year. And, when we ended, we, kind of changed the strategy in every six months more or less. We made some fine tunings and we omitted something away, we added something. So, it became much more agile and I think that the work can go even faster than that. Even on monthly basis, you should be ready to do changes to your strategy. But even when it comes to those goals particularly, and even breakthroughs so.

Markus: Yeah, and what is your message to those who says that at least in bigger companies it’s impossible to change the strategy all the time because it doesn’t even have time to go down the hierarchy to the levels before the first level changes again. So, how does that suit smaller companies, or what do you think?

Kari: Of course, you don’t change the real cornerstones. Like your purpose or if you use mission and vision. I think that those are more, kind of, stable ones. Why do we exist? What do you do? And what do you try to achieve? All those kind of basic components. I don’t think that you necessary change them. But when it comes to kind of focus areas, and particularly those goals underlying. I mean, um, world is changing so fast. You just cannot be stuck into those for too long.

Markus: But what if you have employees like that. That they are not so agile. That they want to continue their work, and they won’t want to check it monthly. So, what is your medicine for that?

Kari: Well, it takes time to get people on the same page. But when they are up and running with this process, I think that they can adapt to the agility as well. So, it just take time. You cannot require them to be agile and change their way of working on one spot. But over (a) period (of time), longer or shorter, they definitely start operating much more kind of… quickly.

Markus: Yeah, and there are those who… Let’s talk about culture now, Kari. There are those who say that you made a transformation turn around in the first company. Then, but… somebody says that you can’t stretch the culture too much. That you have to go in steps. Do you have views on that?

Kari: Well, I think that I or we changed the culture. Because the culture was so kind of slow or stagnated family-owned company, or family company culture. Not international, agile, modern company at all, so I think that the only way was to change the culture.

Markus: He he, yeah. And you did it then by involving everybody too.

Kari: Yeah, piece by piece involving and taking them into strategy work and yeah many things, also those incentive programs and all those goals what we made for people on personal level. So, there are so many components in that.

Markus: Yeah.

Kari: Just have to change everything. You just have to change everything.

Markus: And then comes this question of courage and bravery still because I know that in one of your companies. Let’s not mention which one. But, in one of your companies the management didn’t have the bravery to make these changes. They didn’t follow them through.

Kari: Yeah, that’s true. It’s… if you want to make such a change you have to be very very systematic what you do. And you have to be open, I mean completely open, and you have honestly communicate what is going on. What you have done. What challenges you have faced. What achievements you have made in the company. And it’s a process. So you have to be very communicative all the time.

Markus: Yeah. Kari I also want to ask you a question about the meaning of egos. This is a hard one. Ha ha. This is a hard one, but I’ve seen it so much that there is this leader ego who is, might be the problem, not so much in your company, but that I know that you have working in, but maybe in the other ones that you have seen over ten companies from a very close view. So, how about egos and leader ego, if its somehow against what needs to be done or is an obstacle there. Could you comment that?

Kari: Well if this person and his or her ego is kind of stopping you doing things, then obviously this is the wrong person to run the company. And I don’t think that big egos are really needed. I think that what you really need good performing teams, teams that work together. And the teams forms the ego all together. So no big egos within the team, but of course strong people and people who can also agree on things. And then when some arguing on things are done then people just go with one direction and no different voices around that.

Markus: Yeah. Ok, thank you Kari. Awesome. I think its… You have so much experience from seeing the different companies. And… And how many exits have you made? Once again.

Kari: He he. Eh, if I calculate all of them, um, they are all together nine exits, that I have made.

Markus: And how many IPOs have you done?

Kari: Two IPO projects. I have been involved one as a CEO running that. It was year 2000. Everybody knows what happened in the year 2000. We had to make a U-turn just before we went public there. And then I have been in one very recent IPO as a board member in that process.

Markus: So how is it to do an IPO? Do you enjoy it? He he he.

Kari: Of course, there are many benefits around that. You get more publicity. You get… Your company get much more trustworthy. And it helps your business. No one comes anymore to ask you whether you are going to stay in the business next five years. It’s kind of given that when you are public you are here for eternity. But that’s not of course the truth. But anyway, small companies they have this credibility challenge. But if you go public, then you don’t have those things. But of course you have to, you have to be very carefully what you say publicly. What you do and all those governance issues what you have. You have to be very strict there. So, it is demanding of course, but there are also benefits.

Markus: Yeah. Hey, still about the meaning of a good strategy in the exit case. Could you comment that?

Kari: Uhm… Yeah, I think that that’s one of those things that definitely will reassure or… increase the value of the company if you can demonstrate that you have clear strategy, its working, you are growing, you are making money, people are enjoying being in the company… You have good products, good customers based on… Everything based on the strategy that you have formulated and crystallized. I think that’s a clear evidence that the company is value for money.

Markus: Yeah. Yeah, true. So Kari, what would be your advise to small business leaders now in 10-25 person companies, maybe 40. So, what would you say what have you learned concerning strategy?

Kari: Um, according to my experience you should really admit that you are not experienced and competent enough to do everything by yourself.

Markus: Ok.

Kari: I mean, you just cannot. So, seek help where you think that you need. Be honest there, and yeah. And in our case, what you referred earlier, what we discussed earlier with this Opus Capita, I clearly admitted that I’m not good in strategy, so I need some help. I need some assistance. And of course there is a price that comes from such assistance. But anyway, I think it was value for money and yeah. Be honest there. Don’t try to do everything by yourself.

Markus: Wow. Thank you Kari, and..

Kari: And couple of other things, I mean we have touched those issues already. So, involve people as much as you can. Use those digital tools extensively.

Markus: Ok three things. That was really core. And last question Kari. Do… Can you live without a strategy? What is really the big benefit of a strategy? Why take the bother to plan things like that? What is the upside?

Kari: Of course, when you are a startup company in a garage, you don’t need that. You have those founders sitting next to each other and everything is discussed openly all the time and communicated. But when the company grows and when you have different office sides, and more customers and so on… So you really need a clear statement what you are doing that you can convey to your customers, to your new employees… Yeah, all those groups that you are involved (with). So, you need tools to be specific. Have those elevator pitches based on something. And everybody tells the same story and so on. So it’s kind of like a backbone for your growth.

Markus: Backbone for your growth.

Kari: And all those strategy things and values.

Markus: Hey Kari, thank you Master for sharing this. I think many people, persons, will now enjoy and think on your words here. Hey Kari, thank for this and hope to see you soon again.

Kari: Thank you.

Markus: Bye bye.

Kari: As well. Thanks. Bye.