The story isn't as sexy perhaps, as stories about skyrocketing stock valuations. It isn't as breathtaking as reports heralding the birth of entire new industries, la energy trading and dot-coms, circa 1999. It might not be as gripping as the unfolding Enron tragedy in the daily press that will eventually reveal who knew and did what when, and who will pay for the disastrous bankruptcy that followed. But it's real. And it certainly is a breath of fresh air to read about an executive who successfully runs the company with which he's entrusted using simple financial formulas and a good, old-fashioned focus on managing operations. Lou Giuliano, chairman, president and CEO of ITT Industries Inc., follows a down-to-earth management philosophy that provides a much-needed counterweight to the high-flying wheeling and dealing we've heard so much about lately (See ITT's Value Champion) His four-year track record provides a road map for executives looking for a way out of the stock-pumping trap, who want to create real value -- to build real wealth -- rather than manage the numbers. First the math. Since time immemorial, business executives and hucksters alike have hatched schemes to make money (or at least make it appear as if they're making money) in order to ensnare unsuspecting investors, take their money and run off with the ill-gotten gains. Still, there's only one formula that creates real wealth, and that's for a company to create a business in which the financial gains exceed the cost of invested capital. Pumped up sales, a fast-growing revenue line, even a bold new out-of-the-box business strategy can only create a mirage if the money coming in doesn't exceed the money going out. Giuliano uses this formula to evaluate every move he makes, whether it's buying, selling or running a business. Next the operations. While Giuliano's tendency to focus on operations has been decidedly out of vogue in the recent past, there's nothing dated about his operations strategy. He's put a new twist on the time-tested Six Sigma formula, sharpening its focus on value creation. Even better, he's shown that, contrary to prevailing wisdom, even Wall Street analysts can be made to understand the value of a sound, well-executed operations strategy. ITT stock has garnered unanimous support of analysts who follow the company. Call me old-fashioned or out of touch, but I'm tired of the over-hyped stories about unproven management fads and failed business strategies. I welcome the return to the classics that the story of ITT represents -- the return to the real and nitty-gritty world of the manufacturing fundamentals of value creation and operations management. Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.
Voice your opinion!
Sponsored