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Perspective Taking Skills - In action when buying a company

posted Mar 17, 2015, 6:56 AM by John Oliver

I had today a revealing lunchtime discussion with the owner of a very successful retail business. There was an anecdote that came up in the discussion that for me is an interesting example of different levels of perspective taking and action logics.

The scenario was that the owner of the retail business is looking to sell and he recently had a potential buyer visit to analyse the company and its operations.

The current owner was telling me how shocked he was as to the way that the potential buyer was analysing the commercial opportunity. The potential buyer had apparently very quickly highlighted some of the changes to the merchandising and marketing of the current business, and that these changes could immediately produce a 10% increase in turnover. It was based on this potential increase in operational effectiveness that the potential buyer was analysing the investment viability.

The shock that the current owner had was that the key factors at stake in successfully operating the business had for him 80% to do with the quality of the day-to-day management and only 20% to do with the fine tuning of the merchandising and marketing. The current owner had himself completely turned around what was originally a struggling business that he bought for just 1€ (straddled with significant debt) and thanks to his application in the day-to-day and customer-facing management, he had been able to identify where the major problems were and where the opportunities for making it a successful business lay.

It appeared to him that the potential owner had taken no interest in what were going to be the success factors in that 80% area, and was building his investment viability analysis only on the fine tuning within the 20% area of the success factors.

For me this seems to reflect the fact that the current owner has had to put himself into question in terms of how effective he is in running what is a complex open system of not only retail logistics but also of team management (which was one of the major previous failings that was taking the company to near bankruptcy, including product knowledge / competency of the employees), and that the new potential owner was looking at the retail business as purely a closed system that can be analysed in an objective way.

The current owner's action logic, thanks to his experience of course, but also because of his willingness to invest himself at all levels of the business, points towards a higher action logic then the potential buyer displayed.

On one side, this analysis may be totally underestimating the experience of the potential buyer in day-to-day management, but on the other side the current owner's success has been purely built within that 80% area of success factors (within a market that really suffers from significant variations from month to month), and that the potential buyer seemed to show no interest in the competency levels of the current team and their product knowledge (and understanding to what degree the current owner holds this team together), says a great deal about the number of perspectives that the potential owner is taking into consideration in his analysis..