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January 12, 2012

Good Management Circa 1812

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There is no question that the Napoleonic wars in Europe in the early 1800s stressed the community of states at the time. Great Britain, for instance, needed to crew their ships with experienced sailors. She had a problem, however, called the cat-o-nine tails. Do something wrong (sleep late, curse at the wrong time, etc.) and, on many royal ships, you could expect a whipping that might be life threatening. Once a crew realized that it served a captain capable of whipping for simple offenses, the ship's population was likely to  abandon ship at the next port. Can't blame sailors when you think about it. The navy had a plan, however. Whenever they came upon an American ship, especially a freighter, they'd stop the ship and take back anyone they suspected of deserting. Then the cycle would begin again. Yes, Parliament realized they had a problem in the Navy. They debated it in depth. A famous captain, Thomas Cochrane (Daughn, 17), even testified  in Parliament to the brutality of the navy. It didn't do much good. The brutality continued.

Patrick O'Brian's Jack Aubrey novels popularize Thomas Cochrane. Aubrey runs his ship sternly, yes, but equitably. A special captain who loves the heat of battle, his crew admired him for his fairness and his agressiveness against the enemy. A captured ship was worth a fortune when sold, a fortune the crew shared in. Aggression was good. So was fairness. Aubrey, Lucky Jack Aubrey in the novels, was skilled at sailing, aggressive against the enemy (America in some of the story, and France in other parts), and successful at capturing bountiful prizes.

In modern business parlance, we might say that Aubrey had experience and talent. He was able to apply his skills successfully against his competition. His team won, the Navy won, and so did his country. Not a bad combination.

References

Daughn, George C. 1812. The Navy's War. Basic Books. 2011. 

O'Brian, Patrick. Master and Commander.  W. W. Norton & Company. 1970.

December 15, 2011

Reacting Before the Fact

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Bill Bratton's approach to fixing neighborhoods in New York City was to fix the little things. If there were broken windows, fix them. If there was graffitti, remove it. Drug selling? Enforce the laws. The police department collected information about the immediate past and projected where problems would occur in the future. It worked pretty well.

The East Orange (NJ) Police Department tried to do better. Led by a Bratton alum, they installed enough sensors that they knew where shots were fired in real time, installed enough cameras that they knew when a single person was walking down a street in a high crime area, and, when, crucially, that person met up with someone in a car for a short chat. That chat caused the PD to respond with a roll-by just to see what was going on. The roll-by might be announced with sirens blaring. Some of the neighbors didn't really like the big brother-like attention. They did like the real reductions in crime (Ranadive, 118).

The Securities and Exchange Commission is filing fraud charges against hedge funds (Businessweek) which seem to be advertising improper gains. They're responding following examination of public data that seems to suggest a problem. They're using that suggestion to follow-up and ask questions. Then come the indictments. The industry, pretty obviously, sees this as some sort of violation of privacy rights. Some of it feels the same way to me. Let's see how the results pan out. There were necessary elements to this: we've had problems in the past that grossly effected the US economy, they have the data to check up on things, and, they have the willingness to ask questions in an environment where in the past they only followed-up after folks lost a lot of money. Times have changed.

What does this mean for business? All this relies on data mining. The first step requires data to mine. That means much of the financial data in your accounting and sales information may be useful in the long run. Analyzing it may be in order. Should you invest money in that analysis? Well, it takes money to make money; it takes an investment to reap the reward.

What about tools to mine that data? Tableau software, a new firm started by a Pixar alum (Kharif), has software that'll take a ream of data and present it graphically. The presentation many times shows relationships that aren't immediately obvious. That new obvious information may be actionable. That actionable  fact may turn, ultimately, into profits.

References

Hamilton, Jesse. A "Broken Windows" Approach to Fraud. Bloomberg Businessweek. 12-18 December 2011. 63. http://www.businessweek.com/magazine/the-secs-new-approach-to-fraud-12082011.html 

Kharif, Olga. Applying the Pixar Magic to Spreadsheets. Bloomberg Businessweek. 12-18 December 2011. 54. http://www.businessweek.com/magazine/the-secs-new-approach-to-fraud-12082011.html

Ranadive, Vivek and Kevin Maney. The Two-Second Advantage. How We Succeed by Anticipating the Future - Just Enough. Corwn Business. 2011.

 

December 14, 2011

Beyond Disruptive Strategy to Platform Strategy, And On From There

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Create something. Design it. Test it. Sell it in limited quantities. Sell it in large quantities. Move on to your next creation. See something missing in all this? You've done all this work. You could continue to incrementally improve your product. We'd call this (or Clayton M. Christensen would) sustainable innovation wherein you continually improve the features of your product. In disruptive innovation you might take your current feature set and reduce it by a couple features while simplyfying your product. When you're done, the market may applaud because your product in not only cheaper, it is easier to use (remember all those not-used-very-often features you discarded).

There's another way to look at all this. You could take your creation as a series of different features that, when combined, look like your product. There is the housing in a medical device, say. Then there are the electronic features, the mechanical features, the software features, and maybe, the chemical features. All different and all requiring initial creation steps. Many machines might need only a small change to become completely different machines with somewhat different uses. Why re-create everything when you can re-use much of what you've already created, mash it together in a different way, tweak some of the different parts of the features, and end up with a completely new machine? What you've done is recombine a series of different platforms that you already had on the shelf with those few bits of changes, and, pretty cool, you've got a new product.

The medical device companies have been doing it for years. Savage and Cohen laud the time-saving - and cost saving - attributes of all this. You should too.

There's more to all this. Moore has talked for years about the chasm that you've got to cross if you want to take your new product into the general marketplace after all the early adopters have about finished up and are moving on to the next new thing. You can disrupt a new market with a new product. You can disrupt an existing market by removing features to simplify your product while, maybe, reducing price at the same time. Sometimes price doesn't have to reduce if you do things right. Moore takes all this one step - well, fifteen steps, really - further by describing what you do with marketing related to an existing product. He talks about (Moore, 63) Customer Intimacy, Operational Excellence, and Category Renewal in addition to the Product Leadership Zone that we've been talking about already. 

Distilled, we have an opportunity to take a simplifying strategy and to expand it or follow it with a series of other strategies that fit not only the age of your company, but the age of your product line as well.

References

Cohen, Frances. Embracing Change. Software platform technology and other time-saving techniques can boost innovation and reduce development time. Medical Product Outsourcing. April 2011. http://www.mpo-mag.com/articles/2011/04/embracing-change 

Moore, Geoffrey A. Dealing With Darwin. How great companies innovate at every phase of their evolution. Portfolio. 2005. 

Sargent, Bruce, Dr. Andreas Faulstich and Brian Jarvis. Platform Perfection. IVD instrument development time can be reduced through the effective use of platform technology. Medical Product Outsourcing. May 2010. http://www.mpo-mag.com/articles/2010/05/platform-perfection

 

Grand Strategy

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We don't too often get a chance to tackle really big issues, or to create a strategy to address those issues successfully. When we in fact get to make a grand strategy, many times we never get to see how it works out, because those grand strategies take years, or sometimes decades, to play out.

George F. Kennan, in notes for a class at the National War College, drafted a strategy for dealing with the Soviet Union that he expected to play out over ten or fifteen years. As we all know, successful completion of his strategy took more than forty years. Here's the quote (Gaddis, 235):

Our task is to plan and execute our strategic dispositions in such a way as to compel Sov. Govt. either to accept combat under unfavorable conditions (which it will never do), or withdraw. In this way we can contain Soviet power until Russians tire of the game.

The strategy was about what to do about Soviet wishes to dominate the west over the decades following World War II, and in the years following during the nuclear build-up. The one key word, as you've probably already noticed, is a subtle one, but we all know it: contain. In two lines, Kennan laid out the American strategy for the next forty plus years. Reagan polished things a bit, but it was Kennan that originally laid out the strategy. Pretty interesting. Try to put your overall strategy in forty seven words. Even more interesting, yes?

Reference

Gaddis, John Lewis. George F. Kennan. An American Life. The Penguin Press. 2011.

Free

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Giving things away is a time honored practice in retail sales. We all know about the folks giving away free samples at the local grocery store on a Saturday morning. Giving things away to attract - or keep - customers works. There is a bit of disgruntlement about this, as some authors worry that, for instance, a contract is better than a frequent flyer program (Felton), or that free gets over done when you set up a methodology to give something away for free that you don't own as Napster was, and Google is, sometimes accused (Levine). Levine even takes a swing at Lencioni's Getting Naked, questioning the word loyalty and its assumptions about free.

For now, however, I'm pretty on board with Anderson's free and the steps he suggests for using the concept of free to sell more. He uses Microsoft's attack on freeware and open source software, two similar competitors that had the potential to take down Microsoft's hugely profitable operating system and business software/productivity products.

Anderson lays out the Microsoft responses in stages, some of which we've known about from psychology for years:

  • Stage 1 Denial (Anderson, 106): Basically, although its engineers were saying otherwise internally, Microsoft denied that there was a problem or ever would be a problem.
  • Stage 2 Anger (Anderson, 108): Microsoft's salespeople used the best line I've seen about all this, "Free like a puppy." Yes, you can get a puppy for free at the pound, but what are the long terms costs of that puppy in time and money.
  • Stage 3 Bargaining (Anderson, 109): Microsoft did a study that in fact did prove that its open-source competior Linux was, over time, more expensive than the Microsoft products. That got them at the table where they could at least state their case to the big users.
  • Stage 4 Depression (Anderson, 110): Microsoft's lawyers had forbidden its engineers to try out Linux, as the open source mantra required that if they made any changes to the code, those changes must become public. Microsoft didn't want to share. That kept them from understanding what was going on.
  • Stage 5 Acceptance (Anderson, 111): Microsoft finally realized they'd better get on board with opensource and by implication, freeware. Things settled down to eighty percent market share for Microsoft operating system product, with maybe twenty percent going to Linux based systems. There are three segments competing, free, free software with paid support, and "good old pay for everything (Anderson 111)."

Below is a good chronology of free in the tech arena, all tracing its roots back to a Stwart Brand quote in 1984. It is interesting to remember that even Brand realized that while some things should be free, there were instances where capitalism had a place to play.

Chronology of "Information wants to be free."

1984: "All information should be free" (Anderson, 94, and Levy).

1984: "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other (Anderson, 96, quoting Stewart Brand)."

2009: "Commodity information (everyone gets the same version) wants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive (Anderson, 97)."

2009: "Abundant information wants to be free. Scarce information wants to be expensive (Anderson, 97)."

References

Anderson, Chris. Free. The future of a radical price. Hyperion. 2009. 

Felton, Eric. Loyalty. A Vexing Virtue. Simon & Schuster. 2011.

Lencioni, Patrick. Getting Naked: A Business Fable About Shedding The Three Fears That Sabotage Client Loyalty. Jossey-Bass. 2010.

Levine, Robert. Free Ride. How digitial parasites are destroying the culture business, and how the culture business can fight back. Doubleday. 2011.

Levy, Steven. Hackers: Heroes of the Computer Revolution. Penguin Books. 1984.

December 13, 2011

Cook on Apple

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We all know about some of the levers for success Apple uses to dominate its marketplace like design, innovation and, well, Steven Jobs. We're all interested in Apple's continued success. So what is Jobs successor, Tim Cook, talking about when he discusses next steps? Production and operations efficiency (Satariano, 37). And Cook's reference, the one he recommends to folks who are trying to understand Apple from all points of view? Competing Against Time.

When you see the business (Bloomberg Businessweek) press quote a book written in 1990, you've got to wonder just what is going on. Management has changed in twenty years, hasn't it? Satariano and Cook remind us that there are things any manufacturing or out-sourcing operation would be wise to remember.

  • Time and Business (Satariano, 39): Remember the timely business words like respons time, lead time, and up time.
  • Time and Customers (Satariano, 83): You can force customers to take what you offer, you can insulate the organization from customers if you try hard enough, or, and this is where the profits are, you can embrace customers and "be sure that they are more satisfied with the service provided thaan they could ever have imagined."
  • Time and Innovation (Satariano, 107): Every now and then you see an auto manufacturer realize that its entire product line is no longer very pretty and, suddenly, they show up at a trade show with not just one or two new cars, but five, or seven, or maybe even a product announcement encompassing all thirteen cars in their line. And they start winning awards. Reminds you of all things "i" at Apple, doesn't it?
  • Time and Money (Satariano, 149): We've all been through the time and money story. Remember that this book was written in 1990. So we get it. Reduce raw materials. Reduce work-in-process. Reduce finished goods inventory. All good. Now, realize that reducing time and money doesn't mean foisting your inventory off on some supplier who has to warehouse things til you need them. That's not savings. It's waste - to everyone.
  • Time and Strategy (Satariano, 253): Don't coexist with competitors. Anymore, no one is staying in one place for long. Retreat is another strategy. I don't much like that one. Attacking feels a little better. Indirect attacking with subtle changes that suddenly add up from incremental change to dramatic change is nice. Cut price by adding capacity isn't very subtle, but it does work. Apple even has a strategy of cornering the market of production machines so their competition can't, for instance, stuff a board quickly because Apple owns all the latest and greatest production machinery. That one hurts, especially if you aren't paying attention.

Competing against time. Jobs never mentioned it. Cook lives by it.

Reference

Satariano, Adam and Peter Burrows. Apple's Supply-Chain Secret? Hoard Lasers. Bloomberg Businessweek. 7-13 November 2011. 35.

Stalk, George Jr. and Thomas M. Hout. Competing Against Time. How time-based competition is reshaping global markets. The Free Press. 1990.

Bush on Bush

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When George W. Bush began to consider his term in office, he asked a series of historians how to write a memoir, and, perhaps more importantly, what to talk about. The first step most of them recommended was to read Grant's Memoirs (Grant). Bush found that Grant didn't chronologically detail his experience as a leader. Rather he chose topics to focus upon that he found were crucial to the success of his presidency. Bush decided to do the same thing (Bush, xii).

The chapter entitled Quitting was about Bush's bout with alcohol. Running was about the decision to run in Iowa in 1999. Personnel was about how Bush used Dick Cheney to initially vet candidates for Vice President, and how, ultimately, Bush decided that Cheney was the best choice for VP. Day of Fire is about 911. War Footing was about putting the country into a state of readiness for war in Afghanistan. Chapters on Afghanistan and Iraq follow. In Leading, Bush says that his goal was to solve problems, not pass them on to future generations (Bush, 274). He meant to lead the public, not "chase the opinion polls." I guess we all know about the failures in New Orleans during Katrina. What we don't know was that things weren't quite like they seemed. Politics got in the way. So did missing a key point: when you see a problem confront it, don't wait for resolution from others.

Lazarus Effect was about the determination focus on solving the HIV/AIDS crisis. The Bush solution was successful. It focused on aleviating the pain as solving the infectious nature of the virus isn't done even now. The decision to send more troops to Iraq, never popular, is detailed in Surge. Bush's goal was the protection of democracy in Iraq. In his second inagural in 2005, Bush laid out his Freedom Agenda, a plan to support repressive regimes in Iran, Syria, North Korea, and Venezuela, among others. Financial Crisis is about the bursting of the financial bubble, and to Bush response to it, especially the bail-out of Bear Stearns, and the problems at Fannie Mae and Freddie Mac. The Epilogue quotes the Bible Psalm 18:22 as Bush is leaving the White House on the way to Obama's inauguration:

The Lord is my rock, my fortress and my deliverer; my God is my rock, in who I take refuge.

Reference

Bush, George W. Decision Points. Crown Publishers. 2010.

Grant, Ulysses S. Memoirs and selected letters : personal memoirs of U.S. Grant, selected letters 1839-1865  Library of America. 1990 edition.

November 08, 2011

Good Leadership vs. Inspired Leadership

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Having struggled through Machiavelli's various texts, and Unger's inspired biography, I have begun to understand the difference between Machiavelli's brand of ruthless leadership, and, say, Kouzes and Posner's demand that leaders reflect on what the people around them demand from their leader, or Bennis's "deployment of self through positive self regard (Bennis)". All this bred a bit of cynicism when I began to read Credibility. Ruthless leadership certainly is different from responding to demands of followers. There is a dichotomy. We do have a choice.

Kouzes Epilogue "Character Counts" (Kouzes, 201) does summarize the demanding point of view (from an anonymous source):

Be careful of your thoughts, for your thoughts become your words;

Be careful of your words, for your words become your deeds;

Be careful of your deeds for your deeds become your habits;

Be careful of your habits, for your habits become your character;

Be careful of your character, for your character becomes your destiny;

And, finally, from Kouzes: 

Be careful of your leadership, for your leadership becomes your legacy.

Reference

Bennis, Warren. Notes for a speech at University of California Irvine. 2000. 

Kouzes, James M. and Barry Z. Posner. Credibility. How Leaders Gain and Lose It. Why People Demand It. Jossey-Bass. 2011. 

Unger, Miles J. Machiavelli. A Biography. Simon & Schuster. 2011.

November 07, 2011

Five Ways to Loyalty? Maybe

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There is a whole new section in the business book realm, namely, books on loyalty. Witness the titles (Felton, 181):  

  • Loyalty Rules
  • The Loyalty Effect
  • Why Loyalty Matters
  • Lessons in Loyalty
  • The Customer Loyalty Solution, and finally,
  • Getting Naked: A Business Fable About Shedding the Three Fears That Sabotage Client Loyalty.

So, let's talk about loyalty, and some of the things that seem to productively produce loyalty, when, on closer examination, they might not produce loyalty at all:

  1. You've been with your credit card company all these years. You're a loyal customer. Other people get lower rates on their credit cards. You call in, asking for a lower rate, and are denied. The solution? Don't call customer service. Call the section that deals with people who want to drop their card. That section can make a deal, not the loyalty section (Felton, 183).
  2. Local breweries have all been, basically, closed down or bought up. Think you're buying the local brew? Probably not. Pabst is a local brew. It's not made by Pabst any longer. It's made by MillerCoors (Felton, 187). Go figure.
  3. TV ads target 18 to 34 year olds. Why? Because, once you choose a brand, you'll stick with it for life. Al Reis (Felton, 189) says that's not so. Sure you buy a small Chevy when you're just out of college. When you get a raise, you buy a BMW, not a bigger Chevy, right?
  4. The Beatles started out as the best boy band in the sixties. Once they were established, loyalty, even among friends, couldn't keep the band together. Each of them was justified in leaving the band and going out on his own (Felton, 191).
  5. Buy a company with loyal employees who you have no loyalty for. Why have they been there so long? Maybe, just maybe, they can't get a job anywhere else (Felton, 194). Think about it.

Finally, a comment on binding a customer to you for life. Make it a contractual relationship. That's probably the best way - not talking about loyalty, or some sort of loyalty program (Felton, 199).

Felton writes the Postmodern Times column for the Wall Street Journal. Maybe he's got a point.

Reference

Felton, Eric. Loyalty. A Vexing Virtue. Simon & Schuster. 2011.

October 24, 2011

The Infamous Black Swan

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Some statistics wonks get together in Las Vegas. The topic was, supposedly, how to protect the casinos from rogue players. There were two resulting messages from the meeting.

The first is relatively obvious. The casinos are completely covered when it comes to protecting themselves from rogues. No one really gets away with anything. They do it by limiting the size of the bets a player can make. With lots of players, all playing to relatively small sized bets, nothing can go wrong, basically. The maxim, "the house always wins," is true.  

Here's the second message: The casinos are clueless when it comes to protecting themselves. All the technology they have is worthless to protect them. Witness (Taleb, 130):

  • Their biggest loss in a long time wasn't at the gambling tables. Rather, it was the $100 million they lost when - you know all about this - Siegfried and Roy closed down because some tiger bit the wrong performer. Not predictable.
  • A mad contractor at the casino was mad about his treatment. Since he knew all about the construction of the casino, his plan was to dynamite the place. Not predictable.
  • Some employee decided to hide the reports to the IRS the casinos are supposed to make when gamblers strike it rich. Again, not predictable - and stupid, as well.
  • Finally, a casino's owner's daughter was kidnapped causing the owner to dip into the till, a seemingly good thing to do, although it was in fact very illegal, and, again, not predictable.

The message? There are some things that, no matter how much you prepare for them to happen, you can not predict. No, you probably can not plan for all the risks. If you can't reach the grapes, as Taleb says (Taleb, 297), distain them. They're probably sour anyway. Don't play somebody else's game trying to get them. Just move on.

"In Black Swan terms, this means that you are exposed to the improbable only if you let it control you. You always control what you do; so make this your end."

Reference

Taleb, Nassim Nicholas. The Black Swan. The Impact of the Highly Improbable. Random House. 2007.

September 26, 2011

From the Guy Who Made WalMart Green

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Here's what it took to make WalMart green (Humes, 235):

  1. Start with the hire-fire guy: A company has to become sustainable from the top down. 
  2. Bake it in: Sustainability must be part of every employee's mission; relegate it to its own department, and it will fail.
  3. Waste = money (with real question being whether it's los or found money).
  4. Carbon = energy = money. (That's right, cutting carbon emmission can make money.)
  5. Burst the bubble: Talk to environmentalists and activists, consider their criticism and advice-it's free.
  6. Green is what the next generation of customers cares about.

The CEO at WalMart, Lee Scott, got interested first. Taking its time, WalMart focused on a few initiatives. Yes, some of it was driven, early on, by making a better image. Then they realized there was money to be made.

There was the health care media debacle when WalMart healthcare insurance was too costly and under-utilized. Light bulbs came next, with the conversion from incandescent to florescent. A big, early initiative was making all the cotton garments WalMart sells green. First step was to convert entirely to organic cotton. Cotton growers had to to convert from old way (with insecticides and fertilizers) to organic way,  which took years, forcing WalMart to make an unexpected, and first-time ever multi-year commitment to their suppliers. Either that, or they wouldn't supply WalMart. And - here's the reason to do this, in addition to the important social aspects - it made money for WalMart. Probably will for you, as well. First step: get the CEO on board.

Reference

Humes, Edward. Force of Nature. The unlikely story of Wal-Mart's green revolution. Harper Business. 2011.

September 05, 2011

Generic Strategies

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Generic Strategies

Innovation Catalysts (Martin) at Intuit: Select coaches from across the organization who focus on innovation stepwise: Painstorm - find the pain point, Soljam - solutions are prioritized and focused, Codejam - go to test with good enough code, maybe even faked code to see what works. An example is Mobile Bazaar, a market-place on-line where Indian farmers figure out where to take their perishable products to market for the highest price.

Innovation Cheaply (Bettencourt): Off-the-shelf, in-hand innovations for fast implementation - re-use innovations that failed to launch, old capabilities that resurface as new, products customers like for unknown reasons, split up bundled products into stand-alone products, re-combine components into a new product, simplify an over-designed product that failed. Rainbird figured out how to re-configure an existing product to include new drip features to take to market quickly for immediate payback.

Innovation Against Free (Bryce): Analyze how much you are losing from paying customers, better free, then up-sell, cross-sell, and bundle free with paid offerings. Ryanair offers free or discounted tickets and makes up the difference by charging for other services.

Innovation Quickly (Brown) at P&G: New-business creation groups, innovation guides, innovation manuals, disruptive innovation college with sustaining innovations to existing products, commercial innovations (like packaging up-grades) to existing products, transformational and sustaining innovations (take a cheap product and up-grade it so it in applicable in a new, higher margin, market), and finally, disruptive innovations like entering a new business with radically new products (like the Swiffer mop) .

Innovation Pyramid (Rangan): Two steps - first realize that focusing on the folks with money isn't always the best of strategies, then, when you are focusing on the folks with greats needs but little money, divide them into segments, even at the lowest levels, and, then, target offerings at specific needs, like shaving with out shaving creme (or maybe even water).

Innovation Org Chart (Tushman): Yes, let innovation happen in the trenches; Yes, have multiple ideas competing against each other; Yes, have the final decisions made strategically, at the top, not in accounting or by competing departments and divisions. IBM, because a general manager was making the decision, was able to focus resources on new product launch SWAT teams. USA Today, because the CEO was forcing the issue, was able to refocus on the web (to the detriment of the print division) and launch new editions (like USA Today Sports) exclusively on-line.

Some closer-to-home examples:

  • Vizio, which started out as a flat-screen TV manufacturer, is launching an entirely new product line - light bulbs.
  • Allergan, which started out as an ophthalmic supplier, is launching line extensions for its Botox line of wrinkle removers, and adding new products by acquisition (like the Lap-band for obesity).
  • T3 Motive has a two tier strategy of first making products for large target markets (like selling many units, all at once, to the government, for instance, and then, later, it is planning to sell single units to consumers).
  • IRIS Technologies has re-focused its product lines from remote sensing devices to battery technology to take advantage of DOD requirements for power in remote locations.

References

Bettencourt, Lance A. and Scott L. Bettencourt. Innovating on the Cheap. Harvard Business Review. June 2011. 88. 

Brown, Bruce and Scott D. Anthony. How P&G Tripled Its Innovation Success Rate. Harvard Business Review. June 2011. 64.

Bryce, David J., Jeffrey H. Dyer and Nile W. Hatch. Competing Against Free. Harvard Business Review. June 2011. 104.

Martin, Roger L. The Innovation Catalysts. Harvard Business Review. June 2011. 82.

Rangan, V. Kasturi, Michael Chu, and Djordjija Petkoski. Segmenting the Base of the Pyramid. Harvard Business Review. June 2011. 113.

Tushman, Michael L., Wendy K. Smith and Andy Binns. The Ambidextrous CEO. Harvard Business Review. June 2011. 74.

September 01, 2011

Growth Strategies

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Over time, we've spent a lot of time talking about growth strategies. Most of that time has, however, been spent talking about the strategies popularized by Clayton M. Christensen (Christensen), disruptive strategies. Moore reminds us that there are three other generic growth strategies to consider, some of which aren't as risky as disruptive strategies.

Moore differentiates growth strategies four ways (Moore, 98):

  1. New products for new markets: Disruptive Innovation
  2. New products for existing markets: Product Innovation
  3. Existing products for new markets: Application Innovation
  4. Existing products for existing markets: Platform Innovation.

Disruptive innovations target either complex systems markets, or volume operations (Moore, 75). In strategy, for years we've used a product market matrix delineating the likely risk of new strategy investments. The emphasis on new products for new markets always has been the most risky. It still is. In terms of risk, both product and appliction innovations are probably less risky. One relies on marketing strengths, the other on product innovation. Platform innovation seems to be the least risky. Interestingly, platform innovation seems to occur in the bigger companies. The classic example is the automotive industry. One car's under-lying architecture might be exactly the same as another's with just the body panels changed for appearance's sake. A local medical device contract manufacturer has derived a series of solutions to common problems. Clients bring their ideas for manufacturing. The contractor rearranges existing modules to solve the customer's problems. Prices are theoretically lower and production (or, maybe, engineering) times are faster.

We have made the point over time that working a flipchart with a small team might not be the best way to select new strategies. If you intend to grow, one of these four generic strategies might make sense. Each has a different amount of risk attached to it. A process to evaluate your strategies before you put them into action probably makes sense, as does a risk analysis that looks both at the short term and the longer term. 

Reference

Christensen, Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997.

Moore, Geoffrey A. Dealing With Darwin. How great companies innovate at every phase of their evolution. Portfolio. 2005

August 26, 2011

Bottom of the Pyramid Lessons

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Banerjee and Duflo recognize five lessons from their extensive research about the realities of being poor (Banerjee, 268-271):

  1. The poor often lack critical pieces of information and believe things that are not true.
  2. The poor have responsibility for too many aspects of their lives.
  3. There are good reasons that some markets are missing for the poor.
  4. Poor countries are not doomed because they are poor.
  5. It is possible to change governance and policy without changing the existing social and politcal structures.

Let a farmer know where the best market his, and what a reasonable price is, and he will modify his farming habits to take advantage of this new information. The poor have to worry about all aspects of their lives, to be experts at too many things, from health to nutrition to education for their kids, to markets, to politics. It is over-whelming. Making sure public nurses actually show up for work at the local infirmary makes a difference. Poor countries, by focusing on crucial first steps, are able to extricate themselves from poverty. It might be a health step, like immunization or figuring out whether you need to charge for a mosquito net, or whether, if you give it away, folks will use it more. A role for aid exists - beyond the normal supply of grain based food. Infrastructure particular to a specific community my work better. Help farmers get their produce to market, or create a market for their produce. Governance is important to long-term growth. Methods exist to right long histories of wrongs. Again, focus on a crucial few strategies makes sense. Alleviating corruption, if only in one part of interaction with the government, makes a difference. Just steps to provide legal identification might be enough to enfranchise a whole population.

Seemingly simple steps to get the ball rolling.

Reference

Banerjee, Abhijit V. and Ester Duflo. Poor Economics. A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs. 2011.

August 17, 2011

Maximizing Moore

www.mixnerstrategy.com

Moore's first book,  Crossing the Chasm, is easily prescriptive in that it had one message:

  • there is a continuum of technology adoption spread consecutively from innovators, early adopters, early majority, late majority and laggards that is dichotymous in that innovators act differently than early adopters, and that
  • early adopters are separated in their buying behavior from the early majority by specific buying traits, like willingness to take risks on products and technologies that don't have clearly defined reasons to buy the product, not just that it is a cool new product.

Moore's Dealing With Darwin addresses all the other strategies that Chasm ignores. Not only is there a single way to cross the chasm (identify a single specific order-of-magnitude leap in benefits), there are multiple other strategies that address other chasm-like challenges at each stage, not in the technology adoption cycle, but in the corporate life cycle. Early stage firms need to worry about crossing the chasm, yes. Later stage firms (already rapidly growing, or, horrors, in decline) have a whole series of other strategies they could address. Recognizing that they have an opportunity to choose a good strategy is the first step. Choosing a strategy - and here things get good - actually adopting it, is the second step.

Chasm addresses a specific need for early stage companies that need to make it past the innovators and early adopters in their market place. Darwin has a whole other group of strategies to choose from when growth has begun and for each of the other stages that succeed growth.

Organizing your company to take advantage of specific strategies makes sense as profits increase, and, in fact, odds of survival of the firm increase, as well.

Two examples:

Researchers at Cornel University (Economist) are using CAT scans of fabric to help software engineer better looking textures for animated movies. If a company is formed around this technology, it'll need not only a patent or copyright on the algorithm, but a complete business plan that makes the case that there is something here for the general marketplace, that, essentially, this is more than a button on existing software, and that there is enough here for a company addressing not just the early adopters, but the main market.

Alternatively, a mainstream company, Intel, is hiring sci-fi writers (King) to help it come up with unthought-of new ways to package technology. Intel certainly isn't early stage. It's using a new way of looking at its current product lines to figure out how to, for instance, pack more transistors on a chip, or, perhaps, figure how to to make a chip with fewer transistors that is just a good as the old chip. The sci-fi writers dream up things that have been done before (in a sci-fi novel, perhaps) and suggest its applicability to current thinking. Intel is far beyond the early growth stages. It is, however, considering how to revamp what it is doing, to sell more of the next iteration of its current products, or, maybe, create new simpler products, that just happen to use fewer transistors. This is probably more of an enhancement innovation (Moore, Darwin, 62) from Intel's point of view, not a disruptive innovation an early stage company might use.

References

Fabricating Fabric. Economist. 13 August 2011. 76.

King, Ian. To Boldly Go Where No Chip Has Gone Before. Bloomberg Businessweek. 15-28 August 2011. 38.

Moore, Geoffrey A. Crossing the Chasm. Marketing and selling high-tech product to mainstream customers. HarperBusiness. 1991. (Soft-back edition, 1995.)

Moore, Geoffrey A. Dealing With Darwin. How great companies innovate at every phase of their evolution. Portfolio. 2005.

June 22, 2011

Is 3-D Disruptive?

www.mixnerstrategy.com

Evidence of disruptive technology (Mixner):

  • Simple
  • Cheap
  • Faster to market with new up-grades
  • Maybe not quite as good as what out there, but useful.
  • One or two unique features that pique folks interest, probably based on very good design elements.

Let's compare that list to the reality of 3-D movies, cameras, laptops, and televisions.

  • Manufacturing 3-D, in whatever form, is not simpler than regular technology.
  • It's not cheaper either, at least so far.
  • It's more complex; upgrades take longer.
  • It is better, seemingly, than 2-D, especially in the applications where you don't have to wear some type of special 3-D glasses.
  • Yes, 3-D is interesting. It does pique my interest. There's only one problem. It's not cheaper. I said that already.

When 3-D is simpler, cheaper, faster to market, useful, I'll be more interested in buying it. Maybe that means I am a late adopter. So be it. As it stands right now, 3-D isn't disruptive. It's just the next greatest thing that may or may not make it in the marketplace. The movie-going public has voted. They're not willing to pay the $3 to $5 distributors want for a ticket to a new movie release. Directors and producers are scared (Barnes). They should be.

Reference

Barnes, Brooks. As 3-D Falls From Favor, Director of 'Transformers' Goes on Offensive to Promote It. New York Times. 22 June 11. ttp://www.nytimes.com/2011/06/22/business/media/22transformers.html?ref=technology

Mixner, Jack. Disruptive Strategy. Small Companies Have the Edge. 23 Sept 2008.   http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html

May 30, 2011

The Rich-Gumpert Evaluation System

www.mixnerstrategy.com

I sat through six start-up company funding presentations at the OCTANe VC in The OC event [ www.vcintheoc2011.com/main.html ] last week. I am glad I did as I refreshed myself on what it takes to have a fundable deal. Each of the presentations, to varying degrees, was fundable because of two main attributes, the status of their product/service and the status of their management team.

Rich and Gumpert's system lays it all out on a simple one page graph with product/service status on the y axis and management status on the x axis (Rich, 169). Each is labeled one to four with a 1:1 deal having a "single, would-be founder-entrepreneur" and a "product or service idea, but not yet operable," with the "market assumed." The "most desirable" deal, a 4:4 deal has a fully developed product or service, many satisfied users, an established market and is fully staffed with an experienced managegment team.

Chuck Copin's presentation at OCTANe [ Renewit http://0101.nccdn.net/1_5/1e6/180/1d6/Renewit.pdf ] is a good example. Renewit has sales, which also means the product is fully developed and, basically, embraced by a market place. As importantly, they've taken the time to figure out what their marketplace is. Sales channels are identified, competitors named and strengths/weaknesses pointed out. So the market is described, the product developed, and maybe, a market developed. On the Rich-Gumpert scale, they might be a 3.5 for Product/Service Status.

People-wise, Renewit has a CEO and a Founder with two highly experienced advisors. We don't have a business plan, nor do we know who is managing production and the rest of operations. They're asking for $0.7 million. We might assume that some of the money is going for experienced managers, but we don't know for sure based on the limited information we have so far. Since they are in production and shipping, we can assume that they are out-sourcing, a useful, proven way to go in today's global marketplace. Maybe we can give Renewit a 3.0 for Management Status. Without a full business plan, we have been able to score Renewit's deal as a 3.0:3.5 which actually is a pretty good score. With more information, we might score it differently.

Now comes the hard part. How does your company score on the two scales? Will investors - or maybe, the bank - agree? That's the real test.

Reference

Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.

May 18, 2011

Googling Your Site

www.mixnerstrategy.com

It's pretty safe to say that all of us like the appearance of the Google website.  Not much there, is there? For a while, my website had a picture, my name, my email, and that was about it. I've since redone my site to include more descriptors on the home page. You want your site to be searchable by Google's search engines so you get some results from your site. Label things "We Make Widgets" not "What We Do" so Google can figure it out as well. Put your most important content on your home page. Make sure you have a call to action for humans and dynamic content modules for spiders (Goldman, 53). Have a simple message that makes people remember you and want to visit you.

Jack Mixner Strategy

    • Everyone knows the plan.
    • Everyone implements.
    • Everyone cares.
    • Profits increase.
    • So does valuation.               

Reference

Goldman, Aaron. Everything I know about marketing I learned from Google. McGraw-Hill. 2011.

Innovator's Values

www.mixnerstrategy.com

It is the year 1720. You, a traveler, arrive in the Italian town of Cremona in search of the best violins made. You look on the street of the violin shops. At the mouth of the street, immediately to the left, you see the shop of the Guarneri family. In its window is a very large sign with majestic calligraphy: Best Violins in All of Italy. Farther down on the right you see the shop belonging to the Gagliano family. In its window is an even grander sign: Best Violins in the Whole World. Down at the end of the street, tucked in the shady cul-de-sac, you find a small shop belonging to the Stradivarius family. In its window there is a small card. You have to lean over and squint to read the handwritten message: Best Violins on This Street (Denning, 379).

Denning's books starts you down the innovation path: first learn for yourself. Then bring what you know to your community, your company. Only then do you start thinking about global excellence. He and Dunham lay out the steps.

Reference

Denning, Peter J. and Robert Dunham. The innovator’s way: essential practices for successful innovation. The MIT Press. 2010.

Failure

www.mixnerstrategy.com

Most of us can remember the loneliness of walking back from home-plate after having struck out at bat. Not too good a feeling. Slowly, however, it dawns on us that there might be an explanation. Batting averages for the best batters average, maybe, .325 or so. For every ten times at bat, you can expect to strike out more than six times. Now things are starting to look better. What to do? Practice seemed to be one of the suggestions. Keep going up to the plate. Keep swinging. You will start to have more and more successes. Now, in a business environment, is practicing good enough?

Having a look at what went wrong - or right - might be in order. Failures seem to get more attention, but understanding why you made that first sale to IBM might help you make that crucial second sale. Folks have to want to take the time to look at their processes. Learning cultures (Edmondson, 51) examine their decisions to see which ones could have been made differently so next time goes better. Figuring out that something went wrong is the first step; analyzing it is the next. Experimenting to see if making simple changes will help outcomes is third.

These steps - detecting, analyzing, experimenting - ultimately lead to more successes. In some environments, perfection is the goal. In others, perfection is only a dream. Knowing, however, what went right or wrong in both perfect and less perfect environments still makes sense.

Reference

Edmondson, Amy C. Strategies For Learning From Failure. Harvard Business Review. April 2011. 49-55.

May 12, 2011

On My Desk Today

 www.mixnerstrategy.com

 

References

Bogle, John C. Don't Count On It! Reflections on investment illusions, capitalism, "mutual" funds, indexing, entrepreneurship, idealism, and heros. Wiley. 2011. 

Burns, Rebecca. Burial for a King. Martin Luther King Jr.'s Funeral and the Week That Transformed Atlanta and Rocked the Nation. Scribner. 2011. 

Denning, Peter J. and Robert Dunham. The innovator’s way: essential practices for successful innovation. The MIT Press. 2010.

Edmondson, Amy C. Strategies For Learning From Failure. Harvard Business Review. April 2011. 49-55.

Goldman, Aaron. Everything I know about marketing I learned from Google. McGraw-Hill. 2011.

Gostick, Adrian and Chester Elton. The Orange Revolution. How one great team can transform an entire organization. Free Press. 2010.

Hillenbrand, Laura. Unbroken. A World War II Story of Survival, Resilience, and Redemption. Random House. 2010.

Jones, Clarence B. and Stuart Connelly. Behind the Dream: the making of  the speech that transformed a nation. Palgrave Macmillan. 2011.

Kovach, Bill and Tom Rosenstiel. Blur: how to know what’s true in the age of information overload. Bloomsbury USA. 2010.

Lawrence, Greg. Jackie as Editor. The Literary Life of Jacueline Kennedy Onassis. Thomas Dunne Books. 2011.

Parinello, Anthony. Selling to VITO: the Very Important Top Officer. Adams Media Corporation. 1999.

Prince, Cathryn J. A Professor, A President, and a Meteor: The Birth of American Science. Prometheus Books. 2011.

Rutledge, Patrice-Anne. Using LinkedIn. Pearson Education, Inc. 2010.

Schepp, Brad and Debra Shepp. How to Find a Job on LinkedIn Facebook MySpace Twitter and Other Social Networks. McGraw-Hill. 2010.

April 04, 2011

Close's Tactics Work In Lots of Ways

www.mixnerstrategy.com

Chuck Close, early on in his career, didn't really have a technique. He just painted. Things came out like blobs. They weren't reproducible. Then he discovered how to make art work better for him. You can see it today in most of his work. He put a grid over his source sketch (Burstein, 5), drawing, painting, or photograph. Then, working block by block, he reproduced each section of the source material on his large canvasses. The Museum of Modern Art in New York has an early Close self-portrait. The curly hair, the glasses, it is all there. So is the grid. After a bit, you don't notice the grid as it blends back into the painting, but it is still there. This technique isn't new. Painters have been using it since, certainly, the Middle Ages. There is some evidence that the Egyptians used it four thousand years ago, to great success. The painting holds together if you look at it closely. It holds together if you stand back to take it all in. The scale matters, yes, but it doesn't interfere whether you look at the painting close up, or from afar.

The point is that the methodology doesn't matter. The results do. Whatever strategic process you use can work if you work at it. Close still uses his grid forty years later. Some people use Sun Tzu as a model for their strategy, others Von Clauswitz. Or Porter. Or Collins. The source of the methodology doesn't matter. The results do.  

Reference

Burstein, Julie. Spark. How Creativity Works. New York: HarperCollins Publishers. 2011.

Close, Chuck. Museum of Modern Art. http://www.moma.org/interactives/exhibitions/1998/close/

March 28, 2011

Drucker on Dashboards

www.mixnerstrategy.com

Peter Drucker brought a case study to class (Cohen, 189). A CEO wanted to put together a Control Panel, much like the control panel of an aircraft, that would let the CEO know precisely what was going on with his company. Drucker asked his class to derive a list of what should go on the control panel. Then he asked the class whether a control panel was really a good idea. The results were almost obvious. The lists were long. Everyone thought a control panel was a good idea.

Drucker said it was a bad idea. There was just too much information for a CEO and her team to follow. An aircraft needs a control panel. The inputs are, basically, finite and easily demonstrable. A company is different. Focusing on what is, essentially, a short list may prevent the CEO from picking up on some other kernel of information that is crucial to her company. The CEO has a job to do that exceeds the capability of a computer to keep track of. 

Reference

Cohen, William A. A Class With Drucker. The Lost Lessons of the World's Greatest Management Teacher. AMACOM. 2008.

Grace Hopper - Then There Was Software

www.mixnerstrategy.com

Of course, during the forties and the fifties, there were lots of firsts. Before electronics dominated computer design, mechanical machines the size of buildings dominated. Engineers designed the hardward based upon the latest technology. Some of the technology was actually derived from machines created by Babbage in the thirties - the eighteenthirties, that is. The war drove initiatives to determine trajectories for artillery shells and shapes of aircraft wings. Human calculators gave way to mechanical calculators which in turn gave way to electonic calculators. As the engineers moved on to the next upgrade, they left behind the human calculators to figure out how to program the machines - the calculators - were supposed to work. Two philosophies developed, one saying that all software was custom, to be derived by the application, the other common in that certain sub-sets of ultimate programs were saved and re-used over and over again in all worts of applications. This re-use spawned the software industry.

Grace Hopper was there at the beginning. Most of the men had gone to war. A trained math PhD, she taught early on, then consulted in government, and then she ended up at Harvard, working on the large mechanical calculators - think building-sized - that the bosses seemed to think were effortlessly forced to calculate quickly and easily. They were wrong. Figuring out how to productively run the new machines was a long and arduous task.

It's a good story, one every technologist should understand. Let's fast-forward a bit to the time when things began to standardize. Early on, there were many types of calculators with all sorts of control parameters. They required engineers to run them. But because of the war, and because of the growth of the industry, there weren't enough trained folks to run and program the machines. Something had to give. Incremental changes in hardware and software design weren't enough. The industry would die unless something was done. Grace Hopper drove the standardization of the software industry by forcing the standartization of the software language and methods. Her invention was the process to create COBOL, one of the first high level programming languages that still serves as the back-bone of eighty percent of extant software. Yes, there were competitors. Yes, there were failures. Hopper lead the derivation of the standards that today drive the industry.

This brings up an interesting point. Early on, the assumption was that all software had to be custom to the job and the machine it was running on, a huge investment that was hard to recoup. Hopper's alignment and standardization of the software process led to growth in an industry that could have possibly failed.

Strategy is in the same boat, if you squint a bit. There are standard processes for strategy, but, honestly, they are whimsical, being based on the intuition and processes of individuals whether internal to an organization or external. There are twenty or thirty flavors of strategy. There is an opportunity to standardize things, much as COBOL standardized the software industry. What's the pay-back? Think about it.

Reference

Beyer, Kurt. Grace Hopper and the Invention of the Information Age. The MIT Press. 2009.

March 27, 2011

Four Agendas for Four Kinds of Meetings

www.mixnerstrategy.com

Lencioni assumes that people hate meetings. No comment. He defines four kinds (Lencioni, 249): Daily Check-In, Weekly Tactical, Monthly Strategic, Quarterly Off-Site. They might be called "All the Meetings You'll Ever Need, in Eighty Hours Per Year" (Lencioni, 249):

  1. Daily Check-In last five minutes. They focus on schedules and activities.
  2. Weekly Tactical meetings last up to an hour and a half. They focus on activities, metrics, and tactical problems and issues.
  3. Monthly Strategic meetings are just that. They last from two to four hours. There is discussion, brainstorming, and decision-making on critical strategic issues.
  4. Quarterly Off-Sites may last two days. Strategy is reviewed, industry trends reported upon, competitors examined, individual and team training.

Having the first three carefully defined allows you to have productive Strategy Off-sites. Ignore these differentiators at you peril. The story is nice. The process is better.

Reference

Lencioni, Patrick. Death by Meeting. A leadership Fable...About Solving the Most Painful Problem in Business. Jossey-Bass. 2004.

Initiative-Based Communities Inside Your Business

www.mixnerstrategy.com

Your team has finished their strategy sessions. They have identified a couple major initiatives they want to roll out to the company as a whole. A simple question first. Is this a minor tactic or is it a major strategy. A test for a strategy might be that it addresses your colleagues, company stakeholders, business partners, maybe competitors all with the goal of achieving a company-wide success beyond what a single person is able to achieve by herself. Tactics may be easily iplemented at the individual or small team level because communication is easier and focus on the limited goal of the tactic is relatively simple. Things get done quickly. Strategies seem different since they are a level up from tactics in, apparently, complexity and time needed to accomplish them. Wouldn't be interesting, however, if we could make our strategies as simple as tactics and implement them "effortlessly" at the local level without the hoopla and pain of rolling out huge initiatives across your company.

If we assume, especially in a large organization (maybe even a global one), that smaller teams in local environments may address new strategies dissimilarly, we may be on to something. Not everyone has to do the same thing to get you the result you need. If you make smaller teams of colleagues, stakeholders, partners and competitors, it might be possible to get local results quickly and effortlessly, just like we said. Let them address what they consider to be important in the global strategy, but let them do it locally.

Kahan suggests some questions to get things rolling locally (Kahan, 121-122):

  • Ask people why they want to participate?
  • Do you want some sort of reward?
  • So far, have your received a personal reward from your participation?
  • What do you want to contribute?
  • What, practically, would you like to get from your small work group?
  • Tell us something extraordinary that you'd like to get out of what you do.
  • How do we engage others, outside our small group, in what we are doing?
  • Who's missing? Who should be add?
  • If you don't want to do this, if we changed something to be more enticing to you, what would it be?

Two things: Don't assume a global strategy has to be addressed globally and don't assume that participants may not change things to meet their needs. You might be wrong. There are lots of different to meet your goals. Take the risk of allowing local teams to figure out what works best.

Reference

Kahan, Seth. Getting Change Right. How Leaders Transform Organizations From the Inside Out. Jossey-Bass. 2010.

Reinvention of Your Brand - On the Web

www.mixnerstrategy.com

We all thought we knew everything there was to know about marketing and branding until the web came along. 1960 saw the creation of the Four Ps of Marketing, Product, Pricing, Place and Promotion. Those classic Four Ps have been replaced by the Four Es,

  • Experience (you have to be involved while the customer makes a buying decision),
  • Everyplace (you have to me communicating continuously, and modifying along the way, in order to figure out how to close the sale),
  • Exchange (yov've got to give more information - maybe, exclusive information like new product information before the launch, or maybe letting the customer actually design the product she buys) - to keep a customer) and
  • Evangelism (share an idea with a contact in such a way the he wants to pass it on, to share it with his friends - who become your friends) (Moffitt, 48-49).

The Four Es are great. And, as you can well imagine, there are strategic steps (really, just one step) you'd better take before you focus on the Four Es. That is to focus what you're about before beginning to build out your Four Es. In a way, the fun part of a web effort is just doing it. Ask two questions first (Moffitt, 90):

  • Just what is your focus, and, this is a new twist on things,
  • How do you focus on your customer before you focus on your company?

This last question isn't much different than normal strategy. You've got a couple more questions to answer (Moffitt, 92):

  • Where are you going? What are your business goals and objectives?
  • What are you values? Then, what are your customer's values, what is their lifestyle, and what are their desires?
  • What does your brand mean in the community, yes? But, what does your brand mean to you? The community is interested in commoditizing things. If you know your your brand and what it means to you first, that'll influence what the outside community thinks of you, and how they react to you.
  • What is the value you want to deliver to your new community, to your customers? Is it apparent in what you are offering? If you don't know what it is, you won't be able to deliver it, or your offering won't be interesting. 

One final question, or comment, really (Moffitt, 97): My bet is that the size of the community you end up building on the web really isn't that large. It's probably going to be less than two thousand members. If you decide to keep things small early on, you are able to build in the intimacy to what you are doing early on in the process. Make it focused enough on your community and you will be able to open a dialog that remains a dialog over a longer time frame, a good thing.

Reference

Moffitt, Sean and Mike Dover. Wiki Brands. Reinventing Your Company In a Customer-Driven Marketplace. McGraw-Hill. 2011.

March 04, 2011

They say it's disruptive...

www.mixnerstrategy.com

The Pepperdine Alumni Association recently hosted a series of c-level folks to talk about disruptive strategy at their companies. Here are things they mentioned:

  • Parker Aerospace developed a system to replace (the very explosive) oxygen in airliner fuel tanks with inert nitrogen. They are expanding the system into new markets beyond fuel systems.
  • St. Jude Medical has a new wireless patient monitoring system. Constant monitoring reduces costs by allowing them to focus on the patients who need attention at the time they need it. Other folks appear for check-ups, but not in an emergency situation only.
  • Yamaha musical products had a perfectly good digital replacement for their old analog mixers. However, their user base didn't like how it sounded. Yamaho replicated the look and feel of the old analog system over five years diode by diode, transistor by transistor, and then sold the system to the complaining users as a system that worked and sounded exactly the same, but was cheaper and easier to use.
  • Nissan has approached their new Leaf fully electric auto differently by attacking the infrastructure system at the same time they designed the car, so there will be enough "re-fueling" locations at the final launch of the vehicle.
  • Vizio figured out how to staff their $6 billion company (approximate) with only 175 folks by working very, very closely with their suppliers in Taiwan (one had to buy a $250 million piece of new equipment to make the new 3-D screens) to not only have them design the new systems, but have enough confidence in the ultimate success of  Vizio's market penetration to justify such huge production line innovations. Vizio has focused on making the consumer experience cheaper and easier - their 3-D glasses cost $1.50, not $150. The TV itself is hugely more expensive to produce, costs Vizio will recoup in expanded production over time.
  • Tesla owns their whole distribution system, ensuring - they hope - happy customers.
  • Epicardial Technologies has a new heart surgerly system. No more chest-cracking - they go in through small incisions.
  • Spectral Molecular Imaging has focused on earlier diagnosis of disease with an imaging system that focuses on the molecular level.
  • Origin Oil is figuring out how to use algae to generate oil.

The test book definition of a disruptive strategy is that the new product system is simpler, cheaper and not an incremental improvement on an existing product or service. Some of the systems above aren't simpler, for sure, but they are improvements. We'll see how they do in the marketplace.

February 22, 2011

Cash Flow Model

www.mixnerstrategy.com

A very useful tool to figure out your cash flow. It helps you end up with depreciation, amortization, taxes calculations, and comparison to RMA standard ratios, if you look very closely. 

Reference 

U. S. Small Business Administration, SCORE Financial Projection Model, Ann's Nursery, http://www.score.org/downloads/SCORE%20Financial%20Projections-Anns%20Nursery-May%202010.xls

February 21, 2011

Strategic Story Telling

www.mixnerstrategy.com

Why worry about telling stories? Your employees need to hear you say what you mean about that new strategy.  When you do say it, say it right, so folks remember, care, and, take action.

Schumpeter makes the point that art should return to the executive suite, not physical art, but personality art (as it were). An interesting point? George Orwell's Why I Write as a useful management text.

Martin suggests a continuum on strategy formulation (in the executive suite) and execution, well, across the company (Martin, 71):

  1. After the choice has been made, explain it - and it's rationale.
  2. Recognizing that management made a choice (which they explained in step one), allow the next layer of management to make their own choice. Yes, management might say what they see as the next choice to make, and may even give their advice on which of the alternatives to make. However, the actual choice is made by that next layer of folks, not the management team.
  3. If choices get all clogged up - or basically remain unmade - management has a role in assisting those choices to be made expeditiously.
  4. This is the best of all the points: revisit your choices regularly, from the highest levels and their choices, to the local levels and the choices you or your team made there. Admit errors and make changes. Faster is a lot more profitable than later.

References

Guber, Peter. Tell to Win. 2011.

Martin, Roger L. The Execution Trap. Harvard Business Review. July-August 2010. 65.

Schumpeter. The Art of Management. The Economist. 19 February 2011. 76.

February 19, 2011

Strategy Execution: Top 5 Tactics - and Six Mistakes - and Seven Questions for Issues

www.mixnerstrategy.com

The Top Five Tactics for Accelerating Strategy Execution (Neilson, 61):

  1. Everyone has a good idea of the decision and actions for which she/he is responsible.
  2. Important information on competitive environment gets to headquarters quickly.
  3. Once made, decisions aren't second guessed.
  4. Information flows freely across organization boundaries.
  5. Field and line employees usually have the information they need to understand the bottom-line impact of their day-to-day choices. 

Six Classic Mistakes (Miles, 69):

  1. Cautious management culture.
  2. Business-as-usual management culture
  3. Initiative gridlock
  4. Recalcitrant executives
  5. Disengaged employees
  6. Loss of focus during execution. 

Seven Steps for Working an Issue (Professional Service Providers):

  1. What is the issue?
  2. It is significant because?
  3. My ideal outcome is?
  4. Relevant background information?
  5. My options are?
  6. Direction I'm headed?
  7. Help I would like from my group? 

Reference

Miles, Robert H. Accelerating Corporate Transformations (Don't Lose Your Nerve!). Harvard Business Review. February 2010. 69. 

Neilson, Gary L., Karla L. Martin, Elizabeth Powers. The Secrets to Successful Strategy Execution. Harvard Business Review. June 2008. 61.

Professional Service Providers. PSP Issue Outline. Professional Service Providers. February 2011.

Wiki Brands

www.mixnerstrategy.com

Nine types of stories that people most like to talk about (Moffitt, 115, after Kelly, Beyond the Buzz: The Next Generation of Word-of-Mouth Marketing):

  1. Aspirations and beliefs help form emotional connections to a company. Occasionally, you meet an intense young person who really believes she can save the world. Maybe they can't articulate the next steps, but you are pretty sure they are going to figure them out.
  2. David versus Goliath stories let you root for the underdog. In Orange County we have start-ups galore. Ever heard one of them tell you how their product is going to unseat the market leader - and why? Try it with your product.
  3. Avalanche about to roll stories are inspiring. We got to watch Botox launch a couple years ago when it migrated from fixing diseases in the eyes to fixing wrinkles around the eyes. Those kinds of stories are all over the place. A coming example? Allergan (marketer of Botox) just got the LapBand approved for a more general portion of the population. Avalanche forming if you watch carefully.
  4. If you challenge assumptions, you might have a story that gets talked about. Wisconsin assumes that unions in state government don't mix any more. That is a story with assumptions going both ways. It'll be interesting to see how it comes out.
  5. Anxiety and uncertainty inspire action. The future in Bahrain certainly, and Egypt maybe, is uncertain. Folks there are taking action because they are inspired by the possibilities.
  6. Personalities give your company a face. Robert Grant spoke repeatedly about possibilities when you was President of a division at Allergan. Botox was something that clearly got him excited. He just moved on to lead a division of Bauch and Lomb. The story - his excitement about the story - about what B&L is going to do to mimic the Botox success isn't written yet. Believe me, when Grant finally starts talking about his plans, the story will be personal to him - and very interesting to you and I. And the Bauch and Lomb investors.
  7. How-to stories work. How to write a five work values statement is a good story. How to combine that values statement with short vision, mission, objectives, and strategy statements, and, then, get it on one page, is one of our most interesting how-to stories. And, oh, yes, it makes companies more profitable.
  8. Glitz and glam sell. Botox gets injected a lot on the Upper East Side in New York City. That story drives a lot of sales on the Upper West Side - and in the Bronx, and in, well, your town. For sure.
  9. Seasonal stories are interesting. In California we don't have fall, or spring, either, for that matter. We have flood season (or mud-slide season, more like), and fire season, and, every now and then, earthquake season. I used to meet with a CEO in a camper outside his abandoned manufacturing facility while we planned the next stages of his company's growth. Why outside? The building was, basically, rubble after the latest earthquake. That was a real story that he used to his advantage. Manufacturing went on in all sorts of places by a dedicated workforce who pitched in to save the company while they saved their community. What are your seasons?

What is your story?

Reference

Moffitt, Sean and Mike Dover. Wiki Brands. Reinventing Your Company in a Customer-Driven Marketplace. McGrawHill. 2011. www.wiki-brands.com

Getting Change Right

www.mixnerstrategy.com

Reference

Kahan, Seth. Getting Change Right. How Leaders Transform Organizations From the Inside Out. Jossey-Bass. 2010. www.gettingchangeright.com

February 18, 2011

"Get the Best From Your People" - HBR

www.mixnerstrategy.com

"Get the Best From Your People." That's the cover headline on one of the latest issues of Harvard Business Review (October 2010). It goes on to say, "What You Need to Know About Your Staff: Secrets from Google, Best Buy, Comcast, and more."

Most of us don't own companies like Google, Best Buy or Comcast. What do we do? Let's have a look. 

Google says, "People stay because of 'the mission, the quality of the people, and the chance to build the skill set of a better leader or entrepreneur (Davenport, 57).' "

Best Buy can predict how much more operating income a 0.1% change in employee engagement is worth: $100,000 (Davenport, 53).

Sysco has shown that employee job satisfaction and turnover go hand-in-hand. Increase satisfaction, turnover goes down (Davenport, 54).

Google, obviously, is very used to analytics. Best Buy is bigger than most of us. So is Sysco. What to do?

  • Carefully define your mission. What is your product or service? What is your market? And, importantly, is that mission inspiring to your current employees? Ask for help from your team in re-crafting your mission, get better job satisfaction among your employees, and, yes, better profitability.
  • Turning over folks in one of your departments? Consider job satisfaction. First step? Talk to the team. Watch the team. Engage the team in a solution. A good first question that will work at any company? "Would your recommend this company as a good place to work - to your best friend?" That'll spark conversation, for sure. All you've got to do is listen.
  • What about employee engagement? A simple way to measure employee engagement in one of your departments is to consider that department's manager? How can you help her become more engaged? Just asking what she thinks isn't a bad first step. Sitting down with her - and her team - makes sense, as well. Open-ended conversations can get things started. Then start to focus on how to improve.

No, we're not the biggest companies out there. That doesn't mean we can't think like a big company.

Reference

Davenport, Thomas H., Jeanne Harris, and Jeremy Shapiro. Competing on Talent Analytics. Harvard Business Review. October 2010. 53.

February 16, 2011

Undercurrents

www.mixnerstrategy.com

Undercurrents to successful strategy:

  • Strategy Doesn't Have to Take Lots of Time.
  • Values Count.
  • People Are Important.
  • A Strategy That Isn't Implemented Is Useless.
  • Re-Evaluating a Strategy Frequently Makes a Difference.
  • Keep Things Simple.
  • Competitive Environment Matters.

February 06, 2011

Military Leadership - and Negotiation

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Useem talks about making decisions quickly, especially when you don't have all the information you need. One key point: in high-stress situations, when you have 70% of the information - readiness and consensus - you need, make the decision and move on your decision (Useem, 89). 

Weiss makes points on how to strategize - negotiate - in the middle of the action (Weiss, 68-74). Be curious - get the big picture. Collaborate - "why is that important to you?" Get buy-in - "What should we do?" Build Trust - respect comes first. Process focus - slow the pace if you've got to.

Interesting. Now we've got two opinions. Make your decision and act. Or build consensus by negotiation in the middle of the action. Normally, I'm more likely to try action. There are times, however, when my interest to learning, acting and correcting doesn't make sense, especially in complex environments with multiple players.

Reference

Useem, Michael. Four Lessons in Adaptive Leadership. Harvard Business Review. November 2010. 87. 

Weiss, Jeff, Aram Donigian, Jonathan Hughes. Extreme Negotiations. What U. S. soldiers in Afghanistan have learned about the art of managing high-risk, high-stakes situations. Harvard Business Review. November 2010. 67.

January 28, 2011

Dysfunctions

www.mixnerstrategy.com

Lencioni lists his five dysfunctions (Lencioni, 195-216): Trust, or lack thereof; Conflict, or too much thereof; Commitment, or lack thereof; Accountability, or lack thereof; Results, or inattention thereto. He does a good job of balling them all together in a novel.

Two things on Dysfunctions: Lencioni talks a lot about working with a team. Nowhere does he talk about how hard it is to create a team from scratch, or to hire individiuals for a new team, or an existing one, for that matter. Yes, start strategyzing with the team you've got. Yes, take the time to hire new folks that truely fit your value system. And yes, finally just like Lencioni, remove foks who are never going to fit in.

He emphasizes off-site meetings as the way to go for strategizing. I get that up to a point. This book was published in 2002 and written in late 2001. Businesses were flush and most hadn't been up-ended yet. Times have changed. You don't have to go to Napa to have a good meeting, and, by extension, your meetings don't have to take days and days. Try on-site for the first meetings on values; try standing for follow-ups. Everyone has work to do. Planning is still paramount; it just doesn't have to take as much time.

Reference

Lencioni, Partick. The Five Dysfunctions of a Team. Jossey-Bass. 2002.

Take-Aways

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Taught two classes last weekend, one in Business Planning and the other in Business Finance.

Two take-aways from the day:

Buy insurance. A new warehousing business decided not to buy insurance on their (growing) inventory. Big mistake. Thieves got them in the first month for everything. They bought good insurance. Thieves got them the fourth month for everything. They discovered their insurance wasn't so good. They bought better insurance. The moral: make good friends with your insurance agent early on in your business and make sure that agent is a specialist in your niche - and I don't mean just for theft insurance.

Know what gross margin means. One of the students had a highly successful service business. Gross margins were high twenties. The owner's Dad kept telling him that his margins weren't high enough, but the son couldn't figure out what Dad meant. We did a quick calculation, essentially on an envelope. Dad was correct. Margins were twenty points low. Luckily, they're fixable. Moral: know how to calculate your margins. Otherwise, you are probably not as profitable as you thought. A hint: network with other owners in similar businesses to know what your margins ought to be. In a highly competitive business where folks don't share? Follow the trends of your information and make sure that your margins, at a minimum don't go down, and, better, that they rise continually over time.

January 15, 2011

Vanderbilt

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Waterman. Steamboat man. Railroad man. Vanderbilt dominated all. A review of the things he was involved in that changed the way America worked (Stiles, 563):

  •  By his participation in Gibbons v. Ogden, he helped to break down restrictions on interstate trade.
  • Migrating from colonial America to business America, he, while maintaining his individualism in the vein of Jackson (and maybe even Jefferson), he "shattered" the "culture of defference" and made every man capable of success on his own terms, not his class.
  • Moving from boats to ships to trains, he shaped the transportation future of America.
  • His effort to dominate trade from New York to San Francisco via Nicaraugua and Panama transformed communication over long distance, especially during the Civil War years.
  • He epitomized the growing mind of the businessman, from gold coin to intangibles like bank notes and bank accounts, from physical objects to stocks to securities of all sorts, pioneering the giant corporation along the way.
  • Jacksonian freedom of competition for every man matured during his tenure. People who wanted to get rich quickly on the coat-tails of Vanderbilt ended up not liking him at all, as following along really didn't work. His family argued over the estate, and, maybe, felt relief at his passing, as his domineering personality wasn't easly to tolerate.

In all, Vanderbilt helped Americans look at themselves differently, showing us a way to grow a strong America without the imperial dynasties of the past. Amazing life.

Stiles, T. J. The First Tycoon. The Epic Life of Cornelius Vanderbilt. Alfred A. Knopf. 2009.

January 08, 2011

Strategy for Terrible - and Opportune - Times

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The New England Patriots realized that if you do not practice your game far in advance with a carefully selected and conditioned team, you may not get the results you need in clutch situations (Halberstam). We’re in a clutch situation – a quagmire, really – right now. Game strategy works best in terrible times. That means, in today’s business terms, planning to succeed at the few important things that make a big difference at crucial times in a terrible business environment. 

The three main components of game strategy are pick the right folks early on in your process and continue to evaluate them all the time, practice – plan – in advance, and, finally, speed up the pace. Then, expect results. The game strategy of identifying possibilities and enacting them with long–term focus makes sense, especially when compared to extricating yourself and your team from a quagmire. It also increases your valuation. 

PEOPLE 

Discipline and strategy go together. It takes discipline to implement strategies and tactics. For Collins (Collins, 34), however, discipline comes earlier. He points to the disciplines of choosing the right people and putting them in the right positions, structuring thought early on to confront and balance the “brutal facts” with the strengths of your organization in three areas: what you can be the best in the world at, what you are deeply passionate about, and economic results (Collins, 24). Then, finally, comes disciplined acting on responsibilities and relentless pushing to achieve results. Discipline early in the process brings success.  Focus on people first, then plan (thought in Collin’s parlance), and only then take action. 

When you talk about evaluating personnel, one person always comes to mind, Jack Welch. In his book (Welch), Welch talks about all the different charts and curves they used to evaluate senior managers over the years. They finally settled on a chart they called the “Differentiation Vitality Curve” (Welch, 159). The curve broke a management team into three quadrants, the Top 20 (people filled with passion), the Vital 70 and the Bottom 10. Let’s just say you didn’t want to be in the Bottom 10. Over the years, Welch has gotten a lot of bad press because of the Vitality Curve. Dividing personnel according to a curve sounds mechanistic. However, GE’s definition of a “passionate” leader is useful: high energy levels, ability to energize others, edge to make tough go/no go decisions and, finally, ability to execute and deliver on their promises (Welch, 158). Not a bad list. Use it to evaluate new hires. The list and the methodology point to why adopting game strategy takes a while. Start early on when you hire people by looking at how they will work out not just now, but later on when things really matter. 

PRACTICE 

One statistic tells it all: before Carlos Ghosn arrived at Nissan, middle management spent approximately sixty per cent of their time planning. After he arrived, the ratio changed to five per cent planning and ninety–five percent implementing (Magee, 102). On the day of his arrival at Nissan, Ghosn formed nine planning teams to figure out what was wrong with Nissan. They had two months – later changed to three months – to create plans for Nissan’s turnaround. That was the easy part. The hard part was implementing. Ghosn held the planning teams accountable for actually implementing their plan. Nissan closed plants in Japan (think about that), created a passel of new cars, simplified the management structure, changed compensation and advancement (read that, performance raises and promotion only), drastically reduced the number of suppliers, and tied employee bonuses to global results (Magee, page 94). No more talking about implementing. Now they implemented. The pay–off was huge. Planning stalled at your company? Focus on implementation, not strategy.  

PACE

Late in a game with the Houston Oilers, the Bill’s Coach Marchibroda dominated by running their “two–minute” drill. The plan was to score more than once in the last two minutes by running play after play without a huddle. Seeing results at the end of the game, Marchibroda later decided to call the two–minute drill in non–clutch situations as well, completely befuddling the opposition. Bill Belichick’s (the assistant coach at the time for the Giants) response the next time the Giants played the Bills? Slow the game down any way he could. His team practiced little things like taking longer to get up from after a play, messing up the ref’s placement of the ball and taking longer to respond to injuries. Then they worked on actually letting the Bills get more mileage out of their runs, all so they would not go to the air (Halberstam, 285–287). Belichick also installed special defensive plays to confuse the Bill’s quarterback Kelly. It all worked. Slowing down the Bills allowed the Giants to dominate and win. Years later, while coaching at the New England Patriots, Belichick watched the Philadelphia Eagles lose because they did not step up the pace at the end of a Super Bowl game with the Patriots. No urgency at the end of the game led to a defeat. 

Pace is part of game strategy.  If you are thinking of selling your business in the next three years, for instance, plan to pick up the pace of your sales effort. The competition may not understand until it is too late and probably will not keep up. Valuation should increase as a result. It works in football. It will work for your company.

RESULTS

On 1 April 1981, Welch became Chairman and CEO of General Electric. On 2 April 1981, he announced that GE would “manufacture and sell an industrial robot as the first product of its new factory automation business” (Slater, 70). Welch’s goal was to make things happen at GE in order to increase the share price and margin. He did it by speeding up the pace. He began a restructuring process to dominate a business line, or leave it. Using the onetwo mantra (have a market share of either one or two in your business, fix it quickly, or leave it), GE left many businesses, some of which  had been part of GE for years. 

Where to focus in order to fix a division at your company? Porter’s value chain approach shows where to look. Infrastructure, HR management, technology development, procurement, inbound and outbound logistics, operations, marketing/sales and service make up his list (Porter, 37). Having a look at each of your divisions also makes sense.

The first step is analysis, but don’t let it take too much time. Implementation is the key, not planning. Make things happen. Building upon a mainline company that needed to be stronger, Welch started immediately to increase profits and share price. The rest is history. 

References

Collins, Jim. Good to Great and the Social Sectors. Jim Collins. 2005.
Halberstam, David. The Education of a Coach. Wheeler Publishing. 2005.
Magee, David. Turnaround: How Carlos Ghosn Rescued Nissan. HarperCollins. 2003.
Slater, Robert. The New GE How Jack Welch Revived an American Institution. Irwin. 1993.
Welch, Jack with John A. Byrne. Jack Straight From the Gut. Warner Business Books. 2001.

December 26, 2010

On Disruption

www.mixnerstrategy.com

Good review of up-coming - and current - technology: The Economist. 11 December 2010. The Technology Quarterly. After page 60.  http://www.economist.com/science-technology/technology-quarterly/?google_rv=2&cx=001087441947416295956%3Al-gk8r9zm4i&cof=FORID%3A9&qr=technology+quarterly&area=1&keywords=1&frommonth=01&fromyear=1997&tomonth=12&toyear=2010&rv=2

Clayton M. Christensen on financial controls - and their ability to destroy innovation: http://hbr.org/product/innovation-killers-how-financial-tools-destroy-you/an/R0801F-PDF-ENG

September 26, 2010

Warren Bennis - Twenty Years Later

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Warren Bennis' latest advice to folks who want to be CEOs (Brady, 22):

The first thing I would say is forget about balance of work and family. It's more that a full-time job. Abandon your ego. You can't solve everything yourself, so you've got to learn to build and work with a top team. If you don't have that, forget it. And you have to connect with as diverse a group as possible. You have to be as realistic as hell about the sacrifices to become a leader. But if you pull it off, you can make life better for so many people. What could be sweeter?

Now let's go back twenty-five years and see if that squares with his original thoughts (Bennis, 26-27):

    • Strategy I: attention through vision
    • Strategy II: meaning through communication
    • Strategy III: trust through positioning
    • Strategy IV: the deployment of self through (1) positive self-regard and (2) the Wallenda factor (it's not about failing).

My bet is that Bennis would make a couple changes if he could edit Brady's article. His mention of balance early in the discussion is polarizing, certainly, and, ultimately, problematic. 

References

Bennis, Warren and Burt Nanus. Leadership. The Strategies For Taking Charge. Perennial Library. 1985.

Brady, Diane. Speed Dial. Warren Bennis. Bloomberg BusinessWeek. 27 September - 3 October, 2010. 22.

August 25, 2010

Alan Greenspan Triumphant - or Not

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Autobiographies when soon after events and newly written history books have a problem. They sometimes don't stand the test of time, as analysis of current events, while useful, is dangerous as all the facts aren't in yet. Nixon wanted his say. Carter. Reagan. Bush I. Clinton. Bush II. They've all tried to have their say. However, it takes time to figure out what happened and what of it was significant.

My review of Greenspan's book in late 2007 (Mixner) just after Greenspan stepped down was almost exuberant in its willingness to accept Greenspan at face value. China was the great unknown. Inflation was the great enemy. Ah, if only things were only so simple.

13 Bankers really isn't about Greenspan at all. Its premise is that consolidation of the banking industry has led to an oligarchy of sorts, similar in some respects to the oligarchies we're seeing in Russia with the rise of capitalism and the rise of oligarchies from the ashes of the large state-run firms now in private ownership. Greenspan takes it on the chin (Johnson, 133):

  • Repeal of Glass-Steagall, one of the main-stays of Depression Era bank regulation was a bad idea.
  • Banks in 1996 were allowed to take up to twenty-five percent of their revenues from securities operations, up from ten percent. They then made things worse by leveraging said investmests.
  • Banks were allowed to enter new businesses not by gaining approval from the fed before-hand, but only by receiving a disapproval later, after they were already in business.
  • Old Glass-Steagall required Travelers and Citicorp to break up immediately after their merger as they were in unacceptable businesses at the same time. Their solution? Get Glass-Steagall repealed.
  • The huge merger wave of the late 1990's, and the passage of the Gramm-Leach-Bliley bill allowed the entry (or debacle, shall we say) of the entry of the huge banks into the mortgage business and into the mortgage-backed security business.

The history of banking is full of boom-bust cycles. This latest bust is just the latest in a series. The point is, however, without some re-writing of the rules, we can count on another bust cycle.  

References

Greenspan, Alan. The Age of Turbulence. Adventures in a New World. The Penguin Press. 2007. 

Johnson, Simon and James Kwak. 13 Bankers. The Wall Street Takeover and the Next Financial Meltdown. Pantheon Books. 2010.

Mixner, Jack. Greenspan Speaks. Mixner Strategy Blog.  http://mixnerstrategy.com/blog/2007/12/greenspan_speaks.html 2007.

August 21, 2010

Disruptive Surgery

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A disruptive strategy is one where you take your current offering - or a new one, for that matter - and make it cheaper, with fewer features than the marketplace currently thinks it needs. Do it right, and your revenues and profits increase immensely.

Now, I'm lucky in that I've never had a hernia, but I assure you that if I ever do, I'll have it treated by Shouldice Hospital outside Toronto. Why? Well, Shoulice doesn't have specialists in the normal sense. They're not trained in all the different specialities far beyond their normal GP-type training. My prediction is that ultimately, Shouldice will be so sure of what they do, that nurses will be doing hernia repairs. Why am I so sure?

Shouldice only does one thing - repair hernias. The normal failure rate on a hernia operation is ten to fifteen percent (Gawande, 38). Shouldice's is less than one percent. Since everyone just does hernia repairs at Shouldice, they have seen it all, to the tune of six to eight hundred repairs per surgeon each year (Gawande, 38). They've done repairs so often that when something goes wrong, they've seen the same problem recently and can react from rote. They know the exact thing to do, every time. If the surgeon in the room hasn't seen something before, one of the attendants has. They know what to do. There are no work arounds. They've decided, in advance, what to do in every situation they are ever going to see. This is a very good thing if you have a hernia.

Now, let's talk business. An operation at Shouldice isn't twice a much as at other places, as you'd expect. It's half price. And they get you in and out of the hospital fast. Their operating theaters are made specially for hernia repairs. Yes, the team is specially trained, but it is mainly on the job training. GPs are doing the surgery in most cases.

It's cheaper, faster and has fewer features. It's disruptive.

Reference

Gawande, Atul. Complications. A Surgeon's Notes on an Imperfect Science. Picador. 2002.

July 30, 2010

On Character

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Live dangerously. Tell the truth. Noonan talks about Reagan (Noonan, 212):

...Reagan thought honest words the only possible predicate for progress. ...He..remained consistent. The immature are always finding new truths, and the cynical are always discovering new philosophies to claim to believe in, but Reagan was neither immature nor cynical. And so was his consistency, which would have been impressive in anybody, but which was startling in a politician.

Let's parse out the important word, consistent. After his early union days in Hollywood, Reagan realized that his future evil empire was real. He stayed on message through those years and continued to stay on message through this GE speech-making days, his governorship, and his presidency. He stayed on message throughout. Now, as he became president, the Russians were looking for signs of how Reagan would act. Noonan thinks it was the air traffic controllers union strike that really started to turn the tide (Noonan, 222). The union threatened to close down American air space. Reagan said come to work or you are fired. They didn't come to work (at least most of them). They lost their jobs in short order.

I suspect that the Russians were expecting a blink, that Reagan would back down. Reagan saw the truth. The controllers wanted a huge salary increase. It wasn't right. He did the right thing. And the Russians watched.

This says quite a lot about being a leader. If you think little things - or big things, for that matter - are not important, you might want to reconsider. People are watching. The Russians watched Reagan and realized he was likely to do just what he said. Your team is watching you and making decisions as well. Make sure you are showing your true character at all times. And make sure your true character is the character of the right.

Reference

Noonan, Peggy. When Character Was King. A Story of Ronald Reagan. Viking. 2001.

July 18, 2010

The Positioning Process: The Claim

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Here is Moore's formula for creating a positioning statement (Moore, 161):

  • For (target customer)
  • Who (statement of the need or opportunity)
  • The (product name) is a (product category)
  • That (statement of key benefit-that is, compelling reason to buy).
  • Unlike (primary competitive alternative)
  • Our Product (statement of primary differentiation).

Reference

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperCollins Publishers. 1991.

The Case for Green

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Components: LEED 2009 for New Construction and Major Renovations (110 points total):

Sustainable Sites - 26 points

Water Efficiency - 10 points

Energy & Atmosphere - 35 points

Material & Resources - 14 points

Indoor Environmental Quality - 15 points

Bonus Points

Innovation in Design - 6 points

Regional Priority - 4 points.

Sustainability: "...a development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland Commission, 1987 in Our Common Future)."

Benefits of Green Building (Energy, Professional, 16)

Environmental Benefits

  • Green Building consume 26% less energy
  • Green building have 13% lower maintenance costs
  • Green building have 27% higher occumpant satisfaction
  • Green building have 33% less greenhouse gas emissions

Economic Benefits

  • Green market grows from $36 billion to $96 billion by 2013
  • 2% market in 2005; 10% in 2008; 20% 2013
  • Price same as not LEED certified
  • Sale price of building 10% higher

Social Benefits

  • 27% fewer headaches from proper lighting
  • Sales in stores with skylights were up to 40% higher than without skylights
  • Students with most daylighting progressed 20% than peers on math tests, 26% faster on reading tests.

References

Energy and Environmental Solutions. LEED Green Associate One Day Training. http://www.e2-solutionsinc.com/home.php?id=1

Energy and Environmental Solutions. LEED Operations and Maintenance. http://www.e2-solutionsinc.com/home.php?id=1

Energy and Environmental Solutions. LEED Accredited Professional Exam Preparation 2 Day Workshop. http://www.e2-solutionsinc.com/home.php?id=1

U. S. Green Building Council. http://www.usgbc.org/

July 15, 2010

Picking A Team

www.mixnerstrategy.com

My old friend Don Phillips once asked me which player on a Pop Warner football team is the most important. My response, was, of course, "Oh, it's the quarterback." Whoops. Don very quickly asked me why. Well, the QB drives everything that happens on the field. In the pros, obviously, the QB is the highest paid player on the team. But, remember, we're talking about Pop Warner, not the pros. There's a difference.

In Pop Warner football, if the QB doesn't end up with the football in his hands, nothing happens. Kids aren't necessaryily dexterous, so there is actually a very good possibility that, if you don't have a very good Center, your team is never going to go anywhere. One of your best players might end up being the QB, OK. But another good player had better end up playing Center. If you as a coach want to spend time with individual players on the field, the Center is a very good place to start. That even goes before practice to actual team selection. If you can, make sure you have a good Center.

Jim Collins actually has a whole chapter on the people topic entitled "First Who ... Then What" (Collins, 41). He has some tough advice, especially in these times. He points to the ascention of Wells Fargo from regional has-been to national power house. From 1983 til about 1998, the bank out-performed other banks. The effort to grow healthier and then larger actually started back in the early seventies when the CEO Dick Cooley started to very carefully put together a team (Collins, 42). It took him more than a decade to put his team together. Their efforts, working together, sparked the ultimate growth. Collins' criteria for selecting folks are interesting (Collins, 52): Ruthless could be nice for some companies. Rigorous is better. Not sure? Keep looking. Not happy with a current team member? Make a change (Collins, 56). Put your best people on the largest opportunities, not your problem children (Collins, 58).

OK, you say. What's the next step? Start thinking about what goes into your plan.

References

Collins, Jim. Good to Great. Why Some Companies Make the Leap ... and Others Don't. Harper Business. 2001.

Fire! Ready! Aim!

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In preparing for a series of presentations to small groups of CEOs, I realized that, strategically, I had a problem. Each of the groups is composed of CEOs with whom I want to discuss strategy while at the same time sending them home with some action items for the day after our discussion. That seems doable until you consider that many, many CEOs are entirely booked for the next three or four weeks, let alone tomorrow. Giving them homework to do might be a stretch. What to do?

Since I can't really expect a CEO to drop what she is doing to quickly implement homework from a speech, I needed a work around. So let's go with what we've got. One simple question comes to mind, "What are you doing tomorrow?" Let have a look. My bet is that, if we follow the Pareto Principal, we'll find that eighty per cent of that CEO's productivity comes from twenty per cent of her activities. There may be a strategic implication that is useful: there may be some things you don't have to do tomorrow. If you didn't do them, would you have more time to do something else, maybe even something strategic?

The "Fire! Ready! Aim!" mantra comes to mind. This next day action plan is really a "Fire!" plan. You already know what you are going to have to do, so you have to go ahead and do it. My only request? Carve out some time to do something strategic in your busy day. How? Don't do something - one of those eighty per centers, maybe - so you are able to give some thought to how to proceed strategically.

Let's have another look at the three words in the mantra. Next comes "Ready!" and "Aim!" If you give yourself some time, getting ready for planning is a very good thing to do. If you've never done planning, what comes first? Pick a team to work with you. Meet with them. Decide together what to do next. Just make sure the dialog is strategic, not just an eighty per cent activity.

 

July 13, 2010

The Five Most Important Questions

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Let's get right to it. What are Drucker's five important questions (Drucker, ix)?

  1. What is our mission?
  2. Who is our customer?
  3. What does the customer value?
  4. What are our results?
  5. What is our plan?

Now, we all like Drucker's work. How could we not? The latest edition of his Five Questions text is just icing on the cake.  Complexifying his five simple questions might not be a good idea. Let's just suppose, however, that we decided to break the rules. What would we add?

Two additions come to immediate mind. The customer question, basically, "What do our customers think?" could have two additional key points, namely,

  • "What do the folks who work here think?" and
  • "What do our stakeholders think (after Palermo, Do the Right Things..., 1-6)?"

These questions really read closer to,

  • "Would you recommend this company to your friend as a place to work?" and
  • "Would you recommend this company to you friend or business associate as a good place to buy goods or services?" Finally, stakeholders are asked something like,
  • "Would you recommend our company as an investment (after Palermo, 1-6)?"

Now, as we know, Drucker kept things simple. However, considering things a little bit more closely makes some sense.

Reference

Drucker, Peter F. with Jim Collins, Philip Kotler, James Kouzes, Judith Rodin, V. Kasturi Rangan, and Frances Hesselbein. The Five Most Important Questions You Will Ever Ask Your Organization. Jossey-Bass. 2008.

Palermo, Richard C., Sr. Do the Right Things...Right. It Is That Simple. A Step-by-Step Guide to World-Class Performance. The Strategic Triangle, Inc. 2003.

Palermo, Richard C., Sr. Leadership...A Return to Common Sense. A Leader's Common Sense Playbook for Uncovering the Right Things...and then Doing Them Right! The Strategic Triangle, Inc. 2006.

July 12, 2010

You Want Change. You Also Want Results

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Consultative selling is a very useful sales process. You spend quite a bit of time figuring out just what a customer wants before you do anything. Then you work with the customer to make sure that you are both on the same page. Then - and only then - do you propose on the customer's needs. It is a very useful method  based largely on The One Minute Sales Person (Johnson).

Palermo uses a similar methodology for change management. He says look first at the current state of the organization and then look at the new, desired state (Palermo, Leadership, 38) and identifies six generic stumbling blocks to actually making the changes you desire:

  1. Reward and Recognition
  2. Key Measures
  3. Strategies and Action Plans
  4. Focused Training
  5. Role Model Senior Leader Behavior
  6. Focused Communications.

The title of this posting could also be, "You Want Change. You Also Want Results. Now." If it were only so easy. Have a look at the list. Fail at any one of the six items and your initiative is likely to fail. A crucial suggestion: admit defeat early. Plan for success. Measure yourself as you go into the change initiative to make sure you are ready for all six steps. If you are not ready, rectify the weaknesses early in the process (Palermo, 10-4). Don't wait around. Your action plans will include measureable objectives. That makes sense. Your team, especially the ones that didn't actually participate in the design of your change plan, won't really understand what is going on. Paint them a picture (Bridges, 55). Visual aides work, of all sorts. Meeting and discussing with all the different constituents of the change process also makes sense. Face-to-face. That takes time, yes. It also ensures that your change process has a better chance of success.

References

Bridges, William. Managing Transitions. Making the Most of Change. Addison Wesley. 1991.

Johnson, Spencer, M.D. and Larry Wilson. The One Minute Sales Person. Avon Books. 1984. 

Palermo, Richard C., Sr. Do the Right Things...Right. It Is That Simple. A Step-by-Step Guide to World-Class Performance. The Strategic Triangle, Inc. 2003.

Palermo, Richard C., Sr. Leadership...A Return to Common Sense. A Leader's Common Sense Playbook for Uncovering the Right Things...and then Doing Them Right! The Strategic Triangle, Inc. 2006.

Results From Planning

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Planning with the "end in mind" will make for a better plan that actually is implemented. We all are used to the classic SWOT analysis where you consider your company's internal strengths and weaknesses and your external threats and opportunities. We all tend to focus on weaknesses because, let's admit it, they're easy to come up with. Threats are pretty obvious, but many times they come from sources we can do nothing about. Strengths - and let's hope there are lots of them - help you decide what to focus on. If you don't have a strength to support a strategy, maybe it was a very good strategy for some other company.

Some thoughts come to mind: A simple SWOT analysis on a flipchart with a few people gathered around may not be enough. Spending just a couple hours or days a year considering your strategy may be woefully inadequate. Polling the room for opportunities is nice. You may in fact come up with a few good ideas. However, unless those opportunities are tied to actual execution you are wasting your time (Barrow). Everyone is busy. Unless you really commit resources to executing the plan, nothing is likely to happen. Folks, after all, are already busy doing what they are already doing. How can you expect them to do more? Those woefully short days of planning are flawed because they don't include any plan for monitoring performance. Just having the plan is not enough. Implementing is nice, but it can't be implementing in a vacuum. You've got to tie your planning to periodic, repetitve re-visiting of your strategies and the action plans you have put together to carry them out. Those re-visits have to take place with everyone regathered in the room to talk about progress, what changes to make, and what strategies or portions of action plans to drop.

Other ways to consider strategy (Center):

  • Spending some time considering how other folks in companies in your industry and in companies you admire - bench marking - can be very useful.
  • Considering you company not as an individual entity, but as part of a business ecosytem makes for more comprehensive strategy. Consider customers, yes, but don't forget suppliers, logistics, human resources, information technology, customer service, along with manufacturing and service delivery.
  • The more people you have involved in the process, the better. The receptionist knows more that you might think. So do the folks on the loading dock.
  • Simple, actionable, dated goals are easier to refer back to. People will forget the particulars, however, unless you make the objectives more relevant to the individuals involved. Tell a story about how your objectives work at your company. Include more narrative or, literally, stand in front of a small group and tell a story and ask for their feedback on implementing the plan based upon the story's description.
  • Keep a score card of performance on objectives may be useful. Posting it on the wall works. So does posting it on the wall with a neon sign. They've done it with safety results at steel mills for years (remember the signs "462 days without an injury"?). How can you do it with marketing results, or HR results for that matter, in a similar fashion?
  • Mission statements, done properly, will focus your company on providing products or services that match the company's core competencies. Straying from your core competencies may rightfully cause you to re-consider whether such straying really makes sense.

References

Barrows, Ed. Four Fatal Flaws of Strategic Planning. Harvard Business Reveiw. 13 Mar 2009. http://blogs.hbr.org/hmu/2009/03/four-fatal-flaws-of-strategic.html

Center for Applied Research. Briefing Notes: A Summary of Best Practice Approaches in Strategic Planning Processes. 2005.  http://www.cfar.com/Documents/BestPract.pdf

July 07, 2010

Animal Spirits

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Akerlof's Animal Spirits Table of Contents (Akerlof, v):

  • Preface
  • Acknowledgements
  • Part One: Animal Spirits
    • Confidence and Its Multipliers
    • Fairness
    • Corruption and Bad Faith
    • Money Illusion
    • Stories
  • Part Two: Eight Questions and Their Answers
    • Why Do Economies Fall Into Depression?
    • Why Do Central Bankers Have Power over the Economy (Insofar as They Do?)
    • The Current Financial Crisis: What Is to Be Done?
    • Why Are There People Who Cannot Find a Job?
    • Why Is There a Trade-off between Inflation and Unemployment in the Long Run?
    • Why Is Saving for the Future So Arbitrary?
    • Why Are Financial Prices and Corporate Investments So Volatile?
    • Why Do Real Estate Markets Go through Cycles?
    • Why Is There Special Poverty among Minorities?
  • Conclusion
  • Notes
  • References
  • Index

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

BloombergBusinessweek. The BusinessWeek Best Seller List. 7 July 2010. http://images.businessweek.com/ss/09/06/0611_bestsellers/10.htm

Why Aggregate Demand Targets Aren't Enough This Time

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Traditionally, when the federal government battled a recession it had two main tools at its disposal, namely fiscal policy and monetary policy. You could reduce interest rates (monetary policy) and/or you could expand the money supply (fiscal expansion) (Akerlof, 86). When financial markets work, it is a straightforward task to stimulate aggregate demand using these two basic tools (Akerlof, 89). Unfortunately, because banks suddenly don't trust the system (and who can blame them) stimulating demand using these tools isn't working. Banks aren't making loans to business; they're keeping what funds they have on their balance sheets.

This time around the economy needs a greater boost than usual. Akerlof proposes a second target beyound aggregate demand, a target "for the amount of credit of different sorts that is to be granted. This target should correspond to the credit that would normally be given if the economy were at full employment. (Akerlof, 80)"

We all know why. Talk to any CEO and she will tell you that credit of any form is very tough to acquire. In order to book that new sale, a company needs to assure itself that it can actually produce what has been ordered and pay for the labor and materials related to the sale. Customers normally want terms for their sale, meaning, unless the company has funds to produce the order, the order isn't going to be produced unless someone supplies a credit line of some sort. Enter this new stimulus for credit.

For obvious reasons, banks pulled credit off the table. Interest rate reductions and increases in the money supply weren't enough to jumpstart the financial system, again. Enter federally provided (through non-traditional providers if need be) loans to reduce the credit crunch. Interest rate reductions and fiscal stimuli continue. Credit is added.

This is new. Some of the SBA lending guarantees currently available or discussed address part of the problem. So do guaranteed micro-loans (or not so micro loans). There may not be enough of them, but they are becoming available. If you need to leverage that new sale, look around for the funds. They are becoming more and more available.

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

July 06, 2010

On Human Psychology, and Business Strategy

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John Maynard Keynes first tackled the concept of "animal spirits" in his description of how psychology effected the markets.

Keynes Confidence Multiplier - the Keynesian Multiplier - rated the propensity of a consumer to spend, especially her or his propensity to spend part of a stimulus package. You had a choice. Spend your portion of a stimulus package, or save your portion. The more people who decide to immediately spend their portion of a stimulus package, the greater the impact of the stimulus, as that expenditure allowed the person or entity which received your portion to immediately spend, and so on. The higher the propensity to spend funds, the greater the impact. As computers and modelling were growing economic tools during the Depression and the periods following it, there ended up being a multitude of multipliers like the consumption multiplier, the investment multiplier, a government expenditure multiplier, and a confidence multiplier (Akerlof, 16).

Akerlof expands the discussion of the Confidence Multiplier's effect on economies to include Fairness, Corruption and Bad Faith, the Money Illusion, and, finally, economic Stories that effect results. If you have thought about it much, you probably realize that portions of capitalism are unfair. That realization may require closer examination. Involuntary unemployment has an economic cause (or certainly a psychological one), but that doesn't make it fair. The disenfranchised - the involuntary unemployed - seeth at their status which effects consumption. Inflation has an effect - a fairness effect - on aggregate output, as well (Akerlof, 25).

Corruption is a little more obvious, as we have a series of scandals to point to, like the Savings and Loan fiasco in the 80s, the Enron fiasco in the 90s and, more recently, the Subprime Mortgage market. These scandals effected not only their immediate environment, but the whole system. Hear enough about what is bad about a system and you may decide that just maybe your stimulus funds are better put into savings than into a newly "corrupt" investment.

If accounting is the langauge of business, business isn't working very well. Why? Well, after quite a bit of discussion, Akerlof (50) shows that accounting doesn't take into account inflation. Leave out inflation and you don't know what your savings account will really be in five years, your estimate of the current value of a bond will be off, you projection of a stock's price will be erroneous, wage contracts will be spurious, prices will be off (especially those contractually set into the future), and, those wonderful statements your receive about your stock holdings will suddenly be a lot less useful than you had expected.

Economists are supposed to base their predictions on facts, not stories (Akerlof, 54). There is a flaw here that explains why confidence takes a dive during a recession. All consumers hear is statistics. They don't hear stories about what is really happening, nor what economists think should be done. What economists forget is that facts don't drive markets - stories do. Eighteen banruptcies in your zip code or census tract don't mean much until you see those people thrown out on the street (OK, that doesn't happen much any more, I know). Then, the story of their plight will guide your decision making. You want to help, yes. You also don't want to end up in the same position. That effects your relationship to a stimulus package: you'd better save, the story goes, even when consuming is better for the economy. The stories people tell are more important than the facts.

So, some recommendations for your stategizing this summer:

  • Start with confidence. Maybe there is a reason to build your team up.
  • Make sure things are fair. Sometimes, fairness takes some explaining. You want to be fair to your current team and you want to be fair to your new hires. Fairness to each of those populations may read differently.
  • Corruption does have an effect. You have to stand back and decide whether the shrinkage you are undergoing is a boost to limited salaries - or theft. Both effect ultimate profitability in very different ways.
  • Southwest Airlines made more money through the last years than other airlines because it made fair estimates of the oil price increases and built those future prices into its contracts. When prices spiked, they had fixed price contracts that helped them weather the storm.
  • Stories matter. Employees listen to what you say. If you are going to tell a story, consider what the real message is. Make sure it is confidence building. And, remember, a confidence building story is sometimes hard to come by, so don't just wing it. Finally, remember that your team won't remember the statistics - they'll remember the story. Make sure it is a good one.

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

Wikipedia. Animal Spiritshttp://en.wikipedia.org/wiki/Animal_spirits_(Keynes)

June 28, 2010

Top OC Green Companies

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Here are the top twenty-five green companies in Orange County (OC Metro, 39): 

  1. B. Braun Medical, Inc.
  2. Towe Jazz Semiconductor
  3. Sustainability Leadership Program, UCI Extension
  4. Rent A Box
  5. Stantec Consulting
  6. The Costa Mesa Green Home
  7. Yard House Restaurants
  8. e-Recycling of Orange County
  9. McCarthy Building Cos.
  10. Miocean Fundation
  11. Nova Vita Salon & Spa
  12. OCB Reprographics
  13. NuWa Textiles
  14. Irvine Rance Water District
  15. Kaiser Permanente Irvine Medical Center
  16. Alere
  17. Toshiba America Business Solutions
  18. Waste Management of Orange County
  19. Cox Communications
  20. City of Irvine
  21. Green Foam Blanks
  22. The Irvine Co.
  23. Poseidon Resources
  24. UPS
  25. Sharp Solar Energy Solutions Group and the city of Huntington Beach

Reference

Borgatta, Tina. The 2010 Green Team. OC Metro. June 2010. http://www.ocmetro.com/t-GreenCompanies_MAIN0610.aspx

Designing Software When You're Late to Market

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"We're late on our software design project. What are we going to do?"

"Just add more people. More people means faster to alpha."

Ever had a conversation like that? Just throwing people at a project may not be the best solution says Fred Brooks in a now classic software design book. Brooks came out of IBM in the sixties where he managed the creation of big, main-frame software that took lots of time to create. Having seen it all, Brooks takes the time to share with us just what can go wrong on large software project - and how to avoid all the mistakes he watched happen over time. He has one basic premise. Actually, a bunch of them, but they all come back to the man-month.

Let's say management wants a computer program designed and implemented. They'll say, "Let's have it done by such-and-such date." Your job is to get the project done and the software implemented. Now, your company is like most others. It has a budget. So, wearing your best manager's hat you estimate how many hours you think the project will take. You do it pretty quickly, hand it in to the boss who approves it quickly, because, as we all know, the boss wants it done fast.

Brooks makes two points about the process just described: your estimate is always wrong because - are you listening? - you didn't plan enough for the ultimate implementation of the software (Brooks, 20). Interestingly, he says spend a third of your time planning before you even begin coding. Then, get the coding in a sixth of the time you have allocated to the project. "What?" you say. All the time should be spent on coding. Not if you want your software to work properly. You've planned it (and took a lot longer than you expected), you've coded it, and now, you want to implement it. You've forgotten half of the work, the early systems test (with the component test) and the late systems test with all the different modules in hand (Brooks, 20). They get half the work.

"OK", you're saying, "times have changed. We're making a different type of software than IBM made in the sixties." I agree with that. You've migrated to a different platform using all sorts of new bells and whistles, modifications and changes. I agree. My suspicion, however, is that Brooks has it right. Spend a third of your time planning, a sixth coding, and then, half of your time checking your work. That's Brook's first lessen.

The second one gets more interesting. When was the last time you delivered software on time? Never, right? Brooks has a formula for making up lost time. It's simple. Use the same number of - indeed, the same - coders. Extend the time. You can't do it right? It'll take too long. Well, adding more people won't save time. All you'll end up doing is messing up your time-line bringing people up to speed. The trainers are pulled from coding. The new coders never catch up (Brooks, 26). The only solution? I already told you: keep the same number of coders. Extend the time. Simple to do. Hard to sell to management.

What if you run a design firm? You have a job to do. Your firm's profitability depends on it. Estimate your project properly. Leave time for planning. Then, leave more time than you ever expected to test the result of your efforts before the code ever gets to a customer.

That's Brooks, 1982. The time has changed. The message has stayed the same.

Reference

Brooks, Frederick P. Jr. The Mythical Man-Month. Essays on Software Engineering. Addison-Wesley Publishing Company. 1982.

June 03, 2010

This is Your Knee Calling

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I spent a lot of time at the Medical Device and Manufacturing show back in the winter. One of the neatest machines I learned about was a new x-y-z printer that made prototypes out of stainless steel. One of the prototypes on display was a new hip joint that had been made entirely using the x-y-z process. It wasn't smooth like you'd expect - they had built in micro-ridges on the polished surfaces to retain lubricating fluids so the joint would last longer and feel better. When I saw the Capell (When Body Parts Call the Doctor) article, I couldn't help but think of the MDM show.

When a new joint is starting to wear out, it hurts. If you could program the new part to whine - via, say, WiFi to your Doctor's office - when things aren't going correctly that failing joint could be replaced before it advance to the pain stage.

These stories are the fun of medical device innovation. Manufacture better. Build in technology. The x-y-z printer cost $600,000 if I remember correctly, not a simple expense if you are trying to upgrade your prototyping facility. The electronics in that joint might force you to go through a whole new application process to the FDA. The negatives could out-weight the positives, unless you consider a few things. There will be lots of innovations in your processes over the next year. If you choose to consider carefully which ones to invest in, you are farther down the way. You will reject some new innovations; others will get the green light. How do you choose?

Corning says have an innovation team, not in your silo but at the corporate level. Include lots of folks on the team. Force them to deliberate - quickly. Then, once they like an idea, keep the idea before the committee. Force them to track progress. Demand reports back. And, this is important, allow efforts to succeed by giving them assets repetitively, not just once or twice. The x-y-z printer spent the money to buy machinery that they weren't sure a market existed for. The Corning folks invested in a new glass (new in that, while it was created initially in 1963 as an auto glass, then never touched for decades) by allowing expensive ($300,000 a pot) test batches, not once but a series of times. And yes, they pushed production of the lines to get the test batches. The team said it was worth doing, ran the numbers, and continued to follow up. If the CEO was the only advocate, he would've forgotten about it by the time came around for the second test batch.

Allow the ideas to percolate up. Prioritize them. Follow-up. Sounds too simple, but it works.

Reference

Capell, Kerry. When Body Parts Call the Doctor. Bloomberg Businessweek. 12 April 2010. 54. http://www.businessweek.com/magazine/content/10_15/b4173054256568.htm

Holstein, William J. Five Gates to Innovation. Strategy+Business. 1 March 2010. http://www.strategy-business.com/article/00021?pg=all

I Want Telescopic Eyesight

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When my Grandmother had cataract surgery in the late sixties, it was debilitating, to say the least. She was hospitalized and they kept her in bed for what seemed a very long time. She never really was her old self again. Now a days, that surgery is an out-patient procedure with very little downtime, if any. About twenty years ago, optometrists had to look for something else to bill for. Enter Lasik surgery in all its different types and phases. That worked for a while. In fact, I still get a mailing from my Optometrist about every other month saying that now is the time for me to upgrade my eyes with some sort of surgery so I won't have to wear my contacts. If you wear contacts, you're getting the letter, too. right? OK, I'm a late adopter. My Doc is trying to upgrade me, yes. I certainly won't pay as much for my procedure as the folks twenty years ago, of course. So, if you think about it, you realize they're already thinking of the next step. In my mind, it's not just the next improvement to Lasik surgery. I want to have telescopic vision, just like my digital camera. And I'll bet somebody's working on it. What do you think?

What's happened here is that the eye surgery market has matured over time. Cataract surgery is now very mainstream. Lasik surgery is very mainstream. In order to make the margins they used to make, eye surgeons need to be looking to the next eye improvement like, maybe, telescopic eyesight. Or, they can change their focus to something else that is profitable. Soon (if isn't happening already) nurses will be doing Lasik surgery. The Doc's will need something new.

Geoffrey Moore lays out the whole scenario (Moore, 61). If you look closely, the same type thing is happening to your tech company. After a while, especially if you have an approved medical device, for instance, you focus not on the next new thing but on how to improve your manufacturing process. That's the next step for you if you follow the natural progression from early stage products to later stage manufacturing. Here is the fun part: if you put some effort into your research and development efforts, now, you are able to cycle back to early stage products and re-invigorate your profit margins while you do it. That's the opportunity for you. It's what's happening in eye products. Quit improving your product. Go back and re-think it. When you do, your profits will go up. That's a good thing.

Reference

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005. 

May 31, 2010

Inside-the-Box and Outside-the-Box Thinking

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When you're dealing with an unknown, potentially lethal biologic sample, the last thing you want to do with it is to open the sample container to take a whiff. In some cases, such activity is a death sentence. Unfortunately, that (Peters, 238) is exactly to one of C. J. Peters' team members did with a sample he suspected was Ebola, a very nasty virus, indeed. When the technician (actually a highly trained physician) finally realized his error and confessed, it was days later, after lots of people had been, potentially, exposed as well. Not a good start to a very tough story.

The Ebola sample came from a large monkey colony at a test facility in Reston, Virginia, just outside of Washington D. C. The colony, after much and diligent effort, was eradicated, along with the Ebola virus.

So, what is the strategic point of this discussion? The Army team in charge of cleaning up the monkey colony was long on education and experience. They knew what to do and how to do it. They were experienced. This wasn't a case of a strong leader out ahead of the pack telling everyone what to do. Each person on the team knew what to do and when to do it. If they hadn't done things correctly, lots of people could have gotten hurt.

The point, to return to the question, is that there are strategies that require highly trained and experienced personnel to effectively carry out. Some of those strategies require true "outside-the-box" thinking. Some of them require the opposite, let's call it "inside-the-box" training. Two different types of people are required. Moore's Chasm talks about crossing the chasm from early adopters to the main market. Lots of that is outside-the-box thinking. Bureaucratic thinking, maybe even mainstream thinking like getting things done right time after time, is inside-the-box thinking, more like the repetitive strategies (like quality upgrades and just-in-time processes) in Moore's Darwin. Next time you do your SWOT for a strategic analysis, you might want to consider the folks in the room and whether they are insiders or outsiders. Who get assigned what may be the difference between success and failure.

Reference

Mixner, Jack. Expertise - or Talent? http://mixnerstrategy.com/blog/2010/05/post_4.html 

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperBusiness 1991.  

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005. 

Peters, C. J., M. D. Virus Hunter. Thirty Years of Battling Hot Viruses Around the World. Anchor Books. 1997.

It Took Atari Graphics to Solve Brain Physiology

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We all know about neurons in the brain. They are, supposedly, the place where thought takes place. Have more neurons, have more intelligence, or so the theory went. Until scientists looked at Einstein's brain. His brain looked just like yours and mine in terms of neurons. Where it differed was in the number of cells that were not neurons. In some areas of the brain, his "not neurons" were off the charts (Fields, 7). That led to a whole new exploration of the brain. They used microscopes, binary microscopes and electron microscopes. The problem with all those systems was that they worked on dead tissues. If you've ever run an electron microscope, you realize that the beam has to be focused on specially preserved, especially dead, tissue. So how do you look inside brain tissue - at the molecular level - to see just what is going on? Enter Atari and the generation of scientists the Atari-like imaging spawned.

First it was home computers with their readily accessible controllers and color graphics (Fields, 52). Attach a home computer to a microcope to a video camera and interesting things began to happen. Add a laser system and even more things showed up. You could see what was happening inside a live cell. So, what do you focus upon inside a living brain cell? Calcium transmits information from outside brain cells to the inside of brain cells. All this new technology allowed scientists to see calcium migrate - and when (Fields, 52). When scientists added fluorescing calcium-detecting dyes to brain cells, they could see which cells lit up and what kind of signal caused the flash.

This took new traits in your scientist (Fields, 54). In the past, the good scientists took their time. Preparing samples for an electron microscope that are worth anything takes time. Now, real time science required real time decision making. Your test brain cells only remained alive for so long. While they were alive you had to figure out what to do with them. When you was something on your computer/camera/laser imaging system, you had to figure out what it was - fast. Speed was a new trait. Fixing things on your equipment came in a close second.

Reference

Fields, R. Douglas. The Other Brain. From Dementia to Schizophrenia, How New Discoveries About the Brain Are Revolutionizin Medicine and Science. Simon & Schuster. 2009.

A Dollar Too Far

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Novartis spent more than $100 million, maybe a lot more (Miller, 146), during the years between the mid-eighties and 2005 on xenotransplatation, "the use of live animal tissues and organs to heal sick people (Miller, x)." Ending in 2005, Novartis' investment over three years in the final xeno company they supported, Immerge BioTherapeutics, totalled $30 million. During the period, Novartis never saw a return on its investment.

With all the stimulus funding sloshing around our economy, billions of dollars seem more the norm, but Novartis' $100 million was a lot to them. For their money, they received significant results. Specially grown pigs with special genes were able to provide kidneys and hearts to baboons. The organs weren't immediately rejected. One kidney, in fact, lasted more than two months (Miller, 207).

Immerge and companies like it were established because there is a need for organs. Human donations aren't keeping up with demand. It seems there might be a calculation here to ascertain if federal spending on xeno projects makes sense. Totalling the lifetime of expenses for the normal kidney dialysis patient might give some indication whether additional NIH investments makes sense. We all know the answer. It all makes sense. The problem is "Where's the money to come from?" Not an easy question.

Reference

Miller, G. Wayne. The Xeno Chronicles. Two Years on the Frontie of Medicine Inside Harvard's Transplant Research Lab. PublicAffairs. 2005.

Telling the Green Story - and Making People Listen

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Here's the story (Swan): hyper-active kid grows up, decides to become an adventurer and, because he read a lot of cool books as a kid about Artic exploring (and Antartic exploring, as well), decides he wants to retrace the steps of the original explorers in the Antartic. All good. We get that. All of us know enough about the topic to predict what happens next. Two things, actually. One, money is hard to raise for such an exploration. That's easy to figure out. Two, the explorers get in trouble. All this makes the story interesting. There's a twist in all this that makes it even better: the explorer becomes a green advocate and tries to change the world. Also predictable, if you think about it. I could stop now, but we need to consider the topic.

There are politics that make a solution for our green problems hard to solve. The science of our green problems is hard, as well. We don't know precisely what to do, especially when we balance the green problems with the capitalistic need for growth.

The federal government, in all sorts of ways, is trying to spur business to recognize the need for change, and more importantly, do something about it. In my speeches to entrepreneurs, I always try to make clear that there is no free money from the government. If you take a grant or a loan you're going to have to work to get it and then you'd better perform according to your business plan. Or you are in trouble.

So, we have to realize that the government is interested and that the government doesn't know what to do. We talked about capitalistic growth. Well, in less obvious terms, the government is pointing to an opportunity to fix things before it is too late. Take that government money or not, realize that the opportunity still exists for you and your company to do something. Think about it. What are you going to do? And how are you going to make it profitable?

Reference 

Swan, Robert and Gil Reavill. Antarctica 2041. My Quest to Save the Earth's Last Wilderness. Broadway Books. 2009.

Stories About Hospitals

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Sometimes experience matters. There was a patient. She "didn't feel too good (Gawande, 1)." The medical student assigned to her had done his best. The nurses were watching. All seemed well. The resident wasn't buying it. His experience told him that that patient warranted close following, more than the medical student was providing, so he took it upon himself to continue to follow up. This time, the patient was lucky. The resident found a problem on one of his frequent, unscheduled, visits and made sure things were put right. A good result for the patient. A good result for the medical student. A good result for the resident.

Even without the resident's close attention, basically, the patient got the best care in one of the best hospitals. However, without the resident's willingness to admit that he didn't feel good about what was going on, the patient would have probably had a wholly different outcome. His experience - call it gut reaction, if you will - made all the difference.

So, strategically, what's the difference? Lots. We might say, "Trust your instincts and act," and we'd be partly correct. There's more. Follow-up takes work. Showing up and asking questions repeatly is a part of success. Training the staff - the team - that doing things by book might not be enough seems obvious. Sparking their interest in following-up is part of your job. Not easy, I know. However, relying on "following the book" isn't enough. So, it takes two things to succeed, at least in this instance. Do things by the book, yes. But, at the same time, you've got to focus on the patient and the book. Keep looking when things don't feel right. Showing up isn't enough. Show up engaged works better. The trick here isn't easy, however. You've got to figure out how not only how to motivate yourself to show up engaged. You've got to do the same thing with your team.

References

Gawande, Atul. Better. A Surgeon's Notes on Performance. Picador. 2007.

April 12, 2010

Innovation 1930-1950: Heart Lung Machine

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The stent has upset the perfusion market. It is cheap (well, cheaper). It is less invasive. It replaces surgery to fix arteries, veins and all sorts of major organz. All good things.

But, in its time, the heart perfusion machine - the heart lung machine - was an innovative device that helped millions to survive major surgery and to live long lives. By oxygenating blood outside the body, the machine allowed surgeons to make repairs that, until then, would have gone unrepaired.

Cate, George M. A Final Look at Perfusion in the 20th Century. AMSECT (American Society of Extra-Corporeal Technology) Today. December 1999. 1.

Kids With Diabetes

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A decade ago we started to hear stories of kids with Type I diabetes. Since then, the prevalence of the disease in children has continued to grow. Of course, kids hate the testing related to diabetes. Enter a parent with an idea. Why not hook the testing to the very popular Nintendo DS video game (Weintraub)? That brainstorm led to the Glucoboy testing system and then to the Didget system from Bayer. The idea is to entice kids to keep testing on a regular basis. Available now in Holland, Australia (Glucoboy) and Ireland (Bayer), here's hoping the testing system catches on.

The biggest concern about any new product like the Didget is whether it will get the sales needed to propel it into the bigtime. The inventor came up with a new way of looking at an existing technology. He's hoping it catches on. Bayer - a world-wide pharmaceutical powerhouse - is hoping for more sales of all its diabetes products.

There are a couple flaws I hope the system overcomes. A disruptive product, almost by definition, is cheaper and has fewer features than existing products. It doesn't fit into the normal way a product is normally taken to market (Moore, 64). In the medical device arena, if a product is not cheap then, hopefully, it is on the list of insurance approved products. The Glucoboy/Didget is neither cheaper nor approved for insurance reimbursement (Weintraub). Kids who use it have very high success rates for managing their disease, that's true. Bayer is assuming "parents will spend anything" (Weintraub) to control their kid's diabetes.

Rooting for any device that reduces kid's problems with diabetes is a good thing. Here's hoping the Bayer Didget finds its niche.

Bayer Didget. http://www.bayerdidget.co.uk/Home

Glucoboy. http://www.glucoboy.com/

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005.

Weintraub, Arlene. Diabetes Is No Fun-But It Can Be a Game. Bloomberg BusinessWeek. 19 April 2010. 62. http://www.businessweek.com/magazine/content/10_16/b4174062706997.htm

March 28, 2010

Value Chain Mash-ups

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It is tricky to say who defined terms first in the busines press. Value chains have been around for a while. Porter talked about them. So does Moore. Moore also shows why Christensen should have talked more about value chains in his work on disruptive strategy. Let's see if we can reconcile all this into a workable strategy.

Porter's model worked like this (Porter, 60): Inbound Logistics flows into Operations flows into Outbound Logistics flows into Marketing & Sales flows into Service. There are overlays of Firm Infrastructure, Human Resource Management, Technology Development and Procurement. It is handy to remember, as well, that Porter (Porter, 12) compared Competitive Scope with poles of Narrow Target and Broad Target, to Competitive Advantage with its poles of Lower Cost and Differentiation, to yield his Three Generic Strategies of Cost Leadership, Differentiation and Cost Focus/Differentiation Focus. I suggested recently that the Orange County Business Council use the Porter Value Chain model for research they are performing for the Workforce Investment Board because the methodology has been around a while and is seemingly bullet proof for workforce projections. Customers and competitors are crucial to the model, as a firm is always bench-marking performance against the norms.

Moore (Chasm, 12) talked about a bell curve comparing five sequential consumer populations: Innovators, Early Adopters, Early Majority, Late Majority and Laggards. The crucial section (Chasm, 17) described the near certainty that, while Innovators and Early Adopters might like your new product, if you ever want to make money, you'd better figure out a way to "leap the chasm" of failure for most companies and figure out how to sell to the Early Majority, as their buying habits were vastly different from the Early Adopters in crucial ways. In Darwin Moore applies the value chain concept to innovation (Darwin, 38) while enhancing his discussion of the chasm by describing its effects on complex sales and volume sales.

Christensen explores the evolution of the disk drive market (Christensen, 16), pointing to the inevitability that disruptive products (from new, smaller, more innovative companies) are nearly certain to replace sustainably improved products (from main-stream companies). His team at Innosight follows with a methodology (Anthony) to keep your main-stream, not very innovative, company disruptive.

The Boston Consulting Group compared relative market share with growth rate in its Growth Share Matrix (Boston). Question mark divisions become stars or dogs according to the their relative growth rate compared to the competition and the growth of the market. Hopefully, stars become long-term cash cows, not dogs. The message from this is that divisions migrate from section to section according to market conditions.

Moore very usefully attempts a mash-up of all this disparate information. He amplfies Porter's value chain with overlays for complex systems requiring consultative sales processes and for volume operations where the sales process focuses on a closed-end transaction (Darwin, 38). Then, he applies four innovation zones (Product Leadership, Customer Intimacy, Operational Excellence, and finally, Category Renewal) to the Chasm bell curve. For instance, he defines four different innovation technologies that apply to growth markets (Darwin, 73) in the Product Leadership zone of his Chasm bell curve and ranging up to mature markets: Disruptive Innovation, Product Innovation, Platform Innovation and Application Innovation. You have a choice in your company. If you are rapidly growing, focusing on just a few strategies in this range makes sense. If yours is a mature company or - horrors - a declining company, returning to the growth market strategies also makes sense.

Specific strategies are strengthed when you consider the stage of your technology - and your firm.

References

Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield and Elizabeth J. Altman. The Innovator's guide to Growth. Putting Disruptive Innovation to Work. Harvard Business Press. 2008. 

Boston Consulting Group. Growth Share Matrix. http://en.wikipedia.org/wiki/Growth-share_matrix

Christensen. Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997. 

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperBusiness 1991.  

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005.

Porter, Michael E. Competitive Advantage. Creating and Sustaining Superior Performance. Free Press. 1985.

March 24, 2010

Operational Objectives Central to Strategy

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When you facilitate the strategic planning process, you focus on six basic objectives for the corporation (Birnbaum, 128):

  1. Financial
  2. Marketing/sales
  3. Product/services
  4. Operations
  5. Human resources
  6. Community.

It's a good list as it includes all the obvious objectives you might want to form. Consider making a couple objectives under each major category and you're done. That's simple. Sometimes things are forgotten. Marketing always seems to come first as it drives the top line. Operations is melded into human resources in today's environment as your objective many times is to reduce the head count to increase efficiency. That head-count reduction might have worked over the last eighteen months, but by now it is wearing thin, as are your worn out employees. You could lean on your suppliers to reduce costs, or convert to a quality system of some sort that focuses, for instance, on continuous improvement. I'm thinking those are nice strategies, but didn't we take care of them in the eighties? What do we do now in operations?

There's a picture of an Chrysler automobile manufacturing line that says it all (Simpson, 280). It shows three seemingly different models of Chryslers (two Grand Cherokees, a Chrysler 300C, and a Chrysler Voyager) all going down the same production line. Chrysler, although late to the flexible manufacturing game, is following a platform strategy, that of focusing on the commonalities in a group of products in order to cross-pollinate each of the products with like parts and processes. They do it to save costs and therefore increase profitability.

So, where does platform strategy fit into your strategic plan? Under marketing and product objectives, you might consider what products you are going to manufacture. You make sure that you have the technology strengths to manufacture the products you are targeting, and then firm up your product line strategy by segmenting all the different products in different lines. Right here you have an option to add a platform strategy to what you are doing. If you can figure out a way to provide like parts to many of your different products and product lines, you are on the way to a platform strategy. When the New Beetle came out, for instance, it really wasn't so new (Marion, 84). It fit into a product platform inside the world-wide Volkswagen scheme composed of VWs, Skodas, Seats and Audis. It's new design and all the hoopla related to it fostered growth across the platform as the New Beetle's use of platform parts reduced engineering costs and production costs as the volume of parts used across the platform increased with the bump in sales of New Beetles.

Now, there are impacts as a result of this decision. You have to consider product architecture, design, manufacturing and sourcing, and, finally, customer service. If you do it correctly, however, the platform strategy allows you to reduce costs significantly while at the same time increasing the diversity of your product line and its utility to consumers.

Reference

Birnbaum, William S. If Your Strategy Is So Terrific, How Come It Doesn't Work? AMACOM. 1990.

Bowman, Daniel. Effective Product Platform Planning in the Front End. In Simpson. 19.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

Simpson, Timothy W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

March 23, 2010

Chinese Risk Takers

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My laptop blew out its screen recently and it looked like I was going to have to buy a new one. Since I wanted more portability, I looked at the netbooks. Since I had reported here about the one computer per child movement, I knew about Asus computers and their EeePC. I was focusing on the one with the new Intel chip, the 450N, because it seems that it had the longest battery life. All good. What was also good was that I was able to fix my old laptop and move on without buying another box. All this forced me to understand what the Taiwanese and other Asian businesses are discovering: Silicon Valley is a good place to do research and buy early stage companies. Why let the Silicon Valley VCs have all the fun? They can do it themselves.

And do it they are.  There's risk here, you say. Why would they want to take on this risk? And how can they compete with the VCs on the ground? Not possible. Possible! If you've dealt with Angels and VCs lately, you realize that they aren't investing like they used to, and, when they do invest, they are taking less risk. They feel more like bankers than VCs. What's an Asian tech company to do, especially when it wants access to new ideas and designs? Invest. And invest they are. That Asus computer I mentioned above used to be an unknown. They'd learned how to make the designs. All they had to do was make a complete box. They did it for others, now they are doing it for themselves. It all makes sense. Silicon Valley better get going. Now is the time.

Reference

Vance, Ashlee. Asian Computer Makers Move Into Riskier Ventures. New York Times. 15 March 2010. http://www.nytimes.com/2010/01/06/technology/personaltech/06valley.html?ref=global-home 

The Corvair Was A Platform Strategy

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My friend Steve Maylish first referred me to an article (Marion) about the Chevrolet Corvair and platform strategy. I have to admit that early on, I was giving him a hard time because the Corvair, as we all know, has a storied past, what with Ralph Nadar and all. If you give the message a little time, it grows on you, however.

The Corvair was conceived in about 1955 as a Volkswagen killer. The Big Three in America realized that the foreign imports were doing something they hadn't even considered: selling small cars. General Motors decided to do something. The result was the Corvair. If you look a little more closely, you will notice that the Corvair isn't one car, but at least three or four depending on your definition of a car. There was a four door. There was a two door. There was a two door convertible. There was a van. There was a pick-up of sorts. Then, for most of the models, there was a souped-up version that was a lot of fun to drive. All new. All based on a new platform (when had we ever seen a rear engine car in America before, at least since the very, very short-lived Tucker?) with many shared parts across all the models. Now you have to squint a bit, but you will realize that the Camaro replaced parts of the offering, as did the Chevrolet Van. They were part of the platform, too.

Early on, the Corvair was disruptive in the industry. It was different, certainly. Cheaper, probably. It's smallness forced them to leave off some of the fins and chrome American autos were famous for at the time. It allowed General Motors to enter the compact market with a new design conceived from a blank piece of paper.

The platform part of the strategy allowed GM to use the engines and suspension parts across the whole product line, saving money and design time. Looked at another way, because they were focusing on fewer parts, they were able to invest more in each part.

Reference

Simpson, Timoth W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

March 22, 2010

Investing in Disruption

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Let's say the business press has been speculating about which firm in your industry will make a particular technological advance in an existing product line. The press is looking to identify the winner, as they speculate that the winner's stock value will go up when it announces this new incremental improvement. If you read between the lines - and you're the CEO - you might make the decision to invest heavily in the incremental improvement in order to take advantage of this hit to stock price. In strategic terms, we're talking about a sustainable improvement, one of many that have been made over the years in your product line. The question we're talking about still is "Does it make sense to invest heavily in this sustainable improvement in an existing product line, or is it OK to follow along as other industry participants make the incremental improvement first?"

Let's contrast this sustainable improvement with a disruptive improvement, an improvement made to a product in a small, emerging market. Let's underline the contrast again. Does it make more sense to invest in a sustainable improvement to a current product line, or does it make more sense to invest in a disruptive innovation in a product line that, while new, could grow rapidly?

Christensen tells us the answer (Christensen, 132). Invest heavily in the disruptive innovation to the new product line. The pay-off is twenty times as lucrative as the investment in the sustainably innovated product line.

In financial terms, we're talking about two types of risk, market risk and competitive risk (Christensen, 132). If you are going to invest for the biggest bang for your buck, invest in markets, especially emerging markets and products as opposed to investments in competitive situations where market leadership doesn't matter so much (Christensen, 132).

Reference

Christensen, Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997.

March 21, 2010

The First Time They Fixed Healthcare

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The New York Times just announced that the administration has the votes to pass the healthcare bill. Since I have just finished a book that includes whole sections on another chapter of the healthcare business history I couldn't help but look for commonalities.

Jim Clark helped found Silicon Systems back when. For his efforts (and after he was forced out) he made tens of millions of dollars. To prove he could do it again, Clark made hundreds of millions on the first Internet stock, the one that started everything, Netscape. Of course, as we all know, Microsoft slowly ate Netscape's lunch. So Clark had to do it all over again, with what they started to call Healthscape (later changed to Healtheon because some smart kid already owned Healthscape.com). Now, Healtheon was posed to really shake things up.

Jim Clark had drawn a picture that you can mimic easily on a napkin if you decide to (Lewis, 99). He put four dots on the paper. One was labeled Payers, another Providers, the third Consumers, and the final one Doctors. Pretty simple. You have to remember this was during the Internet boom. You didn't need anything but four dots to go public. So where was Healtheon in those four dots? Right in the middle, taking a portion of the flow of monies for every transaction flowing between the four dots. This was simple to do as this was the Internet. Everything would be automatic. 

Healtheon almost made it big, except for one problem: the Russians defaulted on some bonds, sending the whole market into turmoil and sinking many offerings, most forever. Healtheon ultimately sank too.

I promised commonalities between the Obama plan and Healtheon. I guess I won't be wrong if I say they are both big. Healtheon thought they had a simple solution that would work. The Administration may not be convinced that they have a simple solution, but they do clearly believe that they have a solution that will work. I am going to stop right there. All I will say is that something needs fixing in the healthcare mess and that, hopefully, the solution they are about to vote on will start the process of fixing some of the weaknesses. I suspect this will be even harder than we envision (someone told me the bill was more than two thousand pages long - amazing!), but the first step is always the hardest. Good luck to us all.

Reference

Lewis, Michael. The New New Thing. A Silicon Valley Story. W. W. Norton & Company. 2000.

Bloomberg's Fifteen-Year-Old Over-Night Success

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Mike Bloomberg joined Salomon Brothers in 1966, fresh out of the Harvard MBA program. He counted securities for a while before he moved upstairs to the stock-trading department, working for Jay Perry, with whom he worked until Perry moved on the Dallas, allowing Bloomberg to take his job as head of Salomon's equities desk (Purnick, 26-32). Exile to the "information services" department in 1979 came as the result of serious in-fighting with the same man who was instrumental in exiling Perry to Dallas earlier (Purnick, 33).

Exile could have been the end of the story except for Bloomberg's interest in things any trader in his right mind in the seventies wasn't even considering: how to instantaneously use information to make more money. Manual was the norm. You made decisions based on gut feel and old data. No one was taking advantage of real time information very well. No one was making use of historical information at all. Enter Mike Bloomberg.

While still a trader, he started to figure out how to program the Quotron machines that Salomon had early on invested in. Ultimately, you could ask the machine "what if" questions, something no one had ever considered doing before (Purnick, 34). So Bloomberg's exile became a learning opportunity. The Quotron turned into desk top, personal computers for every analyst, something the rest of the firm still thought a foolish waste. Main frames staffed by staff in a back room were the norm. Bloomberg pushed and pushed and pushed for more personal computers. That pushing had an effect, just not the effect Bloomberg had expected. He still had enemies (remember the guy who exiled him to IT in the first place?) who, in a reorganization of the firm, finally pushed him out the door (Purnick, 36-37) for good in 1981. A nice thing was buried in the distaste of the firing: they handed him cash and securities worth $10 million and sent him on his merry (not too happy, probably) way (Purnick, 37). Bloomberg took two other Salomon values along with him: he didn't cheat, and he "wouldn't tolerate dishonesty" (Purnick, 37).

Drum-roll please! Enter opportunity.

Basically, we all know the story from there: Bloomberg and a small team sold their services to Merrill Lynch to program some computers. Merrill kept buying and investing in Bloomberg's firm long enough for him to reach the critical mass needed by an entrepreneur to succeed. Let's just remember that by the time he closed his first deals, Bloomberg had been working diligently not for a couple years, but for almost two decades. This was no over-night success.

Reference

Purnick, Joyce. Mike Bloomberg. Money, Power, Politics. PublicAffairs. 2009.

March 18, 2010

Every Kid Gets a Computer

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We've been talking for some time now about the advent of a computer for third world kids. Slowly, the talk is turning into a reality. Negroponte reports (Negroponte, 81) that "1.4 million children in 35 countries" speaking "25 languages" are using the original $100 computer (which actually cost $175), the XO from One Laptop per Child. That circuit board had lots of pieces, maybe 900 or so. The goal? A circuit board with "only one chip" (Negroponte, 81). That's all. One chip. And, oh, the computer actually costs $100 this time around, hopefully.

Who cares? First generation XO's go home with their owners. Kids sleep with their computers. They're learning like never before. All 1.4 million of them. Think about that number. 1.4 million is a lot. And yet it is nothing when you consider how many kids there are in Africa. Or South America. Or Santa Ana. We have a way to go yet.

But that's the good thing. There are opportunities here. The XO sparked all sorts of things, from cheap screens to cheap electronics to small computers to wider band width to more kids sleeping with their computers. This next chapter will do the same thing. The next version XO won't be a laptop, it'll be a tablet (Negroponte, 81). You're thinking, "Apple already did that, so what?" Think again. A one chip tablet isn't going to be given to 1.4 million kids. I'll bet 140 million get one. Think about that. Negroponte got beat up last time around because the price wouldn't go down fast enough, because Intel jumped in and created a cheap chip of their own (the Atom, in all those netbooks out there), and because Asus said, "We'll move from chips to computers" and started to make a good competitor to the XO. Big deal. Yes, big deal. Negroponte pointed out a need, started down the production path, got beat up, sparked a new industry, kept going, and still has a vision for more change. He's one guy.

How come your design team isn't acting like that? "Oh, they're too busy," you say. Really? Have another look.

Reference

Negroponte, Nicholas. The Next $100 Laptop. Wired. April 2010. 81.

March 17, 2010

Saving Too Much

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Right now it is easy to take shots at Toyota. GM and Ford are taking pains not to, as they know what it feels like to be in the spotlight. But that doesn't mean that we can't have a look at what went wrong at Toyota. Now, we can point, look at the facts, and, realize that we aren't getting the whole story. Here's the story we're getting from BusinessWeek: Jim Press warned the Toyota brass in Japan in 2006 that there were quality issues with Toyota autos (Ohnsman, 34). Earlier, the company president "boasted of saving $10 billion in the previous six years by reducing operating costs (Ohnsman, 34)." Now, so you know, we have a Toyota. We like it for all sorts of reasons. And, so you know, I have stood back and tried to decide if I would recommend that we buy another Toyota. If you listen to the ads of satisfied new customers, Toyota is hoping that my decision - and lots of other folks' decision - will be to buy another Toyota. I guess the way I'll look at it is to try to figure, with all the problems we're hearing about, the Toyota I might want to buy someday is as good as or better than other autos on the market. That's how I'll make up my mind.

There are issues that apply to a well-run company that we all have to recognize. Continual focus on the bottom-line can ultimately have serious implications. Continuous improvement has to focus on improvement, not continuous cost-cutting. There is a difference. Sometimes it is hard to ascertain. The step that is missing is to realize the difference and act upon it. Just following along and removing every iota of quality to save money isn't what continuous improvement is all about. Reducing production time saves money. Reducing the number of parts in an auto, done correctly, can save money. Saving money is good. Ultimately, folks will notice if the quality isn't there. Toyota has gotten caught in a spiral. With effort they'll do fine. The real benefit is to notice what happened and make sure it doesn't happen to your company.

Reference

Ohnsman, Alan, Jeff Green and Kae Inoue. The Humbling of Toyota. Bloomberg Businessweek. 22 & 29 March 2010. 33. http://www.businessweek.com/magazine/content/10_12/b4171032583967.htm

OpEd Pragmatism

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Occasionally, my pragmatic spirit gets in the way. In a quick stand-up planning session after another meeting recently, I changed my direction two or three times in seconds based on new information from others in the meeting. One of the women in the meeting said, "I'm never marrying you. You change your mind too much." That certainly caused this happily married man to pause and go "What?" And of course, from her point of view, my friend was correct. I do change my mind too easily, or so it seems. In my defense, I realize I am pragmatic - do what it takes, and all that - not hopelessly unable to make up my mind.

That "What?" allowed me to actually read Fish's comments about pragmatism, and caused me to ask my friendly research librarian to order Margolis' new book on pragmatism. The librarian was able to show that only six copies of the book existed, and that, really, did I want to order the book? Closer reading of the OpEd said, "No, don't read the book. You'll go nuts."

Pragmatism "is among the 'very small number of Western philosophical movements ... that ... never exceed the natural competence and limitation of mere human being (Fish quoting Margolis).'" That says there is a philosophy called pragmatism. We make pragmatic decisions all the time. We overlay other codes of conduct on our decisions, but, given a bit of flexibility, those codes don't have to be inflexible. Strategically, when you are working with a team, go with the flow. Have some plans that don't change - grow xxx per cent this year - but be willing to change, sometimes on the fly, what you are doing day to day. That's my read on the situation, anyway. But, and here is my personal caveat from experience with my friend, sometimes it pays not to change your mind too often.

References

Fish, Stanley. Pragmatism's Gift. New York Times. Opinionator. 15 March 2010. http://opinionator.blogs.nytimes.com/2010/03/15/pragmatisms-gift/?ref=global-home

Margolis, Joseph. Pragmatism's Advantage. American and European Philosophy at the End of the Twentieth Century. 2010.

31 January 2007 The Day the Market Broke

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First, he sold bonds on Wall Street back in the late eighties. Then he wrote about the experience in Liars' Poker. Now he is back with a book about the recent debacle entitled The Big Short. Already targeted for production as a movie (Osinski, 96), Michael Lewis' latest plays up the few players in the recent market who really made money, the ones who figured out that there was something wrong with all those mortgages out there, and figured out how to short the mortgage market, all to derision, first, and for great wealth, later. Osinski does a little digging and quotes an optimistic Lewis the day before the bond market broke in January 2007 and compares the quote with Lewis' final realization that, whoops, was he wrong. Rubbing it in when someone takes a bad stand is always fun for Monday morning quarterbacks, as it were.

Lewis got it wrong way back when. Luckily, the star of his book didn't. Michael Burry, a resident neurosurgeon, typed his predictions of doom into the ethers of the web as it existed in the late 1990's (Osinski, 95). People noticed, and sent him money to invest. He continued researching, hitting ultimately on the realization that mortgages "would start to blow up...when the original teaser rates expired" (Osinski, 96). Burry figured out how to invest his point of view and made a fortune.

Contrarians are always interesting to review in hind sight especially if they made money. There are always grey clouds over booming markets. The trick is to know when the rain is going to start. Modern strategy says have a plan and invest heavily in it. It is sensible to realize that everything good ultimately goes bad. Having a plan - having alternative investments already cooking - makes sense in any market. Right now, that means, yes, continue to improve the products and services your current customers happily buy. However, realize that it makes sense to invest in simpler, cheaper combinations for markets you might not normally address. Left a market behind in the last decade? It might make sense to look back to those customers to see if they might be interested in what you are making today, but at a cheaper price/feature point. If they're interested, maybe you have a way to grow, even in a slow growth market.

References

Lewis, Michael. The Big Short: Inside the Doomsday Machine. W. W. Norton. 2010.

Osinski, Michael. The Subprime of Their Lives. Bloomberg Businessweek. 22&29 March 2010. 94. http://www.businessweek.com/magazine/content/10_12/b4171094664065.htm

February 16, 2010

Conversing With Your Customers

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Picture a middle-eastern bazaar on market day maybe in the middle of the eighteenth century. What do you see? People packing the square. Shouting. Cursing. Eying. Ignoring. Touching. Feeling. Negotiating. Settling. Paying. Carrying. Trusting. Not trusting. Knowing. Undecided. Decided. Rich. Poor. Packed. Tight. Close. Smelly. Smoky. Sensual. Nonsense. Cheap. Exquisite. Sunny. Shadowed. Wet. Rainy. Cold. Hot. Safe. Unsafe. Escorted. Unescorted. Free. Enslaved. Story. Sounds. Music. Singing. Horses. Monkeys. Pestering. Quiet.

Now picture a Target on a Saturday afternoon. How many of the adjectives above apply? Some of them just don't fly anymore. People want to be safe. They want a fair deal. Things have changed. Walmart the same way. The center of the retailing universe has become staid. Yes, the end-caps sell. So do the aisles, or, believe me, the items for sale won't remain at Walmart very long. But the experience has changed. Maybe it is a good thing. It might be what we really want.

Doc Searls (Levine, 76) says we really do want the bazaar, and that the bazaar has been re-created on the web. Want to argue? There's a place for you. Same with every one of the adjectives above. Quiet. Unsafe. Smelly. There's an idea.

Searls talks about a marketing assignment for a computer company that had spent years in the dark making their latest product. They wanted to make a big splash at the launch. There was no way. No one was interested.  They weren't part of the conversation, and, crucially, the conversation couldn't be created in an instant. My friend Shannon Barnes clued me in to The Cluetrain Manifesto. He does a good job with all the media out there. Twitter. Facebook, I guess. Linkedin, certainly. What's that mean for you? Want to launch a new product or service? Make sure you're part of the conversation (that might even be too simple - be part of the arguments) in today's bazaar, or have a very tough time marketing your new product.

Levine, Rick, Christopher Locke, Doc Searls and David Weinberger. The Cluetrain Manifesto. The end of business as usual. Perseus Books. 2000.

Connections, Not Sequences

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A Table of Contents is sequential. Following from the first chapter to the second to the third is the idea. Want to innovate? Forget about the Table of Contents. Focus instead on making connections throughout the book - throughout your company and your clientele - to make things new and worthwhile to customers.

Remember the pictures of bicyclists racing on those big-wheeled bicycles back in the last decades of the nine-teeth century? Bicycling has been a popular sport for a long time. The designs have changed, but it is a reasonable bet that you rode, if not owned, a bike when you were a kid. So, if we are all bicyclists, why did we mostly stop bicycling by our twentieth birthday? Shimano, after looking at the problem a bit, found out (Brown, 13). Bicycling is a cyclic business, something most marketing folks with expertise in the bike business will tell you. You are going to have down years. Shimano wasn't willing to accept that as a given, so they tried to do something about it. The first thing they should have done, if they followed the chapter-by-chapter scenario, was to go to their marketing department (or maybe their research and development department) and ask for a new flavor of bike for next year. They chose instead to look for connections in the biking community to see if they saw anything interesting.

Their classic assumption was that they should focus on the high end of the market. After all, they had thought all those years, you make more profits on higher priced parts and components. That makes for more profits, normally. Instead they looked down market. People stop bicycling when they hit twenty for a reason. If you've bicycled lately, you probably know why. The seats hurt. Leaning over isn't comfortable on your back. They found out a whole list of things folks hate about the experience (Brown, 14): people hate comparing themselves to lycra-clad sales clerks; the complexity - and cost -of owning a bike isn't conducive to a quick weekend ride; cycling on a clogged city street is dangerous to your health; maintaining a bike is a pain in and of itself; everyone owns a bike, but it has a flat tire, or a broken cable that has been broken and abandoned for years. Fix all that and you might increase sales. Thus was born (or re-born if you think about it) the coaster bike for weekend warriors who want a simple ride. Shimano makes components, so they had to convince manufacturers like Trek, Raleigh and Giant to follow along (Brown, 15). They didn't just make stuff. They designed campaigns for local bike shops to start with their local government. Safe place to ride. Safe equipment. Safe rules. Safe sold more bikes.

A simple concept if you think about it. Don't "complexify" your product to sell more product. Simplify it. Throw out parts. Make it easy to maintain. Make it a cool thing to do in your community. And -oh, this is cool too - sell more bikes. I didn't say it would be easy. It takes time to sell more stuff. But it is doable. Think about it.

Brown, Tim. Change by Design. How Design Thinking  Transforms Organizations and Inspires Innovation. Harper Business. 2009.

December 13, 2009

Technology Platform: Market Disruption

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Table of Contents: The Innovator's Guide to Growth.

Forward - Clayton M. Christensen

1. Precursors to Innovation - Core business in control, growth game plan, allocated resources

Part One. Identify Opportunities

2. Identifying Non-consumers

3. Identifying Overshot Customers

4. Identifying Jobs to Be Done

Part Two. Formulate and Shape Ideas

5. Developing Disruptive Ideas

6. Assessing a Strategy's Fit with a Pattern

Part Three. Build the Business

7. Mastering Emergent Strategies

8. Assembling and Managing Project Teams

Part Four. Build Capabilities

9. Organizing to Innovate

10. Innovation Metrics

11. Conclusion

Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield, Elizabeth J. Altman. The Innovator's Guide to Growth. Putting Disruptive Innovation to Work. Harvard Business Press. 2008.

December 12, 2009

Watching Your Best People Leave Town

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First, the rise of Europe as a power in the 17th century. Then, the rise of the United States of America in the late 19th century. Now, the rise of all sorts of economies around the world, mainly China and Asia and including India (Florida Flight, 236). Florida thinks things aren't so dire. We have a chance if - if - we have a "multi-polar (Florida Flight, 237)" strategy. "Cultivate new industry sectors, prepare people for the future, and most of all remain an open society (Florida Flight, 237)."

For decades America attracted talent from all over the world. Things have changed. Folks can go a lot of places to educate themselves. China. India. Scandinavia. Canada. Australia. All will compete. Florida say we have a choice. Restore creativity and openness. Succeed.

Florida's next book focuses on where to live if you're going to succeed. He has maps and formulas that say who's on top, and who's on the way down. Well, we already knew that Flint has a problem. If you take the time, however, there is a message. Americans have done it all along: migrate for economic reasons. Our county has immigration and emigration according to economic conditions. Florida (City) calls this a strength and recommends migration at will for economic reasons. His premise is that education and where you went to school aren't as important as where you end up living. He posits that living in the big mega-cities of the future ensures success  because of the vibrancy of the larger community. The World is Flat got it wrong, Florida says. Having an Internet connection isn't enough. You have to end up in a vibrant community. Then he proceeds to map out all the communities and suggest good locations for you according to your psychographics. Luckily, I appear to have ended up in a good place for my psychographics. Of the five people from my Fortune 500 company who migrated to southern California when I did, two, maybe three, have returned. This wasn't right for me. Interesting how it works. Florida recommends a strategy of deciding where you end up, as community dictates economic success. OK, I'll buy that. I also will buy that life is more fun when there is a bit of serendipity involved. Arrive somewhere and look around. Is it a viable community for you, your business, or should you move on? Have a look, especially before you put down roots you can't transplant.

Florida misses a big point. The high schoolers I talk to are considering relocating, all right, but not to NYC or LA. They're considering points all over the world. I can't blame them and, if we plan now, we can keep them here. It'll take a re-focus of American schools on creativity, not just science, technology, engineering and math. An interesting mix, not just a technical one.

Florida, Richard. The Flight of the Creative Class. The New Global Competition for Talent. HarperCollins. 2005.

Florida, Richard. Who's Your City? How the Creative Economy is Making Where to Live the Most Important Decision of Your Life. Basic Books. 2008.

December 11, 2009

Web 2.0 Community Building

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Eight key points for building a Web 2.0 Community (Libert, 127):

  • Lead from the rear. Provide direction and then stand back. Let the crowd lead.
  • Know when to step in. You'll know when you have to take action. You just have to pay attention.
  • Form a club of like-minded people. Start with, for instance, satisfied customers.
  • Don't even try to hide. You're going to make errors. Admit them, fix them - and move on.
  • It's never going to be perfect. The coders will continue to improve things. Editing may take forever. (Here's a hint: late in the process, take control of the editing. It has to end somewhere).
  • Stir things up. A little bit of heat in a discussion makes the out-put stronger. Make sure you have a pretty good idea where folks stand.
  • Here's my favorite: Always say "Thank you." Pretty easy. I am amazed about how many people forget this simple step.
  • Don't encourage folks to pass through. Figure out how to engage them in what you are doing.

Final comments: if you are going to create a Web 2.0 project, don't let the crowd decide what your mission is. Decide, then invite folks to help out. Otherwise, you'll waste time you can't afford to waste.

Not only is it fashionable right now to build Web 2.0 communities, it just makes sense. Give it a try.

Libert, Barry and Jon Spector. We Are Smarter the Me. How to Unleash the Power of Crowds in Your Business. Wharton School Publishing. 2008.

Newest Management Buzzword: Jugadu

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My friend Peter Agarwal and I were discussing a new word (for me) that came from India: jugaad. Together we figured out that it meant "workaround." You've got a problem but no support whether from personnel or capital, what do you do? Work around the problem. You've acting in a jugaad manner. It ends up that there's a book being written about jugaad. Newest fad? Yes. Useful? Maybe it is intuitive and we all are doing it. Might be useful to think about and see if your team needs a five minute story about it.

Peter sent me this definition from Wikipedia:

Jugaad (Hindi: जुगाड़ Punjabi(gharuka)) are locally made motor vehicles that are used mostly in small villages as a means of low cost transportation in India. Jugaad literally means an arrangement or a work around, which have to be used because of lack of resources. This is a Hindi term also widely used by people speaking other Indian languages, and people of Indian origin around the world. The same term is still used for a type of vehicle, found in rural India. This vehicle is made by carpenters, by fitting a diesel engine on a cart.

"Jugaad" is also colloquial Hindi word that can mean an innovative fix,often pejoratively used for solutions that bend rules, or a resource that can be used as such or a person who can solve a vexatious issue. It is used as much for enterprising street mechanics as for political fixers. In essence, though it is a tribute to native genius, and lateral thinking.

Even though in everyday life, a Jugaad can be a solution, in context of Management, Jugaad is essentially a person who has some special capability or access to a resource or even access to another Jugaad that can be useful under extreme or special circumstances. A Jugaadu person is one who has numerous useful and cashable Jugaads. 

Jugaad is also mentioned by Jana. Need to learn how to develop products more cheaply? Maybe you need to do a little research on jugaad methods.

Jana, Reena. From India, the Latest Management Fad. BusinessWeek. 14 December 2009. 57. http://www.businessweek.com/innovate/content/dec2009/id2009121_864965.htm

Competing for Talent

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Three factoids about the up-coming battle for executive talent (Fernandez-Araoz, 72):

  • Tata Consultancy Services calculates the ROI of each new hire, by university. The best schools' graduating classes get blanket offers from Tata.
  • China is working to attract scientists from around the world. Singapore is shifting itself from a host for exec talent to a home. Subtle shift. Big meaning.
  • A European-based company just moved its entire management team to Singapore so they could see things "from the other end of the telescope."

In the early eighties Japan was the big nemesis. Today the rest of Asia is filling that role. The battles aren't done yet, but they will effect your hiring process in subtle ways. Now is the time to start planning.

Fernandez-Araoz, Claudio. The Coming Fight for Executive Talent. BusinessWeek. 7 December 2009. 72. http://www.businessweek.com/magazine/content/09_49/b4158080830272.htm

December 09, 2009

Assign Your Best Salespeople Early in the Cycle

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You have one meeting with the top brass in your biggest sales target. How do you prepare (Lay, 6)?

  • Lodge a provocation. Come prepared with information that will unsettle the potential client. "If you don't do this, now, this will happen."
  • Capture their reaction. No reaction? Leave. Concern? Push your case harder.
  • Give war stories. Tell them what happened with another client when they did it your way.
  • The close? A diagnostic. Charge for the diagnostic. If you do this right, expect them to find budget, even when there is no budget.

Who do you take to the meeting? This is not consultative selling. In consultative selling, you save your best sales people for late in the dialog. Regular folks found out what is going on. The sophisticated closers come in late, to close. Not any more. Take the best people early on. Arm them with the best information you've got, including war stories. Make the close earlier, even when you are not sure there is budget to do what you want to do.

Provocation is compelling, with new information (Lay, 5). You know they have angst. Address it. State your case and prove it with hard facts. Keep it executive level. Dealing with a manager? Go higher. Provoke. Lead. Force issues out.

Lay, Phillip, Todd Hewlin, and Geoffrey Moore. In a Downturn, Provoke Your Customers. The companies you serve are slashing their budgets-but you can still make the sale. Harvard Business Review. 2009.

December 08, 2009

Flip's Pareto: 80% of the Functionality; 20% of the Cost

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More than a year ago, we extolled the virtues of the Pure Digital Flip video camera (Mixner). Since then, the camera has sold millions of units in a down economy. The company has since sold to Cisco for $560 million. The Flip is still riding high. Sales still continue to be "off the charts," competitors are taking notice (and failing in their efforts), and the company is carefully adding features as costs come down (there is now a high definition version of the Flip for basically the same cost).

Capps calls products like the Flip "good enough" products (Capps, 118) because they give eighty percent of the functionality for twenty percent of the price, or, more succinctly, "twenty percent of the effort, features, or investment delivers eighty percent of the value to consumers" (Capps, 118). He lists a whole series of similar products and services (Capps, 113-118):

  • AutoCAD has a simple, cheap competitor called SketchUp that costs $500 versus AutoCAD's $4,000.
  • 90% of Google's ad revenue comes from text ads: no pictures, no celebrities.
  • Netbooks have minimal storage, minimal processing power, no graphics capability and they are cheap, small and light. Shipments are up seven-fold in 2009.
  • Kindle isn't high resolution or complex graphics driven. It is slim and has hundreds of book titles. Oh, and $310 million in sales its first year out.
  • Net calls aren't so hot. They are cheap, however. Skype sales are up forty-two percent year-to-year.
  • Conlin talks about the new simple in healthcare: Doctors who make house calls. A trip to the emergency room costs $1,500 on average; a home visit costs $150 (Conlin, 071). In this case the quality and the price is there. Not bad.
  • Wildstrom talks about Microsoft's new free virus scrubber. They tried to sell it and failed, so they are giving it away. It is apparently as good as Symantec's offering, but simpler and not as "invasive" on a computer.
  • Markoff talks about I.B.M.'s entry into the genome business with a targeted $1,000 report. Cheap, simple genomes will revolutionize medical diagnosis and treatment. Let's watch and see if I.B.M. is actually able to pull this off. Their personal computer decades ago was successful because they assigned the project to a remote team and left them alone. Let's hope they decide to do that again.

I am interested in one flaw in the discussion. I said it a year ago, and it still appears to be true: only small companies can create disruptive strategies that work. It's true until you begin to examine things a little bit closer (beyond the Microsoft and I.B.M. examples above). Two big-company examples:

  • Kaiser Permanente has a new clinic in Hawaii staffed by two physicians who are able to do eighty percent of what any walk-in customer/patient might need. What they can't do, they refer across town to the Kaiser hospital with full services. No one needs to cart around x-rays or patient records: they're digital and accessible everywhere in the system (Capps, 118).
  • It used to be that attack fighters were fast, heavily armed and devastating to the enemy. The only problem is they can't stay over a battle field for hours. Predator drones are the opposite (Capps, 117). They're light and minimally armed. They are also able to stay put to watch 24/7 (via video) what is going on over the hill or over the mountain range. They either fire their simple weaponry or call in the troops or the fighters.

Both the clinic and the drone were created by big companies (Kaiser and General Atomics). This deserves more study. Disruptive strategies work for small companies. They also work for big companies.

Capps, Robert. Why Lo-Fi High Tech Will Rule the World. Wired. November 2009. 111-118.

Conlin, Michelle. The Return of the House Call. BusinessWeek. 16 November 2009. 70. http://www.businessweek.com/magazine/content/09_46/b4155070821061.htm

Markoff, John. I.B.M. Joins Pursuit of $1,000 Personal Genome. New York Times. 5 October 2009. http://www.businessweek.com/magazine/content/09_46/b4155070821061.htm

Mixner, Jack. Disruptive Technology: Smaller Companies Have the Edge. http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html

Wildstron, Stephen H. Microsoft Steps Up Its War on Hackers. BusinessWeek. 21 September 2009. 76. http://www.businessweek.com/magazine/content/09_38/b4147076993366.htm

October 18, 2009

High Risk Collaboration

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With risk comes reward. Collaborate at a high level, increase reward. There is a hierarchy of partnerships worth considering, from transaction based partnerships, shared learning, customer interactions through service innovation, and, finally, end-to-end collaboration (Tyagi, 131). Collaborations can focus on increasing market position, reducing costs, increasing responsiveness, growth and reducing time to market (Tyagi, 131-131).

Why bother? OK, increased profits are one reason. They're a given. In this marketplace, however, they're not enough. A brutal word might be more apt: survival. Collaborate. Survive.

Tisch talks about collaborating to help lower income potential employees to succeed as hotel workers by applying Workforce Investment Board technologies during the welfare to work process a decade ago. It's still working for him (Tisch, 21). This was a pretty high level rish for him, as he was making investments in up-grading his hotels to four-stars (five-stars were too expensive and too risky. Four star hotels have the ambience of five but without, maybe, a quarter of the staff.) The federal/company collaboration worked. He suggested it to other hotels nation-wide.

Tisch, Jonathan M. and Karl Weber. Power of We. Succeeding Through Partnerships. John Wiley & Sons, Inc. 2004. 

Tyagi, Rajesh K. and Praveen Gupta. A Complete and Balanced Service Scorecard. Creating Value Through Sustained Performance Improvement. Pearson Education Inc. as FT Press. 2008.

Follow-on Success

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Win the race. Make the whole team famous - and more valuable. Lose team. Re-build. That was the process facing Lance Armstrong after his first win in the Tour de France. That, and the press's reaction to his win. They claimed he had cheated by using drugs to win his victory. Wasn't so, but what to do? New team? Yes. New PR? Yes. Same Lance.

The new team was necessary because all the good folks retreated to other teams. They got paid more, after all. You can't blame them. The PR? That was necessary because no one understood how Lance had won. When they couldn't see or understand his training regime, they balked (Wilcockson, 282) and cried "Foul!" Same Lance. Yes, again. After his bout with cancer, Armstrong came back fifteen pounds lighter. That allowed him to attack the hills better. Less weight, less to drag up the biggest mountains. His legs were the same, capable of long courses.

Armstrong utilized two new stragies. They were pretty obvious, but no one else was using them effectively: training and cadence. He rode all the legs of the next Tour all by himself, attacking them over and over (think about: he was attacking thirty mile hills over and over again - that's training) again until he understood how to win on them. Some of it was cadence: pedal in a lower gear, increase the number of revolutions, be more efficient (Wilcockson, 262) while, at the same time, attack going down the steepest slopes (Wilcockson, 122). All while training more than all the other pros.

So, you're trying to win at your market for a second time. Look at your team. Practice more on the hard parts (the hills) and the easy parts (the down hills). Change the cadence (speed things up - or slow them down). Might work for you.

Wilcockson, John. Lance. The Making of the World's Greatest Champion. Da Capo Press. 2009.

Pharma Strategy as Model for All

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Long term strategy takes a back seat, usually, to profits next quarter. That's the illusion, maybe even the facts. There are contrary examples worth remembering, however.

American pharma companies which wanted to sell more in Japan after WW II gave away tuberculosis medicine.  River-blindedness in Africa was solved the same way. They build recognition in a new market with the hope that that recognition would turn into profits down the way. It's happening again.

Traditionally, pharma companies have two methods: fund hugely expensive research and development operations and profit on the few drugs that make it through the process, or, as in public health initiatives, subsidize the distribution of drugs into a population unable to fund the pharmaceutical purchase itself. Both can make sense. There is another way.

Martin tells of a researcher who did it a new way that was just as effective (Martin, 109). The researcher examined drugs - old ones - that were no longer manufactured because they weren't profitable. She found new uses for the old drugs, got them approved, and took them to market in poorer countries. She built the model before she found the drug or the target market. Old drug, new market, new manufacturer. With a little bit of thought, the process may have applications in other applications, as well, maybe even in your industry.

Martin, Roger. The Opposable Mind. How Successful Leaders Win Through Integrative Thinking. Harvard Business School Press. 2007.

Design. Profit.

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Strategic "success can only be achieved in collaborations where all partners understand the fundamental role of creativity in the strategic plan. Business leaders who view design as little more that an aesthetic "fix" for dull and naive business models might temporarily look good in the media, but their moments in the spotlight are brief. It takes a day to create a fascinating "study," but years to create a new strategic business (Esslinger, 33)."

Esslinger's been involved in design at Apple (he owns frog design who advised on the Macintosh), designed the logo for Microsoft's Windows, made ship designs for Disney, and on and on.

He talks about the strategy of design. It's not just making things look good. It's about the whole company. Want a new airplane seat to save space and weight? Might want to look at the whole design of the interior of the airplane, and, while you're at it, the waiting area, the ticket taking area, and, oh yeah, the website. It's not a little thing. It's a big thing that effects the bottom line, big time.

Esslinger, Hartmut. A Fine Line. How design strategies are shaping the future of business. Jossey-Bass. 2009.

September 28, 2009

Story-telling Worksheet

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Denning's book has a premise: story telling is the way to make your company grow. Interesting concept. Sometimes useful. Here is a worksheet (truncated) on formulating a story about where you want to take your company (Denning, 99):

One piece of paper, three sections. First section: Where we've come from. Second section: Where you are now. Third section: Where you are heading. A line connects the sections. It ties the story together, "the journey of your life" (Denning, 99).

Now tell a short story (sixty seconds) about the first section. Review it for relevance. Tell it to other people. Check out if they understand it and have suggestions. Repeat for the next two sections. You now have a three minute speech to tell your team. Need a longer speech. Prepare more one minute stories. Add them to your speech.

Seem too simple? Try it. You don't want a complex formulation. You want simple stories, one after the other, to engage folks. They'll actually listen and engage. That's good.

Denning, Stephen. The Leader's Guide to Storytelling. Mastering the Art and Discipline of Business Narrative. Jossey-Bass. 2005.

Kawasaki's Revolution

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Kawasaki was the marketing person involved in the launch of the Macintosh computer at Apple. His book is full of lists on how to do stuff related to new product launches. Lots of lists. Here's a list on why hiring market research consultants aren't necessarily useful all the time (Kawasaki, 115):

  • You probably know - or will recognize - the subtleties that a trained researcher will miss.
  • Because you don't focus on research per se, you'll notice more. Hang around places where buyers congregate. Look for what they need. Figure out how to supply it. Kawasaki talks about market research for auto show rooms. Without a Mom on the team, it would forget that Moms would love to have a place to put the kids while they wait for a car repair, pr better, buy a car.
  • Sam Walton strolled through lots of competitor's stores. He'd notice it. By the next Monday, it was happening at WalMart. The Saturday management meeting made sure of that. Fast to market. More profits.
  • Use folks with lots of different experiences on your market research teams. If they're all the same, you get fewer useful ideas. More ideas, more profits. Makes sense.

Kawasaki, Guy with Michele Moreno. Rules for Revolutionaries. The Capitalist Manifest for Creating and Marketing New Products and Services. HarperBusiness. 1999. 

Reengineering Useful in Down Times?

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You'll remember that business engineering got a lot of press in the nineties. I revisited Hammer's book to see just what is applicable today. Here's Hammer's part of a list of things to do to make sure your process works (Hammer, 201-213).

  1. Don't fix the process - change it.
  2. Focus on process, not trivialities. Look for big issues to address, or don't bother.
  3. Focus on values and beliefs as part of your process. Ignore them? Ignore your employees who are watching very carefully for a reason not to help you.
  4. We talked about trivialities. Minor results are the same. Big results, or don't try.
  5. Don't give up. Well, that's obvious, but how many instances can you supply where a company you are involved with gave up too quickly?
  6. Don't constrain the scope. Everything is on the table, or nothing.
  7. Move through, around, by culture if you must. Don't get mired down.
  8. Bottom up doesn't work. Without the support of senior management, you've got nothing.
  9. Now here's one that I don't like so much: Don't assign someone who doesn't understand reengineering to lead the effort. Well, remember, this book was written by consultants. They want you to hire them, and no one else. Remember that when you decide to hire them or not.
  10. Reengineering has to be at the top of the agenda. Focus on the most important items that are likely to get the biggest results.
  11. One project at a time, and only one project at a time. Concentrate your efforts if you want to succeed.
  12. Don't stop when folks resist change. Resistance just might be healthy indication of results just over the horizon.
  13. Get things done. Don't take too long. Get going.

Hammer, Michael and James Champy. Reengineering the Corporation. A Manifest for Business Revolution. HarperBusiness. 1993.

Garry Wills on Napoleon

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There is Wills on Washington (Cincinnaticus). There is Wills on Lincoln (Lincoln at Gettysburg). Then there is Wills on everyone else, a treatise on leadership discussing thirty-two good, and not so good, leaders. In this case, Napoleon is the good. We're going to forget about the bad and focus on the good of Napoleon.

Six key points that resonate with leaders today (Wills, 89-92):

  1. Forget about victory for its own sake. Winning the battle, winning a town, without winning the war is useless waste of energy. Pick your battles.
  2. "Attack in head-long lunges (Wills, 90)." Small groups, left to fight alone, lose energy and become fearful. Concentrate your legions. Give them drums and noise makers. Scare the enemy so they run before they engage.
  3. "Fight toward supplies (Wills, 91)." Napoleon didn't travel with a lot of supplies. Ammunition, probably. Food, maybe not. If the troops wanted to eat, they had to fight their way to the food, which was always on the other side of the enemy.
  4. "Fight only with preponderant force on one's own side (Wills, 91)." Mass your troops. Wait until your forces out-numbered the enemy. Split the enemy forces and fight them one at a time, never all at once. That meant he couldn't allow them to concentrate.
  5. Here's one I like: simplify. Fight head on. Don't go around, forget about ambushes, and all the convoluted battle plans everyone else had. Attach. Head on. Now.
  6. Finally, keep moving. If the enemy was fixed in a town, ready to sit it out, entrenched, find another army to fight. Keep moving. Don't lay siege, especially for a long time. Abandon, wait for the enemy to emerge, engage. Don't wait around if you can help it. Remember, if you are waiting around, you aren't fighting toward food. You're starving. Starving isn't good, especially if you didn't have supply trains coming.

Wills talks about Napoleon's first real campaign in Italy. He defeated two armies and was on his way to Vienna, having beat two other French armies to the punch. That wasn't supposed to happen, especially from an up-start like him. At the last minute, Napoleon stopped. He didn't attack Vienna. He just didn't have enough strength. Everyone at the time said he failed. Well, maybe so. Actually, if you look at it, he showed good decision making ability. At Vienna, he would have lost. Why fight a battle you're going to lose? Napoleon knew the answer to that one.

Wills, Garry. Certain Trumpets. The Call of Leaders. Simon & Schuster. 1994.

September 18, 2009

A Leader Has to Have Followers - and What Else?

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It's pretty obvious that leaders have to have followers. Since we all watch CEOs in action, knowing when they are going to fail might be a good thing to know, yes? I think so. Wills takes the time to detail the leadership styles of thirty-two different leaders, half of them successful leaders, the others not so effective. Some of the leaders failed because they couldn't inspire any one to follow them. That's pretty obvious to see. Usually, corrupt folks are found out eventually. Not a very good leadership style. (OK, Madoff took a little bit longer, I'll warrant. He's an outlier, wouldn't you agree?)  What about the rest? They couldn't find followers. OK. Why?

There seems to be one effective predictor of failed leadership, namely, leaders and followers without a goal that they all agree on. Now, Madoff's staffers must have been following along, at least to some extent. Why they did it isn't clear. If they profited, why aren't they in jail, you ask? My prediction: they will be eventually. That's still an outlier example. Most CEOs, when they fail, fail because folks are not helping to create their company goals. The CEOs have followers, yes. But the followers aren't buying into - or, don't understand - the results the CEO needs from them.

Three key things to remember: There has to be a leader. There have to be followers. They have to have a common goal that they all agree to.

We could stop right here and call this the end of the lecture. Not so long ago we talked about failure in corporations (Mixner). We followed Block's description of failure. He said that effective leaders are stewards, not dictators. Stewards follow more democratic principles than dictators. As a result, because they allow their teams to make decisions - even about values and vision, usually high level tasks - on their own, their teams buy in to what they do and perform at a higher level, usually at much higher levels. That's good for everyone.

When we mix Wills (got to have a leader, followers and a goal) with Block (the best thing is to let the team make up their own values and actions with a little very high level training on how to do those things) we've got something very valuable. Let's combine terms, sort of like algebra: steward leaders, enlightened followers, high level goals that they create together and that they all buy in to. Now we're getting somewhere. Think about it.

Mixner, Jack. Democratic Strategy. References Block's Stewardship. http://mixnerstrategy.com/blog/2009/09/post_1.html 

Wills, Garry. Certain Trumpets. The Call of Leaders. Simon & Schuster. 1994.

September 16, 2009

Beware the Omniscient CEO

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I took a graduate class in comparative literature along the way. The idea was to understand how to evaluate a book quickly not only for its conciseness, but also for its applicability. We'd ask ourselves who the narrator was in important scenes, how knowledgeable that narrator was, and, further, what kind of axe that narrator had to grind. I find myself doing the same thing with strategic plans.

In literature, they examine the narrator's point of view. In strategic planning, we do the same thing. The omniscient point of view (the narrator knows everything, is all knowing) is pretty obvious sometimes, especially when the CEO dictated the plan without any input from the team. Objective point of view (tell what happens without stating anything else) (Literature) loses the feeling of it all. When you are discussing values, for instance, forgetting about feelings may not be a very good choice. Whether the narrator participates in the story either directly (first person) or indirectly (third person point of view) sometimes shows through.

Having an omniscient CEO isn't all bad, especially when you're going through tough times. It is dangerous, however, in the situation where all creativity of the team at all levels is wrung out of the system. Sometimes, sales people - and loading dock people, for that matter - know what is best for the organization. Not allowing them to make decisions on their own isn't a very good idea, even when they are making strategic decisions.

When you think about it, while we live in a democracy, our businesses aren't very democratic. Leaders sometimes stay leaders for many, many years. In a democracy, elections and term restriction limit the amount of damage any one person can do. In a business, that isn't always the case. When a CEO is saying, "I know what is right for the organization," and doesn't brook any real comment about what she/he is saying, watch out. Dictatorships get things done, yes. Sometimes, however, they forget to do the important things, like motivate employees to help the company succeed.

Literary Analysis Guide. Point of View. http://www.ci.maryville.tn.us/mhs/studyskills/CompGuide/LitAnaPOV.htm 

Literature. Exploring Point of View. Types of Point of View. http://www.learner.org/interactives/literature/read/pov2.html

September 07, 2009

The Harley Davidson Story

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My good friend George Morrisey, a professional consultant if there ever was one, suggested that I read the Zimmerman/Tregoe books on strategy back when I was first setting up my consulting practice. George was interested in the Tregoe explanation of Driving Force and how it applied to corporate strategy. The idea was to identify the driving force of an organization and, with it, the time frame for its application. Combine the force and a time frame into a quantifiable strategy. Critical issues were identified and planned for if there were supporting strategies that made sense.

Recently, I found the Zimmerman book in the library. It is interesting because it talks about culture and how to amplify its effects throughout the organization. My first impression of this discussion was that the strategy of spending a lot of time identifying the culture and then trying to communicate senior management's perception of values throughout the organization was just that - a strategy that took too much time to implement in this fast changing environment. That's my assumption, especially when it is amplified by Block's book on stewardship. Block, Tregoe and Zimmerman are all trying to effect positive change at an organization. Block uses management lightly, expecting them not to dictate a value system, but to open a dialog with customers and employees to deteremine what values and strategies are important to each part of the organization. No one grinds on results, because each person in the organization knows the metrics that are important to them and their individual customers and operates to them. Tregoe and Zimmerman are more analytical, spending large quantities of energy in examining the current belief system in an organization (Zimmerman, 219) and trying to effect its change to make it jive with management's point of view.

Zimmerman's team was involved in the turn-around at Harley Davidson in the early eighties. There is an entire chapter on what happened there. Basically, they realized that their bikes were over-priced and marginally shoddy, with, however, wonderful brand recognition. Their job was to fix the shoddiness and lower the price, something they were able to help the Harley team accomplish. Everyone was happy. Good story. Harley hadn't applied quality techniques yet; lean manufacturing was something that they couldn't even fathom early on. But they had craftsmen who cared about the bikes they produced. That was enough. Engaging teams of craftsmen to resolve they problems was enough to "kick-start" Harley for another twenty year run of success.

I feel like I have to say that I like the Zimmerman method better than the Block method, but I can't. I see value in both their points-of-view. Stewardship - letting the team figure things out, and do them without explicit direction - and beliefs set from above that flow throughout the organization are, in the end, be very similar. They feel different, but they're not. Interesting.

Block, Peter. Stewardship. Choosing Service Over Self-Interest. Berrett-Koehler Publishers. 1993.

Tregoe, Benjamin B. and John W. Zimmerman. Top Management Strategy. What It Is and How to Make It Work. Quickstone. 1980.  

Zimmerman, John Sr. with Benjamin B. Tregoe. The Culture of Success. Building a Sustained Competitive Advantage by Living Your Corporate Beliefs. McGraw-Hill. 1997.

Jobs at Pixar

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Those of you have been following what I write will be aware that I am interested in Steven Jobs management techniques - or lack thereof - at Apple. After leaving Apple the first time in the mid-eighties, Jobs started a new computer firm, Next. He had money. He had time. He was mad. A good combination for starting a tech company. It didn't really work, unfortunately, and Jobs ended up selling some of the Next operating system to Apple in the late nineties, presaging his return as CEO. We know all that. I wanted to know about Jobs's time at Pixar. Did he act the same way? Was he as pushy? Or - and this is what really happened - did he just sign checks and leave folks alone because he couldn't really influence the art at Pixar, as everyone was better than him at animation. That's basically how it worked. Jobs ended up investing $55 million ($5 million to buy the company from Lucas Film (Price, 7), and $50 million over ten years to keep the doors open). Ultimately, his job was to stay out of the way, let the management in place run things, and, importantly, arrange for distribution agreements of Pixar animations through Disney, and, finally, the sale of the whole company to Disney. Along the way, Jobs was part of the reason that Eisner ended up leaving Disney, to be replaced by the more affable Iger, who Jobs could get along with, and, who, with Jobs nudging, bought Pixar for stock worth at that time $7.4 billion. Not a bad performance for Jobs. Patience paid off.

Price, David A. The Pixar Touch. The Making of a Company. Alfred A.Knopf. 2008.

Democratic Strategy

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A while back we talked about Machiavelli and John Bogle (Mixner).

Machiavelli says, basically, it is all right to break the rules, especially if you do so to reach your ends. Bogle says that the ends aren't your ends, they're society's. Character and courage don't count for much if they are all about you, instead of us.

Machiavelli was writing way back when, Bogle, last year. Bogle was trying to make sense of the melt-down in the financial markets over the last decade. Machiavelli was selling his services, his knowledge. Block adds words to the discussion that are worth reviewing here.

Democracy is all about people having a say in their future, capitalism not so much. Owners and managers - bosses - exert special powers in the workforce that vary from the democratic ideal. Bosses aren't elected to terms that are finite. Do it right, and a boss can hold on for a very long time. We assume that as we enter the plant gate, it is all right to leave some of your decision making ability behind. Bosses indeed do know better, and we'd better realize it - or else. No, it is not so blatant, but when was the last time you spoke what you were really thinking in a weekly review session, unless by chance, you were the boss - the manager - in the meeting?

Block has thought through a lot of this. His point of view is worth sharing. Normally, planning for the future of an organization takes place at the highest levels. A team - and, usually it is a team - of senior managers joins together to consider the values of the organization, its mission, its vision, objectives for the next years, and maybe even specific strategies for the organization to follow. The assumption is that the plan will be carefully articulated, shared with the organization, and, here things start to get sticky, implemented at all levels of the organization.

You know as well as I do that implementation is where all strategic plans begin to fail. Great plan, poor implementation. We see it all the time. We didn't have time to implement the plan. Customers were asking for stuff, so we didn't have time. Something like that, right? So, do you pitch the planning process and give up? Maybe not. But what to do?

Modify the process. Don't be dictatorial. Let the team determine what is important to them and their work. "Values spring from the top," you say. Maybe. Forcing the entire organization to use a time-clock may not make sense. Forcing the entire organization to follow edicts from headquarters may not make sense. We all say, "We knew that." Since you knew that already, what were you doing? You were defining some of the company's values locally, that's what. "You're caring for a sick child today. I'll cover for you." The work will get done. Control shifts from HR to individuals in their own work units. But "HR has to control," you say. Maybe not. Nor does a boss have to control if she does things right. Set parameters, yes. What customers, broadly, do we target? OK. Clarity, then is a management role (Block, 32). Value-added ways to address a market. Again, a management role (Block, 32). But the how and whys? They get answered not by senior management, but by the folks who know the answers. Reward goes down in the organization as it is no longer the carrot it once was. Punishment goes down too. The team rewards and punishes, not management. Direction goes down; clarity goes up.

So, who keeps their job in this new environment? People who understand that they are not subordinate, but equals, that's who. Want someone to protect you and your job? Not going to happen. Your responsibility is making sure a team wants you enough that they ask you to play in their game. That's not management's job. It's your job. Eventually, we'll need fewer managers, won't we? The teams will manage themselves. Some managers will realize that managing, even coaching, is an empty title. They had better be doing some work, not just managing. "But the reports due at the end of the month," you say. Is anyone reading them, anyway? Isn't it better to interact with customers, rather than managers, anyway? That's your job. That's management's job, as well.

Who leaves the organization? People who don't hold up their end of the bargain. Not interfacing with customers? Maybe it's time to leave. Don't know who your customer is? Maybe it is time to leave. Or, more properly, maybe it's time to find out, and do something about it.

Block, Peter. Stewardship. Choosing Service Over Self-Interest. Berrett-Koehler Publishers. 1993.

Bogle, John C. Enough. True Measures of Money, Business, and Life. John Wiley & Sons, Inc. 2009.  

Mixner, Jack. The Virtuous Leader. http://mixnerstrategy.com/blog/2009/01/the_virtuous_leader.html

August 25, 2009

Helping a Team Create

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Usually I am lucky. I visit the library about weekly to get another armful of books. I usually don't have to go farther than the new books shelf to find things that interest me. Lately, things haven't been so rosy. People aren't donating as many cool books, and, seemingly at the same time, the library isn't adding new, interesting books at the old rate. So, on my last trip, I had to visit the regular shelves to find new reading.

I lucked out. Of the four books I found, Hall's is the most creative. And that's what it is all about, how to spur creativity at your company. OK, that's not really what it is all about. It is really about how you can hire Hall and his team to spur creativity at your company. They do a good job, so that's OK by me.

Now, the biggest thing I learned from Hall is that the first step is not to take a first step. Silliness makes more sense than structure. He has all sorts of games and processes meant to foster good ideas for new products and new marketplaces. That's all good. There's one list I liked a lot. Since silliness is the root of all new product ideas, Hall suggests a series of silly questions to help out. Here are three of them. You'll have to get the book to read the rest. Remember, it is in the library. The three questions (Hall, 132): 

  • What would be the simple solution?
  • What would contradict history?
  • What would be the most outrageous solution?

Consider: Hall is the sort of guy who, before he takes your gig, will visit a store where they sell your stuff (or your competitor's) and just watch people buying things on the same aisle as your stuff. He'll ask questions, maybe, but it seems that early on, he just watches. Simple enough. You could do it. But that is the point. You could do it, but you never will. Do it. Talk to people. Squeeze the Charmin (Hall worked for P&G, so maybe he really did squeeze the Charmin). Look around. Be creative. Take the day off and just watch. Don't act official. Be unofficial. Dream stuff up. Let it brew a while, then actually do something about your crazy ideas. A thing could happen: you give up on your crazy ideas. In the light of day, back at the office, they look trite, foolish. Well, remember Hall's admonition. Try crazy stuff. It works, I'll bet. At a minimum, it sure beats sitting around the office. More fun, too.

Hall, Doug with David Wecker. Jump Start Your Brain. Warner Books, Inc. 1995.

August 20, 2009

Hack and Hacker Defined and the Ethics Thereof

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Hack: as a noun, a "project undertaken or a product built not solely to fulfill some constructive goal, but with some wild pleasure taken in mere involvement (Levy, 23)." 

The hacker ethic:

  • "Access to computers-and anything which might teach you something about the way the world works-should be unlimited and total. Always yield to the Hands-On Imperative (Levy, 40)!"
  • "All information should be free (Levy, 40)."
  • "Mistrust Authority-Promote Decentralization (Levy, 41)."
  • "Hackers should be judged by their hacking, not bogus criteria such as degrees, age, race, or position (Levy, 43)."
  • "You can create art and beauty on a computer (Levy, 43)."
  • "Computers can change your life for the better (Levy, 45)."

Levy, Steven. Hackers. Heroes of the Computer Revolution. Penguin Books. 1984. 1994.

Optimism in the Face of Crisis

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Bill Gates, the philanthropist, is optimistic about world health (Coy, 46). Others say "people are no longer taking crazy, overleveraged risks, so they're less vulnerable to blowing up again.... For those reasons instability leads inevitably to stability (Coy quoting Peter L. Bernstein in Harvard Business Review, 44)."

So, has the pendulum started to swing in the other direction? Are the bad times over? No one is sure, so you have to be careful. Even more, even if things start to swing, no one knows how long this cycle will last, or, importantly, how high it will go. We'll just have to wait and see. Opportunities will present themselves. Our job is to be ready to take advantage of them when they appear. Have the right people on board. Have a plan. Be ready to implement quickly. Nothing has changed.

Coy, Peter. The Case for Optimism. BusinessWeek. 24 & 31 August 2009. 041. http://www.businessweek.com/magazine/content/09_34/b4144040812940.htm

 

August 19, 2009

Unraveling of a Strategy?

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When they first tried to sell Jell-O, no one would buy it because it was new and made of "interesting" ingredients. When it was made up into the final product, it was sweet, tasty, and everyone who tried it liked it. But how to get people to try it, that was the question. They finally figured out how to get things started. Since they couldn't give out free samples door-to-door because of laws preventing salespeople to do such things, they gave out a free recipe book that drove folks to buy the product at the store in the center of town. Sales finally took off (Anderson).

This evolved into such things as giving away a razor so folks would buy razor blades to fit the razor - forever. Every MBA knows this as the "razors-and-blades" strategy. It works.

HP has done this for years with their ink jet printers. They sell the printer for give-away prices. Then they price the ink high. People buy.

Looks like HP's strategy is being challenged by the new cheapness of the American buying public, and businesses. Printing and imaging volumes are down twenty percent (Vance) from last year. So, is this the end for the HP printer business? HP is responding with tie-ins with MySpace and other web media. Something's got to give, somewhere. The ink strategy for HP has worked for a long time. It is going to take some effort to make it continue. Maybe focusing on related markets would work, or, more risky, new products into new markets. Let's keep watching.

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.  

Vance, Ashlee. H.P. Tries to Keep the Ink Flowing. New York Times. 19 August 2009. http://www.nytimes.com/2009/08/19/technology/companies/19hewlett.html?_r=1&ref=technology

August 12, 2009

Cheap Genome

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The first complete human genome cost $500,000,000 to decipher in 2003.

The seventh complete human genome cost $50,000.

The difference? The first one used 1975 technology and lots of time (Wade). The second one used current technology (the Heliscope Single Molecule Sequencer).  

Within five years, a complete genome will probably cost $1,000. When it hits that number, genome sequencing will hit the main stream. Revenues from sequencing will sky-rocket.

This is disruptive technology at its best. It's cheaper, simpler, faster, unique, and, most of all, hopefully, useful.

There are problems with the technology. It is not clear how useful knowing your genome will be at curing diseases. Diseases that were hoped to have simple genomic identifiers turn out to have more variables than expected. So, ultimate applications and usefulness will likely lag the availability of a decoded genome. Eventually, however, genomes are going to be very useful. We'll all want one.

Nicely disruptive.

Mixner, Jack. Disruptive Strategy: Small Companies Have the Edge. 23 September 2008.  http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html 

Wade, Nicholas. Cost of Decoding a Genome Is Lowered. New York Times. 10 August 2009. http://www.nytimes.com/2009/08/11/science/11gene.html?_r=1&hp

 

 

August 08, 2009

Record Pricing at the iTunes

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Steven Jobs tried to be the good guy when it came to music piracy. Initially, you could buy an iPod, copy your CDs onto your Mac, and, then, download them to your iPod. You could also spend quite a bit of time putting stolen songs on your iPod. Jobs wanted something better. That something was iTunes.

Long story short, Jobs convinced the record labels to go along with his plan and ended up with eighty-five per-cent of the music on-line business very quickly. Oh, and by the way, the music labels made a lot of money, as well. After all, they got the bulk of the iTunes cash flow. Ultimately, the labels wanted more. They actually had the nerve to suggest that Apple should give them some of the profits from the iPod itself. Wrong move. Bad strategy. No one listened anyway. iTunes launched in April, 2003 (Levy, 010). By October, the Windows iTunes store was up and running. Apple had a home-run on its hands.

Fast forward to 2009. iTunes is still dominant. The labels have tried a couple times to raise prices and actually succeeded a bit. Not really surprising.

Through all this, everyone realized that there was a paradigm shift going on in the music business. I don't think things are done yet. When you read Anderson's Free and consider the model a bit, you come to realize that there is probably a way to distribute music that is free to the ultimate user and, still, very profitable to the labels - and Apple. I predict that that is the next step. It'll be some sort of advertising process or a gift to start the sale of something else, but my prediction still holds. Music will be free - legally - soon. We'll see.

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.

Levy, Steven. The Perfect Thing. How the iPod Shuffles Commerce, Culture, and Coolness. Simon & Schuster. 2006.

Business Plan Outline

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Rich and Gumpert created - in 1985 - one of the best books on creating a business plan to raise money. Here's a simple summary of a business plan outline (Rich, 33):

The Company: Current Status, Objectives, Management, Management Objectives

Markets and Competition: Present Market, User Benefit, Markets Near and Long Term, Summary of project market, Competition, Projected sales and market share, Sales strategy to reach goals.

The Products: Theory of operation, Applications, Performance data, Economics and advantages, Present status, Scale-up requirements, Patents

Selling: Current, near-term and long-term selling method, Sales support, Custom engineering requirements, Pricing and Warranties

Manufacturing: Facilities, Make/buy decisions, Purchasing issues, Secondary sourcing, Engineering support, Quality, Staffing

Financial Data: Financial history, Expansion requirements and budgets, Financial projections, Current shareholders and their shares

Investment: Use of proceeds, Description of offering,

Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.

August 07, 2009

Why Read About the Macintosh?

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Steve Jobs is back at Apple for the third time (once he battled Scully lost, and left; then, his illness last fall forced him out for six months or so this year). We've talked about Jobs return in 1997 (Mixner). His main job in 1997 was to refocus Apple on a few products, a few suppliers, and, mainly, success. It worked. Actually, that was a strategy similar to the one he followed in the early eightiesduring the Macintosh launch.

Let's remember the landscape. The Apple II had been a huge success for Apple, making Jobs a billionaire before he was thirty. The only problem was the Apple board thought Jobs was too abrasive for management and slowly forced him out of the Lisa project, the next new computer in the pipeline after the Apple II.

Jeff Raskin actually did the first concept work for the Macintosh. The idea was to fix the Lisa's mistakes of being too overblown and too over-priced (Levy, 109). He kept his head down as he sketched out what the Macintosh was and how it would work. Unfortunately, he didn't keep his head down far enough, as Job's figured out what was going on - something really good, basically - and forced his way in.

Jobs added a elegance to the Mac that we all still appreciate. His practice there is directly applied to the iPod and the iPhone. Even though it looked cool, the Mac was nearly a failure. It was priced too high (blame that on Scully, who added $500 just before launch (Levy, 180)). It didn't have enough memory. The floppies basically were toys, incapable of making back-ups easily. There were no expansion slots. Jobs hated expansion slots. All major flaws. However, even then, there Mac-o-philes who would take basically anything Apple created because it was cool and elegant (and the software, what there was of it, was truly cool).

So, why bring up Jobs again? His management style left a lot to be desired, or so you might say. However, his employees were honored to work for him. They knew they were changing the world even if they weren't treated so well. They got the product out the door - they actually shipped, something that was rare in many of the design heavy firms of the day like Xerox.

Ultimately, the Mac was reconfigured and became a wildly successful product. The delays left chinks in the Apple armor that MicroSoft and IBM happily took advantage. So Jobs did things wrong, too.

There's a yin and a yang here, with both sides of the story evident. We like to say that work today is all about teams and working together. OK, that's fair. But let's remember that there is also a role for inspired leadership that borders on dictatorship. Sometimes it actually works. It has worked at Apple three or four times now. Not a bad result.

Levy, Steven. Insanely Great. The Life and Times of Macintosh, the Computer That Changed Everything. Viking. 1994.

Mixner, Jack. Strategic Realignment. http://mixnerstrategy.com/blog/2008/10/strategic_realignment.html

August 06, 2009

The Chronology of a Quote: "Information wants to be free."

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Chronology of "Information wants to be free."

1984: "All information should be free" (Anderson, 94, and Levy).

1984: "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other (Anderson, 96, quoting Stewart Brand)."

2009: "Commodity information (everyone gets the same version) wants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive (Anderson, 97)."

2009: "Abundant information wants to be free. Scarce information wants to be expensive (Anderson, 97)."

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.

Levy, Steven. Hackers: Heroes of the Computer Revolution. Penguin Books. 1984.

McDonald's Three-Legged Stool Doesn't Include Customers

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Facella grew up in McDonald's. His story has a point of view: McDonald's is great, and his experience is worth sharing. In the new consultant-tells-all genre, his book is anecdotal. It tells little stories that add up to value. Let's focus on two of those stories. They are both in the mythology of McDonald's that we have all osmosed over the years, although that may not be obvious at first. The first one, "The Three-Legged Stool" drives the second one I'll call "Trust".

My bet initially was that the three-legged stool included management, customers, and, maybe, suppliers. I was wrong. It includes the relationship between owners/operators, suppliers and corporate staff. I forgot that McDonald's is a franchise. Owners/operators are a big part of the mix. The owners/operators were the key leg (Facella, 26) because they are closest to the customer. Obviously, the operators were also close to corporate. The key word here, though, in all of this, is relationship.

That leads to the second story in the mythology, trust. Over the years, as in any company, profits waxed and waned. In one of the down times, corporate, really the CEO, knew they needed a new product. Chicken McNuggets was born. It was created not by the McDonald's development kitchen but by a couple supplier's CEOs, locked in a room. The guy who created Filet-of-Fish was in the room, along with a primary meat supplier to McDonald's. They worked because they were friends of the CEO of McDonald's USA. They weren't working because they had a contract. They worked because they knew that in the end, senior management at McDonald's would remember their work and reward it with a "relationship" to manufacture the supplies owner/operators would turn into Chicken McNuggets. No contract. No nothing. Just a willingness to make a better product for their big client. All this based on the next key word, trust.

The mythology of McDonald's includes the story that many of the suppliers supplied McDonald's on a hand-shake agreement. That's the way it is. Deliver what you say, when you say it, and McDonald's will reward you. Early on, McDonald's had problems making payroll, and the suppliers came through by helping with crucial loans at crucial times. Those were the cornerstones of the relationship that over time became very important to both McDonald's and their suppliers all over the world. Do things right, and McDonald's will remember you - and reward you.

Not a bad system. Tricky to stick to in these days of profits over everything, but McDonald's has pulled it off. Maybe it'll work for you.

Facella, Paul with Adina Genn. Everything I Know About Business I Learned at McDonald's. The 7 Leadership Principles That Drive Break Out Success. McGraw Hill. 2009.

August 05, 2009

Computers Disrupt the Classroom

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Class sizes are growing. Teachers have too many students. National testing forces school districts to focus on scores in math and reading to the detriment of courses like art and Greek. Focus on what you are graded on and forget the rest seems to be their mantra. Since high grades support more money for education, you can't blame them. There must be another way to get a good education, however.

Larger class sizes and concentration of students in specific courses allows for computerization in grading and teaching. Where teachers (and their unions) have allowed computers to grow in influence, computers are now teaching classes. Their class plans are the same in teacher led classes and computer taught classes. The tests are the same. Theoretically, the results are the same. That's a concentration strategy. Concentrate on what you're already doing. Forget the fringe classes like Greek and art.

This concentration yields two strategies for a disruptive company. The first is in tutoring all those students who don't get it the first time around in their teacher (or compute) led classes. Tutoring schemas in on the web can be modified to mimic the learning style of a student who doesn't keep up in a regular class. They can work at the pace of the student, not the state-approved syllabus. The second opportunity for the disruptive company is teaching all the classes regular instruction can't focus on, like the art and Greek we've been talking about. A student-paced computer can teach all sorts of topics that regular classes can't, at a pace the ensures that the student really learns. The computer, organized through the web, can find a human tutor who will make sure the student is getting what she needs. Maybe a Japanese high school student who wants to practice his English pronunciation but is good at Algebra II tutors an American student who has fallen behind in Algebra.  Everybody wins, including the company that is paid to put it all together.

Now, where's the sale get made? It's not the district - it's too worried about the bigger classes that drive the No Student Left Behind testing. It might be an Algebra teacher, a counselor, a parent, or another student. A referral is made, outside the normal scheme of things, and another student begins to really understand Algebra. Everyone wins. If you own a software company, how do you market? You don't market to the union or the curriculum committee. You market to referrers, to users groups, to tutoring organizations, any group that looks at individual performance and hopes for better. This isn't a hope strategy, however. It's the growth strategy for the future for any company that wants to sell more software to schools (Christensen, 38).

Christensen, Clayton M. Disrupting Class. How Disruptive Innovation Will Change the Way the World Learns. McGrawHill. 2008.

Disruptive Strategy for Health Care

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Some generic definitions of terms Christensen uses in many of his texts:

Solution Shop: "businesses that are structured to diagnose and solve unstructured problems. Examples are consulting firms, advertising agencies, R&D organizations and some law firms" (Christensen, xxiv). In medicine, these shops provide a diagnosis.

Value-adding Process Businesses: "take incomplete or broken things and then transform them into more complete outputs of higher value" (Christensen, xxv). Examples are in retailing, restaurants, and manufacturing. In medicine, the treatment after the diagnosis.

Facilitated Networks: "enterprises which people exchange things with one another" (Christensen). Mutual insurance companies are an example.

A "cascade" of disruptive strategies in health care might flow from the expensive general hospital (each with its Solution Shops, Value-adding Processes and funding from Facilitated Networks). It would cascade through Outpatients clinics, Doctors' offices, and, finally, patients' homes.

So what's the diruption? General hospitals are by their very nature, general. The more specific the treatment across the cascade, the more possibilities for lowering the complexity of the treatment and the clinicians, and thus, hopefully, the price of the interaction. Colonoscopies in a general hospital are expensive. While we don't expect to see them taking place in private homes, they are perfect processes to take place in a clinic set up to do just colonoscopies. The treatment speeds up, the price goes down, in theory.

As solution shops and clinics grow, the need for general hospitals will fall. Foreseeable problems include the large political clout of the hospitals which will resist clinics in retail stores and treatment shops set up to treat only one malady.

OK, so now you're saying, "We know all this. Where is the disruption?" Let's look at reimbursement. A simple statement might be that Doctors may do anything to treat a patient that they think makes sense. That's true, they may. But, if they want to get paid for their treatment, they have to follow very specific methodologies and approved treatments. If something falls outside what is approved, there are good odds they won't get paid for their efforts. So, obviously, doctors stay within the approved norms. Follow that by the fact that patients are shielded from the real costs associated with treatments, as their insurance, with its low co-pay, doesn't let them feel the pain as it were. An HSA is different. Set it up properly in a situation where an individual pays the full amount of an office visit from her HSA and suddenly she's upset about shoddy or unneeded service. Simpler solutions like a cheaper but just as successful medically clinic visit start to make sense.

The debate has just started. There is an interesting role for strategy in health care. Let's hope the health  care system is listening.

Christensen, Clayton M., Jerome H. Grossman, M.D. & Jason Hwang, M.D. The Innovators Prescription. A Disruptive Solution for Health Care. McGrawHill. 2009.

Disruption in the Automotive Industry

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Three people are sitting on the marble steps outside a conference (Womack, 3). The recognize that a business problem, a big business problem, isn't getting the attention it deserves. They resolve to examine the problem and report on it. Simple enough so far. What happened next was what was interesting. Rather than begin their research, they approached the subjects of their interest and asked them to fund their endeavor. They didn't ask for a pittance; they asked for five million dollars (in 1984 dollars) and said the work would take more than three years. All their targets bought. My suspicion is that they actually didn't ask for enough in the first place. Nice story so far. Who was the target?

The target was the automotive industry. In 1984 or so, like most other sensible people, the conference attendees realized that American auto manufacturers had a problem. The problem was, however, that the manufacturers either couldn't - or wouldn't - take action to fix their problems. They needed a nudge. Thus the book.

Their final tome came out in 1990. It summarized lots of scholarly articles that had come before. They had visited with all the major auto manufacturers and visited maybe not all, but nearly all, the manufacturing sites in the world. They really knew what the problems were. They sketched the history of automobile manufacturing from a craft industry, through Ford's mass manufacturing, through the Japanese introduction of just-in-time manufacturing, and its final iteration, lean manufacturing. They even keyed in on the atmospheric warming effects of all the carbon spewed by millions of car's exhaust. Everything was there.

Some people listened. Ford got on board early in the eighties and began and evolution toward lean manufacturing. GM took a lot longer. Basically, however, no one listened. This wasn't a research problem, nor was it a writing or editing problem. The book is great. I'll bet however, that only ten-thousand or so volumes were actually published. Everyone yawned and did, essentially, nothing. Who's to blame. Why blame, you say? Think of the lost investments in the automotive business, and the growth of the Japanese industry.

So, all this boils down to a marketing problem. It's easy to say "The authors should have made a bigger stink." After all, these were MIT professors, the best in the automotive business. No one listened. Were they to blame? Nope they weren't, not really.

Even though the book pointed out all the problems in the automotive industry, it forgot to realize that, really, there was nothing the industry could to for itself. Everyone was so set in their ways and that real change was very hard to accomplish. Ford started and the others followed along, but, basically, they were far too late. The automobile industry had "sailed" without them - to Japan.

So, who could have solved the American auto industry's problems? Entrepreneurs, that's who. The auto makers were following a "sustain" strategy of making incremental changes each year without ever rocking the boat with real innovation. After all, everyone knew that the unions and suppliers, not to mention the auto manufacturers themselves, would never make substantive change. Entrepreneurs missed the opportunity of the century when they didn't step in with a disruptive strategy the focused, initially, on a simple car that was easy to manufacture, that the customer wanted, and, most importantly, was profitable after a few short years. No one did anything. OK, there was some action in the time period. The Delorean was a great car but it wasn't enough to stem the tide of the migration of a great industry from America to Japan. The Japanese had been disruptive for years, what with their cheap, simple cars early on, and later with their highly sophisticated offerings made in a lean way that the Americans didn't catch on to - or ignored - for decades.

Who's to blame for all this? Well, it's not really the Big Three's fault. They did what any other manufacturer would do. They just made little changes each year and ignored what was going on around them. The real problem, or shall we call it opportunity, was for entrepreneurs to take advantage and create a simple, American-made automobile using the lean manufacturing system. We'll see how this all shakes out, obviously, as time goes on. For now, there still are opportunities available (that the Japanese, Chinese, et al are taking advantage of in such sectors as hybrid and electric autos), but American entrepreneurs have to move quickly. Now. The opportunity is there.

Womack, James P., Daniel T. Jones and Daniel Roos. The Machine That Changed the World. Based On the Massachusetts Institute of Technology 5-Million-Dollar Study On the Future of the Automobile. Rawson Associates. 1990.

Role of the Consultant

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Weiss lists nine roles of a consultant (Weiss, 17) organized along two planes, Transfer of Skills and Resolution of Issue. They are: Analyst, Commentator, Interventionist (along the Skills plane) and Analyst, Counselor and Independent Expert (on the Issues plane). Combining the two, especially in the seasoned consultant, are Instructor, Proactive Advisor, Exemplar, and Collaborator.

Using the old fishing or teaching someone to fish analogy, Collaborator combines the best of both roles in that the consultant focuses not only on actually doing something for the client (fishing, for instance) or teaching how to do something so the consultant doesn't have to hang around forever (teaching to fish, according to the analogy. Analyzing, the simplest of all the consulting skills is well applied, but only as a beginning of an engagement.

So, in choosing a consultant, what do you do? Look first at what you need from the consultant, then hire according to need. You have to do some work before you begin the dialog, especially if you want to maximize your investment. Sometimes you just hand off a project and expect a timely report. Sometimes, you need someone to actually direct your team - an interventionist - who focuses on training his or her successor as much as accomplishing the task at hand. Need both? Look for a collaborator. Get deliverables, and train your team, both at the same time.

Weiss, Alan. Million Dollar Consulting. The Professional's Guide to Growing a Practice. McGraw Hill. 2009.

August 04, 2009

Modern Artificial Intelligence: Catching Human Brain-power?

1+714.673.8578.     www.mixnerstrategy.com

Kurzweil's Singularity Curve shows that computers will catch up with human intelligence in the near-term, probably in the next ten years or so (Kurzweil, 43). That's faster than we have been predicting because the curve is logarithmic, not the usual numeric. Things speed up, especially technical things, after they get going. Those are pretty much the facts. What makes those facts even more interesting is that some scientists are concerned because they think singularity - computers better than man - means that bad people will figure out how to use the new technology to mankind's horror. It's probably too late to think about it, so get used to it, scientists. Maybe a little control is in order, yes, but it's probably too late. Better to protect your systems instead.

Free spirits in Silicon Valley have their own way of responding, namely, Singularity University. Kurzweil is the Galactic Chancellor (do I detect a hint of Merry Prankster here?) of the University. An exclusive organization, they're pitching courses on nanotechnology, neuroscience, robotics, biotechnology and bioinformatics. People are lining up to take the - expensive - classes. Other people are complaining about the exclusivity of it all. Get used to it. Kurzweil, at long last, is fashionable. It's his time. Get to know him.

Hardwick, Chris. Know Your Future. Wired. July 2009. 034.  

Kurzweil, Ray. The Singularity is Near. Viking. 2005. [ Referenced in http://mixnerstrategy.com/blog/2009/04/singularity_and_modern_man.html  ]

Markoff, John. Scientists Worry Machines May Outsmart Man. New York Times. 4 August 2009. http://www.nytimes.com/2009/07/26/science/26robot.html?hp=&pagewanted=print

Flash Trading Too Much of a Good Thing?

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After the fact, all my investing friends admitted that they knew something was wrong some time before, and, luckily, left the market. They never bothered to tell me, of course, so I stayed the course. I lost some money, but, luckily, I left it in and some time later I was back even. The trigger for the 1987 crash was interesting. Some years before, some smart analysts figured out a way to insure their stock market holdings. Buy these stocks and hold them - and buy these holdings so that, if your original holdings lose value, your back-up holdings won't. You can't lose.

You can't lose. Ah, savor the words. If only they'd kept their mouths shut, or, more likely, could have shielded their investment strategy from the scrutiny of other investors bent on mimicry. Too much of a good thing (the protection strategy) fostered too much of a bad thing (a market that couldn't react quickly to declines because too many folks followed the protection strategy) and we all know the result, those couple days of catastrophic loses.

Now, fast-forward to today. They say (Wilmott) that the newest trick is fostering a new disaster, as if we need another one to add to our woes. They say that increasing the speed of trades to take advantage of arbitrage opportunities (something is mispriced in a market, so take advantage of it even if the mis-pricing only lasts an instant) will eventually bring down the market.

Two facts from my point of view: the market is going to fall some time in the future. It might actually be caused by this new lightening speed trading. My prediction is actually two-fold: the market will fall, probably before the end of Obama's second term. Why it will fall, I have no idea. But it will fall. It's almost a given. But the other thing, the cause of the fall, is unknown at this time. It might be caused by lightening trading (I sort of like the name, don't you?), but my bet is that it'll be caused by something else that is unidentified at this time. I wish that all the things we have seen in the markets in the last one hundred years (mainly over-leverage, and too much reliance on analysis hiding risk-taking of unknown levels) was going to go away, that we had learned our lesson. Honestly, I don't think anything is going to change. My only prediction stands: there will be a fall in the market in the future. You might want to give some thought about how to protect your investments from that fall. Maybe your plan will actually work. I hope so.

One last thing: the administration wants to regulate lightening trading (they're calling it flash trading now - I like that name even better, don't you?). They're chasing solutions. Unfortunately, it's too late. Even if they regulate flash trades, traders will just move on to something else. Unless we change the underlying trading mentality, the deal-making mentality, nothing will change, really. Is that good? Well, I don't know. For a while there, a couple of months ago, I might have answered that the deal-making mentality had to go. Now, I'm not so sure. Capitalism is based on deal-making, isn't it? We'll have to see what happens.

Sorkin, Andrew Ross. S.E.C. to Seek Ban on Flash Orders, Schumer Say. New York Times. 4 August 2009. http://dealbook.blogs.nytimes.com/2009/08/04/sec-to-seek-flash-trading-ban-schumer-says/?pagemode=print

Wilmott, Paul. Hurrying Into the Next Panic? New York Times. 4 August 2009. http://www.nytimes.com/2009/07/29/opinion/29wilmott.html?pagewanted=print

July 21, 2009

The Healthcare Cluster

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Bibliography on the Healthcare Cluster

California HealthCare Foundation. Medi-Cal County Data - Delivery Models. California HealthCare Foundation. 2003.  http://www.chcf.org/topics/medi-cal/index.cfm?subsection=countydata&itemID=20451

Christensen, Clayton M., Jerome H. Grossman, M.D. & Jason Hwang, M.D. The Innovators Prescription. A Disruptive Solution for Health Care. McGrawHill. 2009.

County of Sonoma. Public Health Division. Frequently Asked Questions: The Managed Medi-Cal Planning Process. 2008. http://www.sonoma-county.org/health/ph/mmc/faq.htm

Hurley, Robert E., Cheri Rice. An S.O.S. for the COHS: Preserving County Organized Health Systems.  Mercer Government Human Services Consulting with Pacific Health Consulting Group. 2004. http://www.pachealth.org/docs/PackardReport0504Final.pdf

Legislative Analyst's Office. Analyis of the Budget Bill Health: County Organized Managed Care Health Programs. Legislative Analyst's Office. 2004. http://www.lao.ca.gov/analysis_2004/health_ss/healthss_anl04.pdf#page=103

Marsh Mercer Kroll. County Organized Health System (COHS) Fiscal Year 2007 - 2008. Rate Range Development and Certification. State of California. Mercer. 2008. http://www.dhcs.ca.gov/dataandstats/reports/Documents/MMCD_Fin_Rpts/CA%20COHS%20SFY08%20Rate%20Range%20Cert%20010208%20FINAL.pdf

Schauffler, Helen and Sara McMenamin. Baseline 1997: A Survey of Medi-Cal Managed Care Plans in County Organized Health Systems and Two-Plan Counties. Medi-Cal Policy Institute. 1999.

 

Bibliography on the Consulting

1+714.673.8578     www.mixnerstrategy.com

Block, Peter. Flawless Consulting. A Guide to Getting Your Expertise Used. Pfeiffer. 1981. 

Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.

Shenson, Howard L. Shenson on Consulting. Success Strategies From the "Consultant's Consultant". Wiley. 1994.

Weiss, Alan. Getting Started in Consulting. Wiley. 2009.

Weiss, Alan. Million Dollar Consulting. The Professional's Guide to Growing a Practice. McGraw-Hill. 2003.

July 02, 2009

The Cruise Line Industry

www.mixnerstrategy.com

http://www.cruiseindustrywire.com/HNR-pop.html

http://ats-sea.agr.gc.ca/us/4120_e.htm

http://www.cruiseindustrywire.com/article36526.html

http://www.cruiseindustrywire.com/article36547-The_State_of_the_Cruise_Industry_in_______Well_Positioned_for_Challenging_Times.html

http://www.cruiseindustrywire.com/HNR-category-category-Trends.html

http://www.cruiseindustrynews.com/annual-cruise-industry-report.html

http://www.cruiseindustrynews.com/cruise-news-articles.html

http://www.people.cornell.edu/pages/rjk34/Research/Carnival%20Cruise%20Lines%20Burnishing%20the%20Brand.pdf [ free version: http://www.allbusiness.com/accommodation-food-services/1190122-1.html ]

http://gttp.org/docs/HowToWriteAGoodCase.pdf

http://www.gttp.org/index.html

Womack, James P., Daniel T. Jones & Daniel Roos. The Machine That Changed the World. Maxwell Macmillan International. 1990.

June 13, 2009

Are We There Yet?

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When I was growing up, we used to take road trips in the family Pontiac. I remember sitting in the back seat, stiffling, hungry, and ready to be there, asking into the front seat, "Are we there yet?" And I remember the response. Early on it was a wry smile and no comment. Later on into the trip, say, two days later, the response came a little more quickly, "Stop asking!" And that's what I feel like right now. Actually, I have two questions to ask: "Are we there yet?" and "When we get there, will things be different from what I remember?" The market has rebounded nicely. Actually, we have a long way to go, but at least it doesn't look like things are going to go down that much farther, if any. We just finished four weeks that summed to a gain in the stock market, the first in a while.

So, are we there yet? Will things be different when we arrive? Some say consumers are more frugal (Kliner, 1). Some companies are making "gutsy bets on new strategies" (Weber, 37). There will be "more startups, fewer giants, and infinite opportunity" (Anderson, 99). That's what they say.

We're just going to have to wait and see. In the interim, make sure you have the right people on your team, join with them to make a plan and implement your plan. Now.

Anderson, Chris. The New New Economy. Wired. June 2009. 99.

Kleiner, Art. How Real Is the New Normal? strategy+business. Summer 2009. 1.

Weber, Joseph. Hunting for Growth. BusinessWeek. 22 June 2009. 37.

June 12, 2009

I Want a Snap-Together Auto

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Growing up, my family had a record player. You could carry it around, as it had a handle on the outside of the case and the arm could be clipped down. Everything was one piece. Then we got a new record-player. It was in a cabinet of something like mahogany. It weighted a ton, but it had better speakers and a better turn-table. It was great until our deaf cleaning-lady turned up the volume so high that she blew out the speakers. If you played it quietly, you never knew it was broken, something that was just fine with my father. When I got my first stereo things were different. I got the speakers from one manufacturer, the amplifier from another, and the turntable from yet another. When I put it all together, it had great fidelity (it was stereo, after all) and it was a lot harder to blow out the speakers (not to worry, we still managed to blow out one of them). It was a modular system in which the pieces added up to a better total unit that a system made all by one manufacturer. My first computer was the same way. I bought an IBM PC (couldn't go wrong, right?) added floppy disk drives, a printer, a memory card, and a graphics card and I was ready to go. That worked pretty well, except it sure cost a lot. My next five or six PCs were off the shelf - the manufacturer put it together and I bought it as I had to keep up with technology. The costs fell with each successive machine. Cars have never really been modular in quite a while. Yes, during the sixties, we added performance parts and stereos all the time, but as I have gotten older, all that just hasn't been important. Too, the manufacturers increased quality significantly, so I went along with whatever they were selling, basically.

Mann's article shook me up a bit because it reminded how much more I like my modular stereo and my modular computer, and, yes, hopefully my modular car. Today you can't really get a modular car, but that may change. Detroit, with the ultimate reorganization that is happening today, won't be able to spend the big dollars to create the cars of the future. Each system - the propulsion system, the breaking system, the batteries, the communication systems, etc. - will need to come from a different manufacturer. They envision just snapping things together, testing it for safety, and delivering it to me. Well, that doesn't go far enough for me. I want to buy the braking system myself, along with the engine, and suspension and windows etc. and have it put together to my specifications. I'll want simple, cheap, and economical. You might want sleek, fast, cool, with money as no object. But we both, I predict, will want to specify what goes into the car - ourselves, just like when we bought our first stereos or our first computers. That's my prediction. Now we get to wait and see how it turns out. Things are going to change, that's for sure. Get ready. Smaller, inventive manufacturers are going to shake things up, and we all should benefit. Some risk will be there as smaller firms are more likely to fail and not support their products, but that is part of the price we will pay for getting the cars that do what each of us wants. That's what I think, anyway. I'm hoping for the time when I can snap together the car I want, maintain and repair it easily, and then rebuild it or recycle it easily. We'll see.

Mann, Charles C. Detroit. The New New Economy. Wired. June 2009. 101.

Jim Collins' Latest Book

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We've been enamored of Jim Collins books for some time, as they give solid advice that is actionable. His new book, How the Mighty Fall,  at first blush seems like just another book to extent the line of hits. Haven't read it yet, so we'll see. He does reinterate some things we've seen before, like how to get the right people in the right seats (Collins, 38): Choose people that fit the company's core values; don't tightly manage them; the right people realize they don't have jobs, they have responsibilities; the right people fulfill their commitments; the right people are passionalte about the company and its work; the right people display window and mirror maturity (if it is going well, it's the team; if it's not going well, it's their responsibility). We all know that when you watch a company for a long time, decline is inevitable. Collins is trying to figure out why, and, then, prescribe what to do about it. It seems that the prescription isn't what matters, it's the realization that something can be done. The real task is doing it, especially in the instance when things seem like they are going just fine. About three years ago we began working with a Fortune 500 home builder. Their plans included growth with nary a mention of the possibility that the market could turn against them. We pointed out that their growth plans (they envisioned growth of one hundred per cent a year) weren't realistic in a cyclic business. When we asked to see their lay-off plans, they thought we were nuts. Well, someone got that on wrong. And that's the point. Hubris born of success isn't a good determinate of future success. In fact, according to Collins, it is the first signal of decline. He got that one right, for sure.

Collins, Jim. How the Mighty Fall and Why Some Companies Never Give In. BusinessWeek. 25 May 2009. 27.

June 07, 2009

Wagoner Was the Wrong CEO

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Apologia. Today the term "apologist" is colloquially applied in a general manner to include groups and individuals systematically promoting causes, justifying orthodoxies, or denying certain events, even of crimes. Apologists have been characterized as being deceptive, or "whitewashing" their cause, primarily through omission of negative facts (selective perception) and exaggeration of positive ones, techniques of classical rhetoric. When used in this context, the term generally has a pejorative meaning (Wikipedia).

That word pejorative at the end the definition says it all. Holstein's book is an apologia about Wagoner's management of General Motors. Dumped as CEO as part of the bail-out process leading up to the recent bankruptcy, the book makes a case that he was the right man for the job and should have been allowed to finish the task of righting the GM ship. Well, it took to long, Mr. Wagoner. It was in fact time to move on to new management. From a strategic point of view, Wagoner had one neat win, the OnStar system. GM broke company rules big time early in the creation of the system. The strategy wasn't dictated in advance; it was allowed to become apparent over time. They didn't spend a lot of money; the initial investment for the alpha system they bought from General Magic was $15 million. The strategy for OnStar wasn't an automotive strategy; it mimicked the electronics world more closely with its continual improvement and continued innovation. Customers had complained about any remote control of their auto; OnStar began that control in a benign way that customers didn't complain about. It saved lives, after all (Holstein, 157-168). Benighted by Clayton Christensen in a Harvard case study, the OnStar success is a good example of a disruptive strategy that worked (Holstein, 169). The keys to a good strategy? Initial management wasn't told what to do; they figured it out as they went along. It wasn't top-down at all. Secondly, Wagoner ran interference between the traditionalists at GM and the new technologists. Finally, and maybe most importantly, OnStar stood alone. It wasn't assigned to any division. Yes, Cadillac was the first installation. However, over time, OnStar was rolled into most of the autos at GM. Wagoner proved he was a good manager when he championed a new technology. It was his championing old technology, namely, the "way things are done at GM" that proved his ultimate downfall.

Holstein, William J. Why GM Matters. Inside the Race to Transform an American Icon. Walker & Company. 2009.