‘Twas the night before Christmas and all through the office, not an employee was stirring, not even the bosses.
The last orders were shipped by FedEx that day, in hopes that big profits would soon come their way.
The work had been planned to the final detail. Management was confident that nothing would fail.
They’d examined their strengths and knew how they compared. The goal was in sight. The team was prepared. Read More
' tips[1]='Consultants...you can’t live with them but can you live without them? What real value can they bring to you and your company?
The first time I heard this “humorous” definition of a consultant, I didn’t find it very funny. Being a consultant myself, I responded, “If managers don’t have the sense to look at their watches and check the time, if they were that blind, maybe I should double my fee.”
Back then, I had a different view of why executives needed consulting services. It seemed to me that they hadn’t grasped the benefits of participatory management and an open work environment. They were unwilling to communicate openly with their employees, so they hired someone like me to act as a window to their staff.
If they were to ask the kinds of questions I asked (for example, “What’s the biggest obstacle you face in performing your job?”), listen objectively to the responses (for example, “YOU, Mr. or Ms. Manager”), and take appropriate action, they wouldn’t need consultants... or so I thought back then. Read More
' tips[2]='Some companies do strategic planning for the same reason kids get tattoos -- it’s the thing to do. Their golf buddy has a strategic plan, so now they want one. They read about it in Business Week so it must be important.
A strategic plan is about as useful as a tattoo if you’re not sure why you need one. If your motivation for planning is to keep up with the Joneses, you won’t invest the time, resources, and commitment it deserves. Implementing the plan will produce frustration and failure, not the healthy, thriving company you hoped for.
Too often strategic planning is viewed as an expense rather than an investment. Company leadership begins the process without a clear idea of the rewards. And once the plan is implemented, the managers have no idea how to measure the results or assess the gains that might not otherwise have been achieved.
Such measurements would be tricky to say the least. You’d have to have an evil twin - an identical company operating in an identical manner, except with no strategic plan - and compare its position to yours at the end of a trial period. Read More
' tips[3]='So much has been said about disintermediation that trend-watchers now call it “old news.” But to business executives, with more to do than watch trends, the impending demise of the middleman is not only topical, it’s a threat to their companies’ very existence.
In staggering numbers, and in large part because of technology like the Internet, manufacturers and vendors are bypassing multi-tiered distribution channels to sell directly to end users. If your company’s primary function is to be a link in the supply chain, what will you do when the chain breaks or rusts away?
Like the pearl inside the lowly oyster, hidden within every threat are opportunities waiting to be harvested by those willing and able to crack open the existing paradigm.
Remember when big banks started consolidating? Many small banks panicked, wondering how they could possibly compete against the banking behemoths. Those that looked beneath the surface of the crisis noticed service gaps left by the new regional banks. They moved quickly to establish community banks to fill niches in the local markets. Such banks turned what many saw as a threat into an opportunity... and they continue to prosper today.
The pearl. Read More
' tips[4]='Remember when ice cream was vanilla, phones were black, nail polish was red, beds were “single” or “double,” and stores closed on Sundays?
Standard colors, flavors, styles, and business practices were ... well, standard. But it worked out, because lifestyles were pretty standard as well.
Of course, this kind of uniformity was, considering the age of the universe, a pretty new thing. It took the Industrial Age of the 18th and 19th centuries to make it possible for shoes, cookstoves, blankets, books, sewing machines, and Fords to be made in batches rather than as individual hand-crafted units. Until then, from the beginning of human history virtually everything had been custom-made. Read More
' tips[5]='Why is Wayne Gretzky one of pro hockey’s all-time greats? Gretzky says the trick is “skating to where the puck’s going to be, not where it is.” Anticipating his teammates’ moves and competitors’ reactions, he dynamically positions himself to take the shot. This time-tested strategy has landed Gretzky among the National Hockey League’s leading scorers for the past ten years.
Your company can glide to the top using a similar approach, dynamically positioning itself to anticipate the market’s direction and competitors’ responses. That’s one way strategic planning gives you an edge. Unlike operational planning, strategic planning focuses on where you need to be in three to five years. Failing to look ahead is like skating blindfolded. You never know how close you are to the goal.
Are you going up in smoke?
In the sea of information available to help you identify and track long-term industry trends, some is industry-specific and some is more broadly applicable. Demographic data can be valuable to virtually any type of business. Read More
' tips[6]='When Faster, Better, Cheaper, Smarter Doesn’t Matter.
Today’s management mantra is “do it faster, better, cheaper, smarter (FBCS) and customers will beat a path to your door.” While this is often sage advice, there are industries were FBCS is of little use. If your target market happens to be one of those industries, FBCS will bring you frustration instead of profits. Your product or service may be genuinely faster, cheaper, better, and smarter -- but they won’t buy it. It seems irrational, but is it?
Surprisingly, some customers’ indifference to FBCS is not only sound but easily intelligible when you step back and look at the competitive forces within the industry. According to Michael Porter, the five forces that determine the level of competition within an industry are customers, competitors, suppliers, entry barriers, and substitute products. (Entry barriers determine how difficult it is for companies to break into the industry. Substitute products are items that serve the same function as the industry’s product; for example, airplanes are substitutes for trains.) The level of competition in an industry depends on how these forces align.
Why your customers might not be interested in FBCS. Read More
' tips[7]='And You Thought it was True Love.
What’s the real reason it’s so hard to pry customers loose from the competition? Bribery? Karma? Hanky-panky? True love?
Yes, personal relationships have a lot to do with customer loyalty, but the ties that bind aren’t indestructible. One way to sever those ties is to eliminate the cost of changing vendors. “Switching costs” are those one-time expenses incurred when a customer stops using your competitor’s product or service and starts using yours. Considerable time, energy, and even money are expended in the transition.
Switching costs were a key element in the videocassette-recorder battle between VHS and Beta. If you bought Beta technology and tapes, converting to VHS required a major purchase to do the same thing you could already do. Before VHS could achieve victory in the VCR war, the usefulness of its equipment had to greatly diminish the value of owning a Beta machine. Read More
' tips[8]='You might have a product fit for a king, or offer a service suitable for royalty. But do you have the keys to the castle? You can plan, research, merchandise, brainstorm, advertise, form alliances, buy out the competition, add features, cut costs ... if the monarch’s not amused, it’s off with your head!
Aristocracies come and go, but the customer is king. Proper distribution channels - how a product gets from manufacturer to customer - can make your merchandise available in the right place at the right time. Developing new distribution channels is a key growth strategy for many businesses. More and more common is direct marketing - going straight to the customer instead of selling to wholesalers (who sell to retailers).
Dell Computer started out direct, while other companies watched nervously, unsure of the royal reaction. Some grew bolder, sent out a few thousand catalogs, put up a Web site ... but the domain was unfamiliar and there were rumors of dragons. Was the direct channel a threat or an opportunity?
Should you take the high road? Read More
' tips[9]='When A Strength Is Your Greatest Weakness
Ed Albert was a classic entrepreneur, a founder of numerous businesses during his colorful life. Though some of his companies failed, Ed’s talent for starting and growing enterprises was legendary - the most successful virtually revolutionizing the furniture industry. He was celebrated in major business publications, and many awards decorated his office walls. When he thought it was time to retire, Ed sold his furniture company and retired to the South of France.
But a man named Bill Rodgers reignited the entrepreneurial flame in Ed one afternoon when the two met at a French cafe. Bill had spent the past five years developing an ingenious product. Though it had been in small-scale production for three years, if the enterprise was to go anywhere, Bill needed outside investment. Seeing a fascinating challenge and an opportunity to use his experience, Ed brought several investors on board, took over as chairman, and hired a longtime associate to manage the business.
Ed was highly optimistic about the new enterprise; for the first time in his life he had money to fuel the company’s growth. The furniture business had been a frugal operation, and he’d always had to cut corners. It could have grown faster and farther, Ed was certain, if he’d had adequate capital. Now that he had it, he was going to do it right. Read More
' tips[10]='When your company spends thousands or hundreds of thousands of dollars on capital equipment, you don’t consider the manufacturer’s scheduled-maintenance recommendations “optional.” The engineers who design the machines also design maintenance programs for them - for a very good reason.
If you ignore your car’s routine servicing and maintenance requirements, it doesn’t take long to feel the effects. Forget to change the oil, and metallic particles accumulate, eventually damaging the engine irreparably. A neglected timing chain can mean sudden death for an otherwise functional automobile.
Funny how we coddle our machines but drive ourselves (and sometimes our employees) mercilessly. For a human being, scheduled maintenance could follow Abraham Maslow’s familiar “hierarchy of needs.” Human maintenance -- ranging from physical to emotional, mental, and spiritual upkeep -- requires attention to people’s physiological (food, water, shelter, sleep), safety, and social needs, as well as the need for self-esteem and self-actualization. Read More
' tips[11]='Dear Dr. Gooding:
I enjoy your strategy tips, and I have a dilemma I thought you might help me with. I’m starting a venture and know how important it is to stay focused. At the same time, I’m told I should be flexible, able to seize opportunities as they come along. Can I have it both ways? If a great opportunity pulls me in another direction, am I undermining my original plan? Or might flexibility make me aware of a better direction for my business?
N.D. Cisive
Dear N.D.:
Yes.
That is, yes you can be both flexible and focused at the same time. But you should be more flexible when the venture is new than when it’s established. In the beginning, you’re learning the business, your vision is fuzzy and your target indistinct. Since your plan is based on limited knowledge and understanding, it must be fairly flexible. But the more you learn, the more assured you can be. As time progresses you’ll begin to see where you are, where you want to go, and how to get there. Read More
' tips[12]='It Slices, it Dices...But is it For You?
Everybody’s doing it! Should you?
The vaunted new management tools and strategies - reengineering, electronic commerce, incentive bonuses, and more - have proven their value over and over. Companies have had great success following the gurus’ advice and achieving greater productivity and profitability, reduced costs and turnover.
Maybe you’ve tried some of these tools -- not just halfheartedly but with enthusiasm and forethought -- only to discover that they didn’t work. Everything you’d read in the business press and heard from your colleagues led you to believe your company’s performance would improve if you jumped on the bandwagon. But a year or so later, you found yourself sitting at your desk, scratching your head, wondering what went wrong. “Was it a bad idea? No. Did we fail to execute? No. Well, it worked for IBM. Why didn’t it work for us?”
Maybe you were using a slicer-dicer to chop a sirloin ... or a screwdriver to pound a nail ... or a toaster to bake bread. Maybe it was simply the wrong tool for YOUR problem. It’s not that the tool is flawed, it just wasn’t designed for YOUR situation. Maybe what makes millions for IBM ends up costing you millions to repair the damage. Read More
' tips[13]='Are You Lucky or Are You Good?
One of the things that differentiates humans from other animals is our ability to make sense of the environment. Because of this distinction, our species has developed technological tools of increasing complexity -- from sticks and stones to computers and cannons.
But our analytical nature also causes us to overinterpret events and situations that affect us and our livelihoods. Concocting false explanations for the unexplainable generates a cycle of self-deception. Innocent illusions gain credibility, growing into myths powerful enough to guide our behavior.
Keep your lucky penny in your wallet if you must, but beware of superstitions that cloud common sense and control critical business decisions.
You’re the coach.
It’s Game 5 of the 1998 NBA Championship. The Chicago Bulls are down by 1 point with 30 seconds to go. Chicago has the ball and calls a time-out to discuss the next play. Scotty Pippen, who typically shoots about 45 percent, has been on fire. He’s 14 for 15 with 35 points for the night. Michael Jordan, on the other hand, is as cold as Pippen is hot. Usually a 50-percent shooter, at 3 for 12 Michael has chalked up just 10 points. Read More
' tips[14]='Dear Dr. Strategy:
We’ve just gone through another strategic planning session. We hoped that this one would be more productive than the others, but - as always happens - we just seemed to go around in circles. As a management team, we just aren’t making any progress. In fact, to be honest, we aren’t really a team. Some of the managers seem concerned only about protecting their turf, others won’t budge from their preconceived notions, and the rest are simply not interested.
How can we develop a strategic plan when nobody cares about the company’s vision? How can we establish common goals? How can we start building consensus and transform our group into a team with a shared purpose.
Wannabe A. Team
Dear Wannabe:
You say you want to build “consensus.” Great - if you really mean it. To some people, “consensus.” means “everybody should agree with me.” That’s the last thing you want - everyone thinking like you, or, worse yet, like the boss. A bunch of “yes men” nodding in agreement isn’t consensus, it’s fear or boredom, and it will drain your company of its vitality rather than motivate and propel it. Read More
' tips[15]='Let’s Think Together: Coaxing Consensus Out of the Closet
There’s a true story about a family of homesteaders that had “lost” their youngest child, a little girl. Everyone scoured the countryside looking for her, calmly at first, then frantically, eventually suspending their search to quarrel about who was supposed to be watching her. After searching the woods and fields all day, her aunt discovered her asleep in the grandfather clock, where she had been hiding from her brother.
Many strategic-planning teams make the same mistake when they hunt for consensus. They assume it’s not present in the group, and their attempts to find it take them far afield, when actually consensus has been there all along, just napping under a stack of papers.
Your planning team’s first step should be to uncover the consensus that exists and to use it as the foundation for your plan.
A company we’ll call Irreconcilable Industries wanted to develop a strategy to take advantage of changes in their industry (something all businesses should do if they want to grow). They used four steps to uncover the existing (but invisible) consensus in their team. Their discoveries were invaluable in formulating a new direction, and the participatory process ensured that the plan got implemented. Read More
' tips[16]='Are You Winning ... or Losing?
Make Sure ‘The Price is Right’
On the “Price Is Right” TV game show, emcee Bob Barker asks players to guess the market prices of boats, jewelry, major appliances, and other consumer goods. The contestant who comes closest to the actual price -- without going over -- takes home the loot.
Just as in business, if the price you name is too high, you lose! And if your rival prices the item closer to its actual value (still not exceeding the actual price) ... you still lose!
But in business, successful pricing depends on the customers’ appraisal. The closer your price to their evaluation, the better. If they consider your price too high, they won’t buy and your revenues will suffer. If your competitors’ prices are below, and close to, the perceived value - and yours are still lower - your revenues may benefit but you’re giving away unnecessary margins.
Not raising prices is one of the costliest errors in business.
If someone offered you a sure-fire way to double your profits, you’d jump at the chance. And if you knew that a 10-percent price increase would double your profit margin, you’d undoubtedly go for it. Doubling their margins is exactly what would happen if the typical U.S. business raised its prices 10 percent. Right pricing can dramatically improve profit margins for minimal cost. Read More
' tips[17]='L’Oreal makes beauty products for women -- fine products, better than Revlon, much better than Maybelline, not as good as Elizabeth Arden or Clinique. At least that’s what the prices say, as does the packaging.
A L’Oreal marketing strategy for the past several years has been to position its products a cut above the best of the drug-store cosmetic brands like Revlon and Max Factor. At $8, a tube of L’Oreal lipstick might cost a little more than a comparable Revlon product, significantly more than Cover Girl or Maybelline, astronomically more than budget brands like Artmatic, but still far less than the department-store lipsticks and direct-marketing brands like Mary Kay.
Most L’Oreal makeup products aren’t bubble-wrapped on cardboard like Artmatic and Wet & Wild - both serviceable products. L’Oreal displays are elegant. So are its spokesmodels -- not merely beautiful but ultra-classy celebrities like Meredith Baxter, Cybill Shepherd, and Melanie Griffith, who get up close and personal with their sister-viewers, confiding that, yes, L’Oreal DOES cost a little more ... “but I’m worth it.”
The price difference between L’Oreal and its nearest competitors is actually either nonexistent or too small to deter consumers from paying extra for hair-color products that won’t go orange or turn their hair to straw. And for those frugal Friedas who will buy the least expensive product, there’s always Maybelline. That’s just fine with L’Oreal, which owns both brands. Read More
' tips[18]='Experiments Don’t Fail, People Do.
Thomas Edison “failed” 10,000 times before he perfected the light bulb. But the inventor considered each failed effort a success. He had eliminated 10,000 combinations of materials that didn’t work.
Edison treated his endeavors as experiments. If he had viewed the results as finished goods, he probably would have given up after a few tries, concluding that incandescent lighting was just a bad idea.
Today’s businesses can profit by Edison’s example. When companies skip the experimentation phase, they in effect use the marketplace or their own organizations as a lab. Promising new products and innovative business practices are launched before they’re proven seaworthy. No wonder two-thirds of reengineering efforts fail and fewer than 900 of the 16,000 products introduced in 1993 are still on the shelves.
People fail to experiment.
Would you buy an expensive new suit without making sure it fit? Companies make a much costlier mistake when they fail to experiment. Instead of beta testing the idea in some small part of the organization or market place, they do a full blown implementation. An experiment is a trial run. You do a small test of the idea to determine if your hypotheses (i.e. assumptions) are valid. Read More
' tips[19]='Do You Know Which Side Your Bread is Buttered On?
Is your company thinking about expanding into a new area? Sometimes misdirected growth is a recipe for disaster.
About 16 years ago, in the heart of the nation’s breadbasket, a newspaper group started a new kind of service -- an on-line news service, or “videotex.” Let’s call this business “Computer-Originated Rural News” -- CORN for short.
The founders hoped to profit, eventually, from an emerging trend: the use of personal computers as information and communication resources. With the introduction of inexpensive models, computer prices had suddenly fallen within reach of the average family. Though still used mostly for games, word processing, and spreadsheets, microcomputers were also being sold with modems (external, of course).
CORN had competition - primarily CompuServe and the Dow Jones information service - but there were a few important differences. CORN was intended primarily for farmers. Its features included statewide weather conditions and forecasts, by county, several times a day, plus grain prices at selected elevators, livestock and grain futures, general and agricultural news, and articles about computers, cooking and gardening. For a monthly fee, subscribers could dial up the service on a toll-free number. Read More
' tips[20]='What’s the difference between a small company and a big company? The dress code? The executive washroom?
Actually, a much more important distinction is the ability to scale up the technology. What works on a small scale, or in a limited market, doesn’t necessarily work with higher volume or in more diverse markets. The chef d’oeuvre of big business is its technique for making more than one loaf of bread at a time, each loaf having the same texture and taste.
Biofoam was in the grain business. But instead of bread, it made a 100-percent-biodegradable packaging material--a substitute for Styrofoam peanuts. The raw material was heated, expanded, and then extruded into Chee-tos-like tubes. It didn’t taste like Chee-tos., but it was edible and quite tasty with salsa. Like a bakery, Biofoam had an exclusive, closely guarded recipe for its “cuisine.” A bag of this, a cup of that, heated to the right temperature and extruded at the correct speed, and--voila! Weight is a key attribute of packaging material, and the Biofoam product’s low density made it ideal. Minor variations in the formula rendered a heavy product or one that “flaked.” As with the powdery crumbs at the bottom of a cereal box, “dusting” is an undesirable quality in packaging material. Read More
' tips[21]='Great Luck! Pet Store Goes to the Dogs.
PetSmart warehouse stores for dogs, cats, and other critters weren’t always so user-friendly. When a store opened near Labrador-lover Mary Riley, she was one of the first to check it out. All she bought on that first visit was a collar for Amos, her fast-growing Lab puppy who already weighed 40 pounds. Mary had underestimated the girth of that strong, furry neck, so she took the collar back and purchased the largest size. This time it was too big, so back to the store she went. A simple purchase had become a doggone nuisance.
Mary vented her frustration to the clerk, who suggested she bring Amos to the store and fit him there. The next day, Mary and her pup - a bright-eyed, eager, friendly animal the color of just-baked bread - strode into the store. As Amos frisked about, licking all the hands and faces in his reach, customers were amused and delighted: How cute to see a dog shopping with his owner. The buzz wasn’t lost on the manager, who encouraged other shoppers to bring their pets along on future visits to the store. Other PetSmart stores quickly followed suit, and today you might encounter hamsters, parrots, and an occasional boa constrictor on your pet-supply shopping errand. Read More
' tips[22]='MERGER MYTH #1: “Diversification Lowers Your risk”
Take the high road in the race to success
It used to be against the law to paint a horse blue, at least in Chicago. Like all laws, this one no doubt had its place.
The same can be said for the “Law of Diversification.” You’ll find it in every investment book: “You will diversify your stock portfolio.” Such diversification generally does lower your risk by minimizing the potential loss from any single stock.
The law might also apply to mergers and acquisitions if companies treated the businesses they acquire as investors treat stocks. But they don’t; and even if they did, in most cases the risk would grow the more they moved into diverse businesses.
Why? Because companies diversify only marginally. It’s unrealistic for most businesses to diversify broadly enough to offer the sought-for security. Read More
' tips[23]='Are Your Growing Your Business, or Sowing the Seeds of Failure?
Restlessness is endemic among entrepreneurs who are energized by the new idea, new opportunity, new product, and new technoogy. The constant need for change and improvement is what makes them great innovators. They’re never satisfied with the status quo...the ordinary. They’re drawn to new stimulating challenges, which sometimes flower and bear fruit.
But more often these engaging diversions are the seeds of a company’s demise. Without disciplined focus, the venture will go unnoticed in the vast field of competitors, the company will wither and no one will recall that bright idea that shriveled on the vine.
So, to set itself on the path to success, to grow and eventually harvest the business, an entrepreneurial company must stay focused no matter how intense the temptation may be to waiver off course. Here are ten reasons why: Read More
' tips[24]='Let it Snow. Let it Snow. Let it Snow.
It’s cold. It’s wet. It’s windy. How about a fire in the fireplace? How about a frosty glass of ice-cold lemonade? No, wait! You want SOUP! Savory, steaming Campbell’s Soup! Okay, you know what you want; now go get it.
That’s what the Campbell’s Soup folks do. They have a hot marketing strategy, and they follow through with it - tactical detail by tactical detail. Campbell’s realizes that the worse the weather, the more soup people eat. But they don’t put that knowledge on the back burner - it goes into their recipe for success: Take a pound of information, mix well with strategic planning, turn up the heat, season to taste, and cook till done. Serves millions!
There’s a secret ingredient, though. Campbell’s has its own professional weather forecaster, who keeps an eye on regional weather patterns. The company buys regional television time in advance, so that as soon as the storm front moves in, the warm-and-cozy soup spots go on the air ... reminding consumers how snug and comforting a cup of clam chowder or chicken noodle can be on a blustery day.
And the customers bite. In fact, over time their response is automatic: clouds roll in, and they start salivating for a steaming bowl of beef and barley soup. Read More
' tips[25]='Developing a strategic plan is essential in your journey to success. But it is only the first step. Having set your destination, its time to set sail for those undiscovered territories. How well your crew navigates the turbulent currents ahead will determine whether you arrive in the promised land.
But at Captain Ahab’s Academy of Management you studied only bureaucratic control. You learned to make policies and write procedures, establish a hierarchy, clearly define each person’s role along the journey, and monitor performance. The more explicit the process, the firmer the control and the more efficient the journey’s progress.
Nobody mentioned the alternatives to bureaucratic control. There wasn’t a class called “Substitutes for Bureaucracy.” If there had been, you might have learned that, though everyone must work together, there are other ways to achieve coordination and control. There are ways to promote harmony without using a “cat-o’-nine-tails” ... mechanisms that bureaucracies overlook or leave to chance. Read More
' tips[26]='Integration or Disintegration? You Decide.
We all SAY integration is an imperative when companies merge. But talk is cheap. The proof is in the planning and execution, as one Fortune 500 company learned too late.
Company A acquired Company B, one of its biggest competitors. Each had offices throughout the country. The companies had often competed for the same accounts and had very different business philosophies. Still, top management left the crucial integration process to the local branches. Some did better than others; often, all that got integrated was the furniture.
Thrown together with little or no preparation, employees who had once competed were now expected to collaborate. With harmony just a vague ideal, the long-standing rivalry and contrasting philosophies festered...finally erupting at a joint sales presentation to a major client.
Toward the end of the presentation, Company A and Company B representatives got into a heated debate on the merits of their contrasting approaches. Read More
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