Category Archives: Strategy

What Has Changed Around You?

Andrew was still upset. The contract was lost and there was nothing he could do about it. He had lost his appeal with the purchasing agent, the procurement manager and the director of operations.

“We did everything by the book,” he said. “This is the way we have earned all of our major contracts. Our reputation is stellar. I can’t believe this is happening.”

“You got sucker-punched,” I observed.

“What?” Andrew replied.

“Sucker-punched,” I repeated. “We often think that our future success lies in the fact that we had one small string of successes in the past. We think that the curve in front of us continues upward without hesitation. We do not realize that, as we continue to do things the way we have always done, the world subtly changes. The nuances of the deal creep up, new players enter the game without detection, and suddenly we are on our ass.” Andrew’s face showed no emotion on the outside, but his eyes betrayed a growing realization.

“There is good news, though,” I continued. “This is not a game. This is life. In a game, there are few second chances. The final period has an ending, even overtime is sudden death.

“In life, in business, there are lots of second chances and the final period can be extended. But only if you stop thinking about your past success and start thinking about what has changed around you.”

Market Responsive

“You improved your quality, so your warranty program became a competitive advantage instead of a liability. Your lead time was down to four weeks. You lowered your cost structure. Your output and unit profit was consistent and predictable, systems focus. And then the rug got pulled out?” I asked.

“Yes,” Arianne reluctantly explained. “Everything, up to now had been internally focused. Efficiency, pace, quality. Then, the market fell out. Our customers would shrug their shoulders and buy from someone else. At first we thought they didn’t understand what a quality product we had. We even sent out our engineers with our sales people to explain why our product was more durable, lower cost and could be delivered faster. But, it was us who didn’t understand.”

“What do you mean?” I quizzed.

“We had been so internally focused that we didn’t notice a shift in the market. Our market moved. Our product was fine, but our market wanted something different. Our competitor smoked us. They had re-tooled a number of features based on user-feedback. We had no clue.”

I nodded my head, “Market responsive.”

“Yes,” Arianne confirmed. “It cost us a million dollars in stagnant inventory and months of development time to catch up. We had been so internally focused, we almost lost the ship.”

Debriefing Winners

“Let me see the projects that you put in for review,” I said, as Sean handed over the list. I scanned down the page, “I see you selected six, tell me, how did you decide which ones for the group to do a post mortem on?”

Each quarter, Sean’s team spent four hours going over significant projects for the quarter, looking for lessons learned. “Oh, that was easy,” Sean replied, “these were the eight biggest money losers.”

“It is always tempting to debrief a project where things have gone wrong. Once you have corrected all those problems, where are you?” I asked.

“My guess is, we are back to even steven. No loss, no gain, no harm, no foul.”

“If you really want to make progress, you also have to analyze where things went right. Pick two or three winning projects to debrief. Find out why you were able to make significant margins. Where was the advantage in those projects? Where can you find more projects like those?”

Timing is Everything

I just spent some time digesting the latest report from ITR. I have a sinking feeling in my stomach, mixed emotions. On one hand, the recovery is underway, but the next bump in the road is only a scant two years away. I have shared this news recently as a “tapping of the brakes,” but this month’s ITR Report uses the “R” word.

“We see the issues of future higher interest rates; higher taxes; federal, state, and local government deficits; unfunded pension liabilities and inflation (including energy and food) as contributing factors to what we think will be a recession that begins in late 2013 and encompasses all of 2014.”

Driving With Both Feet
And I am only talking about the gas pedal and the brake pedal. Between now and 2013, you have no choice but to charge ahead, as fast as you can prudently go. But keep one foot over the brake pedal. Depending on your industry, and some are still reeling (non-residential construction), be careful about building overhead that you cannot easily get rid of. The good news is that we have some warning and time to position ourselves appropriately.

I encourage you to subscribe to ITR, and pay attention. You can find out more information at this link ITR Trends Report.

The Machines Stood Silent

What a year. Running hard, just like you.

This has been a year of transition. The world changes. Blessed are the flexible for they shall not get bent out of shape. I know everyone is hoping that 2011 will be better than 2010. And it will.

But this next year is not about coping. This next year is about growing. Even in those most difficult market segments like non-residential construction.

Some of what we know will no longer be valid. Some old solutions will no longer fit new problems. It will require our brightest mind and sharpest execution. And it will always come down to this.

  • Find a market need big enough.
  • Build a product or service to meet it.
  • Then produce it faster, better and cheaper than your competitor.

But, now it is time to rest and enjoy the holidays with family and friends. Management Skills Blog will return on January 3, 2011. And now this story, first published here in 2005.
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As Matthew looked across the manufacturing floor, the machines stood silent, the shipping dock was clear. Outside, the service vans were neatly parked in a row. Though he was the solitary figure, Matthew shouted across the empty space.

“Merry Christmas to all, and to all, a good night.”

He reached for the switch and the mercury vapors went dark. He slid out the door and locked it behind.

Third Egg Strategy

I have to share with you, a new blog posted by my favorite guru of Customer Service, Howard Hyden. I have been a fan of his ideas for more than a decade. Good stuff. This is his first post.

The Third Egg Strategy
I met a client for breakfast at a coffee shop close to his company where we were greeted with a long line. He indicated that this place was always packed in the morning and a typical wait would be 15 to 20 minutes. He also indicated that there was another coffee shop not far down the street that was always half-empty. Read More.

Nuclear Winter

I spent last week working with my executive groups on an exercise with two purposes. The first purpose was to examine this most recent recession and look for lessons learned. The second purpose was to light a fire moving forward.

In 2005, we first learned of the impending recession, its timing, depth and breadth. My resource for this warning was Brian and Alan Beaulieu at EcoTrends. In January 2007, EcoTrends confirmed their forecast, before we retreated to the basement nailing down the hatches.

In that meeting, Alan Beaulieu, to create some hope (or an economist’s attempt at humor), spoke about the recovery. “There will come a time,” he started, “when we will give you the ALL CLEAR. It will not feel like the ALL CLEAR. It will still feel like nuclear winter. But we will tell you.”

And that signal has appeared. NOW is the time. NOW is the time to be aggressive. NOW is the time to take market share.

“There will be no double-dip,” they confirmed two weeks ago.

Your competition is still on its heels, whining and complaining about the economy. Now is the time to open the hatches, mobilize, expand your tolerance for risk.

Your competition still sees the world in nuclear winter. Now is the time to strike.

Think about your target in 2013. What steps do you need to take?

Can a Mission Statement Be a Picture?

“We have to find a purpose that has us?” Rachel was confused. “I’m not sure I understand. We are trying to do strategic planning for 2011. I get that we have to define our purpose. I know that purpose will drive the rest of the plan. But you make it sound like that purpose has to be some powerful compelling force. We bake bread.”

“Exactly!” I said. “What kind of bread do you bake?”

“Well, we bake all kinds of bread.”

“So, why do you bake bread?”

“I don’t understand.” Rachel’s head was moving from side to side. She wasn’t disagreeing, but she was having difficulty with the question.

“Why do you bake bread?” I repeated.

“Because our customers buy it.”

“And, why do your customers buy it?”

“Well, bread is consumed at almost every meal in some form or another. People eat a lot of bread. It’s a comfort food.” Rachel was trying.

“Why is bread so important to people?”

“It’s just part of life, bread goes with everything. It’s universal. Around the world, all cultures eat bread. When people get together, they break bread. It’s almost a bond between people.”

“And do you bake quality bread?” I asked.

“The best,” Rachel smiled. “Hot out of the oven, warm, soft, drizzle a little honey on it, just the smell of it makes you feel good.”

“Rachel, you are on the right track. Somewhere in what you describe, is purpose. Somewhere in there, is vision. Somewhere in there, is mission.”

“It’s funny you should say that,” she said. “In the hallway is our mission statement, only it’s just a picture, of a steaming loaf of bread emerging from an oven door.”

What is your company’s mission? If you were to take a picture, what would it be a picture of?

Undercurrents Will Surface

“The economic news is disturbing,” Morgan explained.

I nodded in agreement. “So, what are the actual impacts to your business and your market? The world is not ending, it is shifting. You think you are dancing on bullets. You have to find the rhythm in the dance.”

“I know, I know,” Morgan shook his head. “But, this recession has lasted so long. My people are tired. My customers are tired.”

“Then stop whining and figure it out. Get rid of the long face. Search for your advantage. Your competitors are suffering, just like you. In this market, in the midst of this chaos, there is opportunity. New undercurrents will surface. Are you watching them?”

Blessed Are the Flexible

So, what is this recovery going to look like. My primary economic forecasters, Alan and Brian Beaulieu are not expecting a double-dip, but they are predicting a long slow dig out.

Victor Cheng is issuing a strong warning anticipating a double-dip. Victor’s observations are based on conceptual trends and events, while Alan and Brian pay more attention to numeric indicators.

My sense is that we are looking, not at a V shape or U shape recovery, but something that looks more like an L shape recovery. Seven actions to take.

  1. Examine your revenue budget to make sure it is realistic. From your budget, create at least a tactical 6 month forecast, aggressively updated every 30 days.
  2. Take a long look at your personnel plan for the next 12 months. Determine which positions are absolutely necessary based on your revenue budget. Now, lay your tactical 6 month forecast on top of that personnel plan to see if, in the short term, it is survivable. Update aggressively every month.
  3. Eliminate any operational function that is not necessary to meet your customer demands.
  4. Simplify every operational process. It is likely, you will find an effective solution inside most of your methods and processes that is simpler and at a lower cost structure.
  5. Consolidate methods and processes, so that similar tasks are staged and cross-trained. This will allow you to maintain operations in the event you have to reduce headcount.
  6. Outsource any process that is not part of your core value stream. Outsourcing allows you to fix costs and jettison overhead in the event that process is no longer necessary.
  7. Technology. Before adding headcount, explore technology to see if there is an alternative to labor intensive processes.
  8. During this time of uncertainty, blessed are the flexible, for they will not get bent out of shape.

    Credit to the Four Hour Work Week, for some of the central themes of survivability.