Category Archives: Strategy

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.

Opportunistic Predator

From the Ask Tom mailbag.

Question:
Ever since the recession, our company has been scrambling. There was a time when things were calmer, predictable. Now, our management meetings seem disorganized, we are all over the place, decisions are haphazard. We have an agenda, we follow the agenda, but our direction seems muddled.

Response:
You are clearly in the deep stages of Go-Go. You describe a normal organization, out of the start-up phase, yet still struggling out of its cocoon. And many companies were put here by the recession.

During the recession, our focus shifted from operating systems toward survival and sales. Get some sales, nothing else mattered. Get sales and get profitable.

To survive, we chased rabbits, abandoned our core, taking any opportunity that created a sale. We are now entrenched in opportunity seeking, reactive in our behavior.

We did this because we had to. We had no choice. We had to survive.

The counter-intuitive move is to slow down and think. Our markets have moved, they are different, now. Things are improving (slowly). There are patterns of viability forming and we have to pay attention. Market analysis is the next step. We have to move from being an opportunistic predator to an intentional sleuth. As our markets return, we have to understand their new patterns and adapt our internal systems carefully.

Logistically, this means drawing new pictures and flow charts, identifying market needs, not one-off opportunities. As we draw this picture, our market will become clearer and our decisions will make more sense.

Market-Test Demand

Last in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
It’s expensive to create a new product or engage new customers in a new service. How does a company make those decisions without getting spread too thin?

Victor:
Start small. Take baby steps.

In the software industry, companies “invent” new software technologies that exist only in the minds of the management team. First, they create a PowerPoint presentation describing the software (that does not yet exist). Then they market the product as if it existed.

This is known as “slide-ware” (software that does not exist in a form other than PowerPoint). Critics of this process call the product “vaporware” because it doesn’t yet exist in physical form.

In the direct marketing industry, this is called a “market-test”. They create a marketing promotion for a non-existent product, send the direct mail piece, and count the corresponding orders — then promptly refuse to take the customer’s money.

The idea is to see if the product will sell, before committing R&D dollars to actually creating the product.

Find the cheapest, easiest way to “market-test” demand. If you can present “slide-ware” and get a large purchase order out of it, that’s a very favorable sign the product is worth investing in development.
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You can download a free e-copy of Victor’s book, The Recession-Proof Business. This concludes our series with Victor Cheng. He’s a bright guy, check him out.

Does the Customer Care About the Problem?

Fourth in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
How can a company best determine whether a new product or service is something their customer cares about?

Victor:
If the product or service is one that’s easily understood by customers, the easiest way, is to just ask them.

If the product or service is highly innovative, then this approach is unreliable. It’s like asking people who have never seen a mobile phone what they think of it. The cannot grasp the value of the innovation.

In this instance, the better approach is to ask yourself “What problem does this product/service fix for my customer?” and then ask customers how much they care about this problem.

So if I were market-testing the iPod + iTunes combined service, I would ask customers the following:

Q: “How do you find new singers/artists or songs that you might like”
A: “I listen to the radio at work/home”

Q: “And when you listen to the radio and come across a song you really like that you’d like to hear more often, what do you do?”
A: “I drive across town to go to the music store.

Q: “Do you buy the single or the whole album?”
A: “The whole album.”

Q: “Why do you buy the whole album, instead of just the song you like? How do you feel about this?”
A: “It’s the only way they sell the music. $15 for the one song I like. Expensive.”

Q: “How long does the whole trip take?”
A: “1 – 1.5 Hours.”

Hopefully you can see where I’m going with this line of questioning. If the breakthrough innovation is based on fixing a specific problem the customer is very familiar with, be darn sure the customer really cares about the problem a lot… and if they do, that’s a favorable sign that you’re on the right track.
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You can download a free e-copy of Victor’s book, The Recession-Proof Business. Our conversation continues tomorrow.