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June 29, 2006

On Strategy: My Friend Bill

By Jack Mixner

Always trust a friend. One of my friends, Bill Edwards of Edwards Global Services (http://www.edwardsglobal.com/) reminded me of a book that I had not spent much time with lately, Collins' Good To Great. The book adds significantly to an earlier text Built to Last. Examining companies that make it over the long haul, Collins suggests a relationship between:
·          Being passionate about whatever your company does,
·          Being best in the world at what you do and
·          Being very profitable at the same time.

Collins discusses the success of Walgreen’s, a drugstore with margins that humble the rest of the industry. How’d they do it? Passion for them said be the best at what they do. They focused on convenient stores with high profit per customer visit. That meant smaller stores located close to the customer (Collins, page 92). When a location became available closer to customers they closed one store and moved, even if the move entailed paying off a lease and building a half a mile or so away. Stores were located close together to take advantage of economies of scale for deliveries. Then they added high margin photofinishing to increase profit per visit. Some stores have drive-up windows. What Walgreen’s didn’t do was buy small chains in less desirable locations just for increased revenues. They stuck with high profit per customer over increased revenues. Back to My Friend Bill Over more than twenty years, my friend Bill successfully launched operations for a large corporation in markets all over the world. Politics kept getting in the way and Bill decided to take a package, allowing him to recoup and decide what to do next. He realized that what he does best in the world is launch companies and products – worldwide. Another professional pointed out that Bill should apply his passion to an entrepreneurial venture, not employment at a large, international conglomerate. Today, his firm has locations in all the hot global markets, staffed by experts passionate  at what they do. Customers come to them and ask for help. Bill’s team decides if they can help and if everyone – the customer and the Edwards team - will make out very profitably. They’ve got the passion; they’re the best in the world at what they do; they won’t take a project unless everyone makes a profit." It is going to be fun to watch this one grow and grow – and grow. Reference Collins, Jim. Good to Great Why Some Companies Make the Leap... and Others Don't. HarperBusiness. 2001.

 

 

Posted by jackmixner at 10:04 AM |

June 27, 2006

On Economics: Mega Community Manifesto

By Jack Mixner

Business, NGOs, and Governments Work Together?

Businesses, non-governmental organizations or governmental agencies can no longer solve issues like globalization, health and environmental risks or inadequate infrastructure alone. Solutions demand the willingness and ability to work together at the intersection of the three groups – the Mega Community in Gerencser et al’s terminology. They use examples in Italy (securing availability of liquefied natural gas), AIDS in India, small business vitality in Harlem (a project led by Bill Clinton), and rain forest conservation in South America. The process seems particularly effective in communities where there is no clear leadership on issues the have long term effects.

The Orange County (California) Workforce Investment Board has a current project focusing on the nursing shortage. The WIB brought together management of hospitals, universities, and colleges all of whom had stakes in the problem. One of the outcomes is a new nursing school at the University of California Irvine. Everybody should be proud of the result.

How good is the OC solution?

Housing costs will eventually force nurses who work in Orange County to live elsewhere. Transportation costs, including travel time, will make that prohibitive. Even the new nursing programs will need short term (if not long term, as well) fill-in from nurses trained elsewhere. That backs into the national immigration discussions.

Suggestions from the Mega Community

  • The community must realize there is a problem and come together to solve it together with none of the different leaders demanding the leadership role.
  • Leaders must state what the problem is to a larger audience.
  • Negotiation begins in a cross-sector solution.
  • Experiment, learn, and monitor progress.

And in OC?

  • Applaud current results in nursing.
  • Address next phase in the larger discussions on, for instance, housing and infrastructure.
  • Lead discussions with all the communities.
  • Utilize a mega community for the solution.

Reference

Gerencser, Mark, Fernando Napolitano, and Reginald Van Lee. The Mega Community Manifesto. Public, private, and civil leaders should confront together the problems that none can solve alone. http://www.strategy-business.com/press/article/06208 . strategy+business. June 2006.

Posted by jackmixner at 07:01 AM |

June 26, 2006

On Outsourcing – Or Crowdsourcing?

By Jack Mixner

After six years of effort, P&G has moved thirty-five percent of its research and development initiatives outside the company effecting productivity gains of sixty percent. iConclude reduced creation of repair flows for customer’s software problems from $2,000 each to just five dollars (Howe, p 183).

A couple things were necessary. Trust of outside developers came first. Then, in almost the same timeframe came suppliers like iConclude which farm out the work to all sorts of experts who may work for minutes or hours as opposed to months or years. The experts bring interest in finding creative solutions to problems outside their normal experience. Companies pay less and get tiny little solutions to huge problems from people with specific expertise in very precise areas.

Howe’s five rules for making it work:

  • Make sure you understand what a dispersed crowd may do.
  • Work them hard for a short time.
  • Look for the specialists.
  • Must of the work performed is useless. Look for the diamonds.
  • Trust the crowd’s intuition to tell you which solutions make the most sense.

Strategic Implication

You do not have to have total control to succeed. Trust is part of the mix. Communicating with interested supporters and researchers precisely what you need will save time. Ask specific questions. 

Reference

Howe, Jeff. The Rise of Crowdsourcing. Wired. June 2006. Page 176.

Posted by jackmixner at 02:34 PM |

June 24, 2006

On Strategy: Two Sides of Innovation

By Jack Mixner

Creativity - read that innovation - shows up in two interesting pieces. Florida's original book says creative and seemingly pampered people (my words) foster economic growth.

Hanson says that innovation comes from daily, tiny, incremental changes. He suggests that we do just fine at innovation. The problem, however, is that we cannot pick which innovations are important to real growth - nor what to do with them when we really find something truly innovative.

Strategic Implications

Hanson postulates that the next revolution - on the level of the industrial revolution - will be in smart machines, and that it will occur in the 21st century.

One response might be to suggest that everyone look for investments in smart machines.

Another response?

On a daily basis, stoke incremental change at your company using whatever means are available. However, take the time to look out over your industry for monumental change as it occurs. Daily? Probably not. Annually? At least.

References

Florida, Richard. The Rise of the Creative Class: How It's Transforming Work, Leisure, Community and Everyday Life. Basic Books. 2002.

Hanson, Robin. Reality and Fantasy in Economic Revolutions. http://www.cato-unbound.org/2006/06/06/robin-hanson/reality-and-fantasy-in-economic-revolutions/ . June 6, 2006.

Posted by jackmixner at 08:39 AM |

June 23, 2006

On Strategy: Selling Disruptive Innovations to Senior Management

By Jack Mixner

The 90s words "disruptive technologies" scare me a bit. However, opportunities to take advantage of disruptive advances are clearly available. Patnaik talks about how to receive corporate approval to continue to develop your technology. He talks about setting up three sets of criteria for funding, testing and performance to evaluate incremental, experimental and potentially disruptive innovations - before you come up with a new idea. Having hashed out the criteria in advance allows you to evaluate your new technology against firm criteria and cuts out all the hype associated with selling innovative ideas to senior management.

Strategic Implication for Valuation

When you implement incremental, experimental or disruptive strategies, you increase company valuation. Having a ranking process set up in advance for evaluating technologies saves time, reduces gamesmanship and, most important, increases valuation. References

Patnaik, Dev. The Founder of Jump Associates Offers Five Key Strategies for Managing Change. http://www.businessweek.com/magazine/content/06_25/b3989450.htm . June 25, 2006.

 

Posted by jackmixner at 07:59 AM |

June 21, 2006

People Centered Research: Ethnography

By Jack Mixner

[Definition: Ethnography – "The branch of anthropology that deals with the scientific description of specific human cultures," The American Heritage Dictionary, Third Edition, 1996.]  Nussbaum has gotten me interested in ethnography, especially since Intel seems to use it extensively (see all the references on the Intel website). He talks about an Intel posting describing transnationals and cosmopolitans - "people who live outside their home countries and who move back and forth between countries."

Laptops, cell phones, web sites, instant messaging and video conferencing all assist them to communicate with the location they call home. In the southern California community, we all sense that there is similar growing communication between various Hispanic communities. It makes sense, therefore, that Intel is interested in future communication trends.

Watching how people use your products, as opposed to just asking, probably makes a lot of sense. It might be that ethnography has application to what you are doing in your company.

Strategic Implication

The next fashionable trend in management? Probably not. I think ethnography is going to be here a while.

References

Real People Real Lives: People Centered Research at Intel.  http://www.intel.com/technology/techresearch/reallives.htm

Nussbaum, Bruce. Ethnography is the New Core Competence. BusinessWeek IN (for Innovation) Insert. June 2006. http://www.businessweek.com/magazine/content/06_25/b3989414.htm

Posted by jackmixner at 02:17 PM |

June 20, 2006

On Risk: The Intelligent Investor

By Jack Mixner

Warren Buffet wrote the Preface of this edition of the classic by Benjamin Graham. He points to two crucial chapters, numbers 8 and 20, as summarizing the philosophy of investing he follows. On investors and speculators: "The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices" (page 109).

On margin-of-safety: “... to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience" (page 282).

"Investment is most intelligent when it is most businesslike" (page 286).

Strategic Implications

Investors acquire and hold investments with a true margin of safety in a businesslike manner. Operate your business the same way. Reference

Graham, Benjamin. The Intelligent Investor A Book of Practical Counsel. Fourth Edition. Harper & Row, Publishers. 1973.

 

Posted by jackmixner at 06:37 AM |

June 17, 2006

On Strategy: AeA Announces Capital Conference

By Jack Mixner

The Orange County California chapter of the AeA (formerly the American Electronics Association) announces a new capital conference for private companies looking for national awareness and investments. Forty companies will present at the conference. The conference is on October 12, 2006 in Dana Point, California. 

Planning to Present When dealing with venture capitalists we always recommend that a firm have five things:
  1. A complete business plan
  2. An executive summary
  3. Financial projections covering at least three years (more probably, five)
  4. Some sort of PowerPoint presentation for presenting verbally to investors and, finally,
  5. An "elevator pitch" summarizing your deal in less than thirty seconds.

 

References

AeA Capital Conference Announcement. www.aeanet.org/capitalconference . June 16, 2006.

Mixner, Jack. Raising Money: What Middle Market Companies Forget. http://www.mixnerstrategy.com/ARTICLE-RAISING-MONEY.html . 2006.

 

 

 

Posted by jackmixner at 08:16 AM |

June 15, 2006

Why Bother With a Sustainable Strategy?

By Jack Mixner

Over the years, I have worked with many companies to create strategic plans. Very rarely did we address ecological concerns in our planning. The focus was mainly on some form of corporate financial success. Ricoh Electronics always comes to mind when we do consider such a strategy because of all the effort they have made into reducing scrap and emissions (while at the same time increasing profitability).

Now I have a resource that lays out all the environmental problems we all may face in the next years. Normally my attitude is that changes in the weather will take time. I have assumed that we have time to address the carbon buildups in the atmosphere and all will work out in the end.

Head-In-Sand Thinking?

Eugene Linden presents compelling evidence that climatic change will not occur over millenniums but rather over years or decades. He describes convincingly the reasons for the collapse of a Mayan civilization and the advance of the ice ages during the thirteenth and fourteenth centuries in Europe.

The book is interesting - read that gripping and scary, cannot put it down reading - for the way it lays out the problem. All of us need to consider the implications for our society.

Short term, there are all sorts of ways to strategize. Some of them are not necessarily sensible (Friends from the mid-west were talking about buying into an ethanol plant. I would wait a bit if I were them.) Longer term, sustainable strategies make good business sense - and good social sense.

Strategic Implication

Sustainable strategies will increase profitability and company valuation when incorporated in the overall corporate planning process. They make sense to consider.

References

Linden, Eugene. The Winds of Change Climate, Weather, and the Destruction of Civilizations. Simon & Schuster. 2006.

 

Ricoh Social Responsibility Report. 2003. http://www.rei.ricoh.com/download/environment/ricoh_social_responsibility_report_200310.pdf

 

 

 

Posted by jackmixner at 11:33 AM |

Drug Approval by Managed Care Agencies Crucial

By Jack Mixner

There is a new way to trip-up in the minefield of regulation surrounding pharmaceutical manufacturing. Having an approved drug is not enough. The new drug has to meet insurance companies cost guidelines as well. Called OBA - for out-comes based access - the guidelines can hurt, especially if the costs of research and development and the approval processes are already past. The drug may not make the huge revenues in the forecast. Some pharmaceutical companies are posting sales of only a fraction of their predictions.

Strategic Implication

Drug manufacturers must heed not only the FDA in gaining approval for their drug. The new drug must show itself useful in the marketplace - i.e., at a minimum exceed significantly the efficacy of the older drug it replaces - or face failure.

There are two sides to this one. Consumers will applaud. Investors and pharmaceutical managers need to verify the pharmaceutical company's entire strategy before release or face missed sales forecasts later.

Reference David Balekdjian and Michael J. Russo. Drugmakers: A Dose of Reality. Business Week. June 19,2006. Page 98.

 

 

 

 

Posted by jackmixner at 08:36 AM |

June 14, 2006

Combining Puppets AND People for Better Results

By Jack Mixner

Malcolm Gladwell says that
Sesame Street
's initial marketing studies showed the show was a bomb - until they combined human sized puppets that could talk with humans, i. e. until they mixed fantasy with reality (Gladwell, page 106). The experts said it would not work. The rest is history. Blues Clues was even better because it used one character at a time, one story line for each show - and half the length. (Gladwell, page 111).

You will not get the impact unless you try it. One final key point - measure the results of every new change.

Strategic Implication

Spend time in your initial strategic analysis to ask, "Where are we?" Then look to see if there are opportunities for change. Make changes carefully, watch which ones work and only then do you implement.

Reference Gladwell, Malcolm. The Tipping Point. Back Bay Books / Little Brown and Company / Time Warner Book Group. 2002.

 

 

 

 

Posted by jackmixner at 10:57 AM |

June 13, 2006

Valuing Your Business

By Jack Mixner

Inflated business valuations do not do anyone any good. Taking the time to evaluate your business' value correctly helps you think strategically about what steps to take to increase valuation, especially if you intend to increase the value of your company before placing it on the market. Nevin Sanli of Sanli Pastore & Hill outlines two ways to value a business, the discounted future earnings method and comparable or guideline company approach.

The discounted earnings method looks at future earnings by forecasting revenues, expenses, profits and cash flows.  Incorporate threats that affect those future earnings into the equation. Using risk factors, analysts adjust future earnings according to the projected threats to the business.

The comparable/guideline approach relies on the selection of comparable or guideline companies in the same industry, the same geographical area and similar in size. Financial performance is important as well. Removing extraordinary items from the financials of the guideline companies makes them useful for the comparison.

Which method should you use? Use them both independently. You will end up with two values. If they are significantly different, reevaluate the process followed. If they are the same, check again for missing or incomplete items.

Strategic Implications

It makes sense to value your company before you begin a strategic process. It is a good way to make sure you remember to address strategies that make your company more successful - and valuable, as well.

Reference Sanli, Nevin. How Much is Your Business Worth? http://www.sphvalue.com/pdf/2005howmuch.pdf . 1995.

 

 

 

 

Posted by jackmixner at 04:06 PM |

Blog Strategy

By Jack Mixner

We have heard all the stories about how politicians are raising more awareness – and money – than ever using the newest Internet strategy, blogging. We have had a look at the newest journaling blogs out of Iraq telling about war experiences in real time. One question remains for many: “How do we turn this into a useful business strategy to communicate with our clients and customers?” Kline and Burstein have a suggestion for a mythical campaign for P&G for a mythical new car seat. They map out a staged process with on-line research to discover the online “ecosystem” (page 109) of parenting and child rearing sites. As part of the process, they recommend key word research along with identification of what parents are looking for in terms of information. This gets lost most times. Researching what other folks are doing before launch will save a lot of time and increase productivity on your eventual postings. Thought leadership paired with information and advice is paramount. Yes, the P&G logo is on the site. Re-arrange the site by product instead of chronology. No, selling is not the goal of what is going on. Patience and credibility are paramount early in the process. Companies with the long-term – strategic – point of view understand the process better. As the community is built readers will become customers, not before.

A final bit of advice from Kline and Burstein: build the site before you build the product. Use feedback from the site to design your products. It may take a bit longer, but the wait is worth it in profitability.

Reference Kline, David and Dan Burstein with contributing editors Arne J. de Keijzer and Paul Berger. blog! how the newest media revolution is changing politics, business, and culture. cds Books. 2005.

 

 

 

 

Posted by jackmixner at 07:19 AM |

June 12, 2006

Faster Strategic Decisions

By Jack Mixner

Blink Gladwell tells the story of Paul Van Riper, a Marine who served in Vietnam, headed the Marine Corps University at Quantico and, after he retired, served as the rogue commander in one of the most expensive war games ever staged by the Pentagon. In his successful Vietnam stints, Van Riper led from the front, continually trained the team, relied upon decision making in the ranks and analyzed “unavailable” information before the battle. The team practiced enough that during the battle it reacted almost instantaneously without having to pause to analyze.

In the war game, Van Riper embarrassed Pentagon brass by winning the initial rounds without relying upon state-of-the-art communications tools or modern tactics. He reinvented technologies not used since WW II and won with a huge pre-emptive strike after the opposing team, feeling themselves invincible, demanded his surrender (Blink, page 109). The analysis was done before the battle; reactions during the battle came extremely fast, allowing his team respond without the pause to reflect normally suggested when teams are about to make large, crucial decisions.

The Strategic Implications

In order to respond quickly in competitive situations, complete considered analysis and training well before the battle.

Strategic planning is not a waste of time. Training allows your team to respond expeditiously during the heat of “battle” without your micromanagement. When your team responds, seemingly without thought, they are responding with trained senses that are more likely to make the right decisions without sitting down to rehash the situation.

Reference

Blink The Power of Thinking Without Thinking by Malcolm Gladwell. Little, Brown and Company. 2005.

 

 

 

Posted by jackmixner at 11:35 AM |

June 11, 2006

Taking Action on Opportunities

By Jack Mixner     

The Tipping Point's Malcolm Gladwell demonstrates clearly that New York City crime rates fell because of a broken window strategy, namely, repairing graffitied subway cars immediately along with later strategies of focusing scarce police resources on high crime areas.

Freakonomics

Steven D. Levitt and Stephen J. Dubner say that falling crime nation-wide during the same period was caused by changes in abortion laws twenty years before.

The Strategic Response

Who cares why crime fell? When we do our situation analysis to answer the simple strategic question "Where are we?” we need list only the opportunity of falling crime.

Disney did. Then they built a new theater in Times Square and began the much-heralded renaissance that is still going on.

Market Mastery

Spend lots of your analysis time on opportunities. The sub-text of why something is happening may not be clear. However, deciding what steps to take because of it may be very profitable. Actually implementing the steps leads your company to market mastery.

References Gladwell, Malcomb. The Tipping Point How Little Things Can Make a Big Difference. Back Bay Books. 2002.

Levitt, Steven D. and Stephen J. Dubner Freakonomics A Rogue Economist Explores the Hidden Side of Everything. HarperCollins. 2005.

 

Posted by jackmixner at 03:50 PM | | Comments (1)