JACK MIXNER STRATEGY

By Jack Mixner

Mansfield attacks two problems, taking the "rough estimation" and "panic and rapid adoption" of new strategies in situations of a "rapid emergence" of a new technology.

Recognizing that strategy is more that just a flip chart and three days with your team, he lays out a four-step process: Scope and data generation, Scenario development, Dynamic simulation and Testing and planning.

This is more than a flipchart. Mansfield's team starts with analysis - lots of it. The simulation is the fun part, somewhat like the the what-if analysis we're all used to, but with a whole lot more information.

Strategic Implications

In times of rapid change in an important - and probably global - marketplace simple strategy is only the first step. A useful adjunct is wargaming using scenarios based upon rigorous analysis.

When there are large stakes, these are significant tools to wheel into action.

The trick is to take your time and realize when your situation won't allow panic - when you need "no-nonsense" tools.

Reference

Mansfield, Mark. Optimizing Strategic Decisions and Risk Management Through the S3 (TM) Framework. http://www.dpaction.com/docs/S3Methodology%20White%20Paper.pdf . 2005.

Posted by jackmixner at 02:42 PM | Permalink

By Jack Mixner

Klarman's definition of "margin of safety": "How can investors be certain of achieving a margin of safety?" writes Klarman. "By always buying at a significant discount to underlying business value, and giving preference to tangible asests over intangibles ... By replacing current holdings as better bargains come along. By selling when the market price of an investment comes to reflect its underlying value and by holding cash, if necessary, until other attractive investment become available."

Strategic Implication

While investors may make their own assessments (Klarman is famous in investing circles for his returns), one word in the difinition might be important to our discussions, namely, intangibles.

Klarman says invest in tangibles, not intangibles. When working with intangible services, take the time to make them tangible.

Productize intangibles. Ally them with other products. Make sure the story you use to plug your product actually matches the product. The same with services.

One final bit of Klarman advice: be patient. Even when you are investing in your company's dogs, take your time to make them successful. Klarman waits for stocks to "come to him" at a price he finds credible. Let your plans for your dogs mature a bit before you invest heavily.

Why dogs? It may be that they have the largest returns in the long run.

References

Klarman, Seth. Margin of Safety. Risk-Averse Value Investing Strategies for the Thoughtful Investor. [Reviewed in: Farzad, Roben. The $700 Used Book. BusinessWeek. August 7, 2006. Page 86.]

Mixner, Jack. Invest in Dogs. Increase Valuation. Contrarian Situation Analysis Increases Valuation.  http://mixnerstrategy.com/ARTICLE-CONTRARIAN-SWOT.html

Posted by jackmixner at 07:47 AM | Permalink

By Jack Mixner

Ridenour says a business plan isn't needed to raise money from Angels or Venture Capitalists. He says there is basically only one way to get close to a VC, namely, receiving a referral from a personal contact direct to the VC. Then you use your executive summary to get an appointment.

In your presentation, Ridenour suggests five slides (six really): Introduce your team, Market, Technology, Competitive Dynamics, Business Model and Traction, and Financial Forecast overview.

Strategic Implication

Only three per cent of deals are funded by VCs - maybe another two per cent by Angels.

The business plan is not to raise money. It is for running your company. The best kept secret of raising money from either Angels or VCs is that they won't fund any deal unless it is in revenue, and, more and more, profitable. Use your business plan as a road map to get profitable. Then use Ridenour's advice. Get a very good referral to a VC that is perfect for your deal.

You may not get funded anyway. Use the plan to continue to grow using cash flow for interim funding.

Start looking for some sort of strategic alliance, especially if you need $ 1 million or more to finish your chip design or medical device clinical trial. The business plan will help you there as well.

References

Ridenour, Matt. Raising Money: A Contrarian View of Business Plans. Tech Coast Venture Network. www.tcvn.org . 27 July 2006.

Posted by jackmixner at 07:24 AM | Permalink

By Jack Mixner

If tech sales are slowing, what to do? Plan to grow share. That's what Techtronic is doing, and it seems to be working.

Techtronic's historical strategy is nothing new. They started with a tech product, rechargeable battery packs for cordless tools. They

• won the Sears account to make Craftsman tools. Then they
• bought control of brands including Ryobi, Royal, Homelite and Milwaukee,
• shifted manufacturing to closely held plants in China,
• cut costs,
• loaded on features and
• expanded the product line.

Who bought in? Home Depot sold 25 million Ryobi tools in three years.

Techtronic has a ways to go yet - Black & Decker still controls 30% of the market.

Strategic Implication

Techtronic changed the rules and competed against an entrenched competitor. It will be interesting to watch how it all plays out over time.

The possibilities for your firm? Techtronic started with one successful product line, expanded into contract manufacturing, then bought brands. It took them twenty years.

Think longer term. Focus on a sector until you begin to dominate it. Remember price.

Reference

Engardio, Pete. Techtronic Industries, Hong Kong. 'We Have the Vision To Be No. 1'. BusinessWeek. July 31, 2006. Page 46.

Posted by jackmixner at 09:30 AM | Permalink

Copyright Jack Mixner     714 449 1040     www.mixnerstrategy.com

Growth is a given in much of the planning taking place in tech businesses across the country.

What if the reality doesn't match the plan?

Tam et al chart the share performance of three "high-flyers" (Dell Microsoft, Oracle and Cisco) since 2001. None of them have recovered from the bust. All are making management changes. What if Oracle's Ellison is right in saying that the tech industry "is as large as it's going to be" (Tam, page A1)? How does that effect your planning?

Suggestions include

• competing aggressively for market share,
• restructuring and 
• improving the customer experience (Tam, page A9).

Strategic Implications

Middle market companies need to re-evaluate their plans for growth to make sure they reflect market realities. If plans call for growth, are they aggressive enough to grow share in a slowing - or down - market?

Using Godin terms, is your product "remarkable" enough to make an impact in the market? If not, take what profits you have and reinvest them in something new.

The first step? A plan.

The analysis? Look very closely at present - and future - market share.

Actions? Analyze, then don't wait around to harvest - or invest.

References

Tam, Pui-Wing, Robert A. Guth and Christopher Lawton. Once Highflying Tech Industry Reboots for Era of Slower Growth. Wall Street Journal. Juy 27, 2006. Page A1.

Godin, Seth. Purple Cow Transform Your Business By Being Remarkable. Portfolio. 2003.

Posted by jackmixner at 07:45 AM | Permalink

By Jack Mixner

Motorcycles, lawn mowers, cars, truck, all-terrain vehicles, portable generators and personal watercraft - Honda has made them all. Now they will make personal, seven-passenger jets for the business market. Their only restriction on what they will make? It has to have an engine in it.

Could we say the Honda strategy is based solely upon engine technology? Or manufacturing prowess? Or price? Or size? Or over-all quality? They all seem to apply.

Strategic Implication

Normally, we use a mission statement to focus a company on sensible products to make. If we had done that, Honda would probably still be making just motor scooters for the Japanese market. There comes a time when thinking big - thinking outside the box - makes sense. Honda has done that all along. How about your company?

Reference

Maynard, Micheline. Honda Enters the Aviation Market With Small Jet. New York Times. 25 July 2006. http://www.nytimes.com/2006/07/25/business/25cnd-honda.html?ref=business

Posted by jackmixner at 12:00 PM | Permalink

By Jack Mixner

Ford has a problem. Their current CEO - and kin to the founder - is leading a failing organization. Some say the best solution is to make changes - starting at the top.

This is the ultimate nightmare for a Board of Directors: what to do when the founder's kin is failing. Ford is going to have to solve the problem as have Dart Industries, Mortorola and Turner Broadcasting System before it.

One CEO (Galvin at Motorola) was blamed for "not being aggresive enough" in the face of failing performance.

Strategic Implication

There is a place for a strong board of directors. This is it. Sometimes, waiting around just makes things worse. One caveat - make sure you have a back-up plan before you act.

Reference

Dvvorak, Phred and Jaclyne Badal. Relative Problems. Boards of Family Businesses Grapple With How to Sack Executives Who Are Kin. New York Times. July 24, 2006. Page B1.

Posted by jackmixner at 12:48 PM | Permalink

By Jack Mixner

Readers ask the craziest things. A COO of a biotech firm (second generation family owned) asked Jack what to do as their market share was falling. It seems his father, the founder, and the son didn't know how to sell. The son wanted to know if getting an MBA made sense.

The reply? Hire outside help. The Welch's said hire an experienced pro, give him or her free reign to plan strategically, and help - don't hinder - progress.

Strategic Implication

Time is of the essence. The time to act is now.

Reference

Welch, Jack and Suzy. Ideas The Welch Way. BusinessWeek. July 31, 2006. Page 88.

Posted by jackmixner at 03:13 PM | Permalink

By Jack Mixner

I sat recently with an old friend of mine, David Gentry.

Over the last ten years we have talked repeatedly about a crucial planning topic, the continuum we all follow from success to significance. David always has an inspirational - and new - way of looking at it.

David came prepared with clippings, speech handouts - all sorts of stuff. And a book.

Lawler Kang is a family friend of the Gentry's. He presents a model on personal growth based upon five questions (page 69):

1. What is your mission? Passion
2. What can the whole and impassioned you be the best at? Proficiencies
3. What is the most important to you, where you are in Life? Priorities
4. How do you bring yourself to market? Plan
5. How do you fund your plan? Prove

The message: we all have a passion. Why waste time doing anything but acting upon it? 

Strategic Implication

Success is the first step.

Significance is the last.

In between are lots of places to lose traction. Keeping your eye on the ultimate goal for you - and your company - and working at it passionately makes for a more successful - and significant - life.

Reference

Kang, Lawler. Passion at Work. Pearson Education Inc./Printice Hall. 2006.

Posted by jackmixner at 09:11 AM | Permalink

By Jack Mixner

Two interesting problems, one of which is nice to have:

• Do I invest in my fastest growing divisions? and
• Do I invest in my erratically-returning businesses?

Easy answer for the first question: fund high-return business facing frowth opportunities that reinforce your busines or raise market share.

And the second: Unstable businesses may present opportunities. Is this one? Unstable forever: public companies may want to look closely. Private companies may actually have a long term opportunity if they can ride it out.

Strategic Implication

Sometimes it is not immediately clear which is the better investment, a star or a dog. Arms length analysis is important. Clear vision of the future helps.

Reference

Stern, Carl W. and Michael S. Deimler. The Boston Consulting Group on Strategy. Wiley. 2006. [Hansell, Gerry. Advantage, Returns, and Growth-In That Order. Page 275.]

Posted by jackmixner at 01:59 PM | Permalink

By Jack Mixner

When companies play hardball, they use every legitimate resource and strategy available to them to gain advantage over their competitors. (Stern, page 377.)

Showing up isn't enough. Showing up ready to play - and playing fiercely - is playing hardball. How to know if your team is competing?

Market share continues to grow.

Market share declining?

Look to your team. Are they competing - fiercely?

Strategic Implication

If you are not measuring results (especially market share) you will never know if you are successful.

Reference

Stern, Carl W. and Michael S. Deimler, Editors. The Boston Consulting Group On Strategy. Wiley. 2006. [Stalk, George Jr. and Rob Lachenauer. The Hardball Manifesto. Page 377.]

Other References 

Stalk, George Jr. and Rob Lachenauer. Hardball: Five Killer Strategies for Trouncing the Competition. Harvard Business Review. April 2004.

Stalk, George Jr. and Rob Lachenauer. Hardball: Are You Playing to Play or Playing to Win? Harvard Business School Press. 2004.

Posted by jackmixner at 10:49 AM | Permalink

By Jack Mixner

Michael Porter wasn't the first to talk about restoring competitive advantage. Clarkeson suggests three strategies for returning to profitability and growth:

• Restore competitive advantage focusing on the few areas your expertise exceeds that of your competitor's.
• Develop proprietary technology whether it be a breakthrough development or with the help of a third party supplier.
• Uncover specific needs of customers allowing you to differentiate operations.

Strategic Implication

The trend is to assume that some foreign manufacturer will steal share from you based solely upon price.

There are - and will continue to be - alternatives.

Reference

Stern, Carl W. and Michael S. Deimler. The Boston Consulting Group on Strategy. John Wiley & Sons, Inc. 2006. [From the essay Stalemate: the Problem, 1984, John S. Clarkeson.]

Posted by jackmixner at 11:00 AM | Permalink

By Jack Mixner

Last month, Wallace Walrod of the Orange County Business Council invited me to a presentation by the senior regional managers of the U. S. Army Corp of Engineers. They were talking about their focus on keeping infrastructure working in Orange County. They talked about the very successful work they did on Prado Dam out near Corona. Making it higher clearly saved us from significant flooding during storms last winter.

Before the presentation, we all went around the room introducing ourselves. I said I felt like a fish out of water because, to me, infrastructure means access to capital, not cement. Without capital, companies don't grow.

It turns out that access to capital in the U.S. is easier than other places like Europe.

Today's New York Times tells about a $9 million investment the Scottish national government made in a local biotech company with the intent of keeping it there. Only two months later, the company moved to New Jersey. While they left R&D in Scotland, they needed more money in order to grow. The US was the only place to get it. I have had other clients who moved from New Zealand and Korea for the same reasons.

Infrastructure is crucial for rapid growth in science and technology companies. It includes people, location - and money. While I don't really like the way companies are coming to the financial markets (the New Jersey company reverse merged with an existing, basically defunct company) because of the strength of the capital markets here, more companies will do the same thing.

Let's hope it's a win for everyone.

Strategic Implication

Capital formation is crucial to company growth. Rapid growth is some companies requires debt financing. In others, venture capital is required. Focus your efforts of securing capital when you don't neet it, not when you will fail without it.

Reference

Pollack, Andrew. U.S. Finance Pulls Biotech Across Seas. New York Time. 12 July 2006. http://www.nytimes.com/2006/07/12/business/worldbusiness/12place.html

Posted by jackmixner at 04:05 PM | Permalink

By Jack Mixner

Seth Godin ran marketing for Yahoo! back in the dot.com days. His book is still relevant in its discussions about how to make - and keep - customers.

From the book jacket ...

1. Does every single marketing effort you create encourage a learning relationship with your customers? Does it invite customers to "raise their hands" and start communicating?

2. Do you ... have a permission database? track the number of people in it?

3. If customers gave you permission to talk to them, would you have anything to say?

4. Once people become customers, do you work to deepen your permission to communicate with them?

Strategic Implication

Focus on the customers - or potential customers - who will let you get to know them in order to solve their problems. 

Initial impulse is to call the book dated. It's not. I find it useful for deciding if marketing you are contemplating makes sense. Godin's later books are interesting, as well.

Reference

Godin, Seth. Permission Marketing Turning Strangers Into Friends and Friends Into Customers. Simon & Schuster. 1999.

Posted by jackmixner at 01:40 PM | Permalink

By Jack Mixner

Way back when, Texas Instruments (TI) dominated chip manufacture. Then, it diluted the company's focus with all sorts of "extra" divisions and product lines. The dilution allowed competitors to dominate old TI markets.

The 90s saw TI realize its problems, make changes, and begin to grow again. The changes included drastically reducing divisions. It focused on chips that ended up in Nokia cell phones. TI beat Intel in large-screen television processors. Then, last month, Intel annouced its decision to abandon the cell phone chip market. Score two huge wins for TI. The strategy of working with early startups with great ideas helped TI become the sole supplier for the new Slingbox.

Strategic Implication

In the early 90s, TI was moribund. A series of CEOs crafted focus strategies which brought TI back to chips. Focus worked. TI is growing again.

Analysts say TI won't make the leap to new protable chips for all the new electronic devices envisioned in the future and have hammered the stock. Looks to me like the analysts might be wrong. Focus is a good strategy. It might work for your company as well.

Think about it.

Reference

Darlin, Damon. Cashing In Its Chips. New York Times. July 9, 2006. http://www.nytimes.com/2006/07/09/business/yourmoney/09chip.html

Posted by jackmixner at 10:04 AM | Permalink

By Jack Mixner

In all the business texts I have ever seen, the Boston Consulting Group's Growth Share Matrix charting market share versus growth rate has had the now familiar labels Question Mark, Star, Cash Cow and Dog. BCG came up with the Matrix in 1970 when Bruce D. Henderson, summarizing internal discussions, wrote an article entitled The Product Portfolio for the BCG Perspectives series.

It ends up that the texts all got it wrong. The labels from Bruce Henderson's original 1970 paper indeed talk about Stars and Question Marks, but Cash Cows and Dogs aren't there. Cash Cow is actually Cash Flow and Dog is Pet.

Somehow, Pet sounds a whole lot better than Dog. The implication is that everyone loves the Pet and is unwilling to cull it from the portfolio for poor performance. How about you? Love your Pets too much to cull them?

If so, can you justify your position with a favorable business case or a strategy explaining how your Pet will become a Question Mark and ultimately a Star?

Reference

Stern, Carl W. and Michael S. Deimler. The Boston Consulting Group on Strategy. John Wiley & Sons, Inc. 2006. Page 36.

Posted by jackmixner at 04:41 PM | Permalink