JACK MIXNER STRATEGY

Copyright Jack Mixner     714 449 1040     www.mixnerstrategy.com

End game strategy is about speeding up the pace, practicing in advance, and hiring the right people. When you talk about people, one person always comes to mind, Jack Welch. In his book, Welch talks about all the different charts and curves they used to evaluate senior managers over the years. They finally settled on a chart they called the "Differentiation Vitality Curve (Welch, page 159)." Basically, the curve broke a management team into three quadrants, the Top 20 (people filled with passion), the Vital 70 and the Bottom 10. Let's just say you didn't want to be in the Bottom 10.

Strategic Implication

Over the years, Welch has gotten a lot of bad press about the Vitality Curve. Dividing personnel according to a curve sounds mechanistic. Let's look at GE's definition of a "passionate" leader:

• High energy levels
• Ability to energize others
• Edge to make tough go / no go decisions and, finally,
• Ability to execute and deliver on their promises (Welch's four E's of GE leadership, page 158).

Not a bad list. I use it to evaluate new hires. The list and the methodology point to why end game strategy takes a while. Start early on when you hire people by looking how they will work out not just now, but later on when things really matter.

References

Welch, Jack with John A. Byrne. Jack Straight From the Gut. Warner Business Books. 2001.

Posted by jackmixner at 07:14 AM | Permalink

Compyright Jack Mixner.    714 449 1040.     www.mixnerstrategy.com

On 1 April 1981 Jack Welch became Chairman and CEO of General Electric. On 2 April 1981, Welch announced that GE would "manufacture and sell an industrial robot as the first product of its new factory automation business (Slater, page 70)."

Strategic Implication

Welch's goal was to make things happen at GE in order to increase the share price and margin. He did it by speeding up the pace.

He began a restructuring process to dominate a business line, or leave it. Using the 1-2 mantra (have a market share of either one or two in your business, fix it quickly, or leave it), GE left many businesses, many of them that had been part of GE for years.

Where to focus at your company? Porter's value chain approach shows where to look - infrastructure, HR management, technology development, procurement, inbound and outbound logistics, operations, marketing/sales and service round out his list (Porter, page 37).

The first step is analysis, OK. But don't let it take to time. Implementation is the key, not planning. Make it happen.

Building upon a mainline company that needed to be stronger, Welch started immediately to increase profits and share price. The rest is history.

Speed up the pace.

References

Porter, Michael E. Competitive Advantage Creating and Sustaining Superior Performance. Free Press. 1985.

Slater, Robert. The New GE How Jack Welch Revived an American Institution. Irwin. 1993.

Posted by jackmixner at 10:08 AM | Permalink

Copyright Jack Mixner.     714 449 1040     www.mixnerstrategy.com

One statistic tells it all:

Before Carlos Ghosn arrived at Nissan, middle management spent approximately sixty per cent of their time planning. After he arrived, the ratio changed to five per cent planning and ninety five per cent implementing (Magee, page 102).

Strategic Implication

On the day of his arrival at Nissan, Ghosn formed nine planning teams to figure out what was wrong with Nissan. They had two months - later changed to three months - to create plans for Nissan's turnaround. That was the easy part.

The hard part was implementing. Ghosn held the planning teams accountable for actually implementing their plan. The rest is history. 

Nissan closed plants in Japan (think about that), created a passel of new cars, simplified the management structure, changed compensation and advancement (read that, performance raises and promotion only), drastically reduced the number of suppliers, and tied employee bonuses to global results (Magee, page 94).

No more talking about implementing. Now they implemented. The pay-off was huge.

Planning stalled at your company? Focus on implementation, not strategy.

References

Magee, David. Turnaround: How Carlos Ghosn Rescued Nissan. HarperCollins. 2003.

Posted by jackmixner at 03:21 PM | Permalink

Copyright Jack Mixner     714 449 1040     www.mixnerstrategy.com

Jones Aparel. Imax. ImClone Systems. Pep Boys-Manny, Moe and Jack. Bally Total Fitness.

They all have one thing in common: each recently took itself off the public auction market when the price offered for their organizations failed to meet expectations and/or competitive bidding failed to materialize (Eisinger, page C1).

Two points of view on all this: the auction buys time for management to get things in order, and, maybe, just maybe, it will end up selling. The flip side: if the auction fails, price for the company is likely to tank (Eisinger, page C4).

Strategic Implication

We have always said to clients not to try to borrow money when they need it. Auctions are the same way. Don't wait until you are down and out to formulate an end game strategy. Start now. You end up with more strength during negotiations when your company is healthy.

References

Eisinger, Jesse. 'Buy My Company, Please': Why Some Companies Go Unsold in Merger Boom. Wall Street Journal. 23 August 2006. Page C1.

Posted by jackmixner at 08:42 AM | Permalink

Copyright Jack Mixner 2006    714 449 1040     www.mixnerstrategy.com 

Trium, a service firm in San Francisco, has a different pricing structure. “It states a figure and takes on a project if the sum is acceptable. After the project is done, dissatisfied clients can pay as little as half the quoted amount. Happy customers pay up to 35% more than the quote (Badal, page B1).” Customers say the system works because senior managers stay involved in the deal helping projects flow more smoothly.  

Strategic Implication 

Two sides: ensures full engagement by the service firm that is, therefore, very careful what projects it takes. 

An interesting proposition – for everyone. 

References

Posted by jackmixner at 08:06 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

[Exit Strategy: An exit strategy is a means of escaping one's current situation, typically an unfavourable situation. An organization or individual without an exit strategy may be in a quagmire. At worst, an exit strategy will save face; at best, an exit strategy will peg a withdrawal to the achievement of an objective worth more than the cost of continued involvement. From Wikipedia.] 

Many firms use the words "exit strategy" in their titles. Exit connotes an unfavorable situation. While sometimes all companies need to get out of a bad deal, I decided to look bit further.

"End game strategies" works better. Halberstam's book The Education of a Coach about Bill Belichick and the New England Patriots portrays an "end game" strategy. He describes Belichicks recognition that if you do not practice your end game far in advance your team will not respond the way you need them to in clutch situations, especially at the close of a crucial game.

Extricating a company from a quagmire with an exit strategy is a whole lot different from practicing an end game strategy, namely, analyzing and preparing over several years in advance in preparation for the last two minutes of a crucial game.

Strategic Implication 

The end game strategy of identifying possibilities and enacting them with long-term focus makes sense, especially when compared to extricating yourself and your team from a quagmire late in the game.

It also increases your valuation.

References

Halberstam, David. The Education of a Coach. Wheeler Publishing. 2005.

Mixner, Jack Increasing Valuation - On End Game Strategy: Increase the Pace. http://mixnerstrategy.com/blog/2006/08/endgame_strategy_pace.html

Wikipedia. Definition: Exit Strategy. http://en.wikipedia.org/wiki/Exit_strategy#In_business

Posted by jackmixner at 12:46 PM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

Halberstam writes about Bill Belichick's days coaching the New York Giants and the New England Patriots.

He tells the story of Belichick's strategy to beat the Buffalo Bills at their own game. Late in a game with the Houston Oilers, the Bill's Coach Marchibroda dominated by running their "two-minute" drill and scoring more than once in the last two minutes by running play after play without a huddle. Marchibroda decided to call the two-minute drill in non-clutch situations, completely befuddling the opposition.

Belichick's response the next time the Giants played the Bills? Slow the game down any way he could. They practiced little things like taking longer to get up from piles after a play, messing up the ref's placement of the ball and taking longer to respond to injuries. Then they worked on actually letting the Bills get more mileage out of their runs, all so they would not go to the air (Halberstam, pages 285 - 287). Belichick also installed special defensive plays to confuse the Bill's quarterback Kelly.

It all worked. Slowing down the Bills allowed the Giants to dominate and win.

Years later, while coaching at the New England Patriots, Belichick watched the Philadelphia Eagles lose because they did not step up the pace at the end of a Super Bowl game with the Patriots. No urgency at the end of the game led to a defeat.

Strategic Implications

Pace is part of end game strategy.

If you are thinking of selling your business in the next three years, pick up the pace of your sales effort. The competition may not understand the new rule until it is too late and probably will not keep up. Valuation should increase as a result. It works in football. It will work for your company.

References

Halberstam, David. The Education of a Coach. Wheeler Publishing. 2005.

Posted by jackmixner at 12:47 PM | Permalink

By Jack Mixner     714 49 1040     www.mixnerstrategy.com

Collins' four stages of building a great organization:

1. Disciplined People
2. Disciplined Thought
3. Disciplined Action
4. Building Greatness to Last (Collins, page 34).

Two Question Self Quiz based on Collins pages 34 and 35.

Our people - including senior management - fiercely focus on the cause first, not themselves.

[Yes] ..... [No]

When we hire, we look for the right people in the right slots before we strategize.

[Yes] ..... [No]

Strategic Implications

The two questions here reflect at least an eight step process based upon Collins' research.

Being good at just one or two of the fundemental principles might make your company better that your competition.

Addressing all eight might make you world class.

References

Collins, Jim. Good to Great and the Social Sectors. Jim Collins. 2005.

Posted by jackmixner at 08:08 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

"Sacrifice is the essence of corporate strategy," says Al Ries in Focus (Ries, page 130.) In order to dominate a marketplace, a company has to focus its offerings on a tiny sub-set of the market in order to dominate.

Early on, IBM, by focusing on the broad term computers, lost share to other manufacturers who focused on slices of the market. Make an enemy by being against another company, not with one.

Enterprise is the largest car rental agency, bar none. Why? It focuses on locations downtown or in the neighborhood, not near the airport.

Jiffy Lube took the auto repair business and focused on one sliver of the market, folks who wanted their oil changed in minutes with no waiting.

Focus. Dominate.

Strategic Implications

What does this say about diversification? The holding company of a diversified company does one thing well, set goals that divisions and individual companies meet. Staff in a proper holding company is small. Its slice of the market is holding companies. So diversification could be a focus strategy.

Look at your mission statement. Focus on the most profitable areas - and the areas with the potential growth.

And complementary products, where do they fit into the equation? They amplify your focus. Micheln focused eventually on tires from the broader mission of being a rubber manufacturer because of the success of the Micheln Guide. The Guide was complementary to the central products, tires.

References

Ries, Al. Focus The Future of Your Company Depends On It. Harper Business. 1996.

Posted by jackmixner at 03:42 PM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

Plastics contract manufacturers in the medical device business will manufacture your product in the US, in India or Taiwan. You get to decide. The price may vary as much as twenty five per cent one way or the other (Conkey, page B1).

Strategic Implication

If you have issues with manufacturing abroad, have it your way. If you want to save some money, manufacture in Taiwan or India. The supplier has set up to meet your needs.

This will help in branding if you need to use a Made in USA tag. Eventually, I believe that the price differential will fall and some of the manufacturing will return to the US. Logistics and "buried technology" based upon interaction between the engineer/designer and the manufacturer will make it a better bet.

Reference

Conkey, Christopher. Made in USA? Now, Customers Get to Choose. Wall Street Journal. 9 August 2006. Page B1.

Posted by jackmixner at 12:22 PM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

When it is getting closer to time to sell a business, all sorts of ways to value a business start to go through the CEO's mind. Since she or he has been at it a while, three or four ways always stick out. Which way to go?

Recognize that there are formulas for valuing a business. A few are:

1. Multiple of revenues
2. Multiple of earnings (net income, owners dicretionary cash flow, EBITA, etc.)
3. Multiple book value
4. Multiple of a measured unit (restaurant tables, hospital beds, subscribers, etc.) (after Weitzke).

Then we always bring a professional into the mix, especially if there are legal questions related to a valuation. The list above generally becomes the basis for discussions and calculations. They're just a rough starting point, however.

I used to have a book entitled 85 Ways to Value a Business. Weitzke references another with three hundred. Use them to start, do the valuation the traditional way based upon analysis, applaud if they are similar to the Rules of Thumb result, and explain why the results are different if necessary. It is completely sensible to include the flaws in the Rule of Thumb when they are found.

Strategic Implication

Want a higher valuation? Have a professional help calculate it. It may cost more, but in the long run the company will probably be sold for a higher price and more quickly to boot.

We use valuations as part of the strategic planning process. An independent valuation may be the first step. Then, we will decide which recommendations for increasing value make the most sense for us to follow, create strategies or tactics around them, and begin implementation. Finally, we may actually perform a second , independent valutation to make sure things worked out the way we had predicted.

References

Wietzke, Robert. Rules of Thumb. http://www.valuationpro.com/Article,Rule.asp

Posted by jackmixner at 11:45 AM | Permalink

By Jack Mixner     714 449 1040    www.mixnerstrategy.com

Micheln started out as a rubber company. It published a travel guide to entice people to travel more using the then newly developed automobile. Sales increased.

Trolley rail systems produced electricity all day long, but it was needed especially at rush hour. The systems built destinations (Huntington Beach was once the end of the line, as was Newport Beach) for folks to visit on weekends and evenings. The load evened out. Profits increased (Carr, page 1).

Disney started in animated pictures, built a theme park, used TV to sell them both, built another theme park, then another, then a cruise line to give folks more to do when they visited the theme park. And so on. Revenues increased every step of the way.

Beckman started making engineering instrumentation, discovered a market for labortory instrumentation, expaned into reagents, test equipment, and, finally, blood chemistry. There were stumbles along the way incorporating new divisions, but the whole is now profitable.

Looking at complementary products for your company? Consider constraints to your products. Apple finally realized they could add a complement to its line  by adding Intel chips to its computers. Sales increased. Consider new products that might increase sales of your existing products. Disney's original TV programming were basically ads for their parks and movies. Understanding how your product works helps users increase its utility. Microsoft has always supported a whole cadre of outside developers who amplified their operating systems. Microsoft gave away tool kits and training to certify programmers, and increase their proficiency. Adobe's initial universal type printing solutions ended up supporting an future product, the Adobe Acrobat readers and distillers found on most PCs today. Finally, looking at competitor's offerings closely may present you with opportunities for complementary products which just happen to reduce other company's profits. The evolution from WiFi to WiMax chips is pitting the big players in the chip business against each other in ways that will be profitable, but only for a portion of the companies. The evolution of DVD technology is proceeding the same way. Some companies will win - others won't do so well.

Strategic Implications

Diversification goes in and out of fashion. Middle market companies are advised to carefully consider whether it works for them. Diversification has a "flavor" of possibilities, one of which is complementary products. They may make sense for your company.

Begin your analysis with a look internally for strengths and externally for opportunities. Where there is a match, you may have an opportunity for further analysis.

You will have to choose amongst the possibilities. You won't be able to do them all, nor should you.

References

Carr, Nicholas G. Complementary Genius. strategy+business. July/August 2006. http://www.strategy-business.com/press/article/06202?gko=904f1-1876-15784419

Posted by jackmixner at 08:03 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

Henderson makes it clear that there is only one way to retain low cost leadership in your niche, namely, having more debt than the competition. If not, you give up growth, don't ever really win, or go bankrupt (Henderson, page 29).

Strategic Implication

Henderson makes a case that Michael Porter picked up upon later. Strategically, you choose to be low cost leader. Alternatives include some sort of niche production, or specialization.

Need more debt? Work with your CFO to verify that you can hold low cost leadership (today, that is harder and harder). Put your plans in writing. Then, get to know your banker very well.

If growth slows, look again at costs. If you haven't already looked at off-shore production, it might be time to have a look. However, continue to retain those banker relationships. You'll still need them.

Turnaround too slow off-shore? Consider costs of local production. There may still be a way to retain leadership. Technology may be part of it.

References

Stern, Carl W. and Michael S. Deimler. The Boston Consulting Group on Strategy. Wiley. 2006. [Henderson, Bruce D. More Debt or None? Page 29.]

Posted by jackmixner at 11:42 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

About two years ago at a Tech Coast Angels (www.techcoastangels.com) screening session (where they look at new deals) one of the Angels suggested that they should all be on the look-out for investable companies with WiMax technology. WiFi was all the rage at the time. Not many people were thinking about wider area technologies.

Last year, the City of Anaheim announced a deal with Sprint to install a WiFi network in Anaheim. This was in the same timeframe of the announcement of a similar deal in San Francisco.

Now Sprint is announcing WiMax nationwide.

The technology is enticing. The roll-out will cost up to $4 billion.

Strategic Implications

For some time, Sprint has had a problem in that they didn't have a growth engine that was different from everyone else. This is different all right, and expensive, too. Now we get to watch and see if Sprint can make money on the huge investment.

Reference

Sharma, Amol and Don Clark. Sprint Bet on New Wireless 'WiMax'. Wall Street Journal. 8 August 2006. Page B1.

Posted by jackmixner at 10:11 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

Major investments in Chinese infrastructure by manufacturing companies are starting to decline. Honda, for instance, will complete its new manufacturing facilities on schedule and, when it needs more, move elsewhere. More and more of the Japanese companies are focusing high end manufactring in Japan (Batson, page A4).

What gives? Batson mentions one company that moved manufacturing operations from Taiwan in 1995 cutting costs fifty per cent. Its next move will be to Vietnam, again cutting costs - over China - by thirty-five per cent.

China remains a good place to manufacture things. Infrastructure is strong. The domestic market is huge. Its price advantage over other locations is declining, however.

Strategic Implications

China could move up-scale in its manufacturing content, beginning to compete on the world stage to manufacture higher-end goods. The next ten years will be crucial - and interesting to watch.

Middle market companies which need to manufacture in lower cost production locations will look beyond the Chinese market. High value-added manufacturing may return to local production.

Reference

Batson, Andrew. China Loses Some Allure as World's Factory. Wall Street Journal. 7 August 2006. Page A4.

Posted by jackmixner at 06:49 AM | Permalink

By Jack Mixner     714 449 1040     www.mixnerstrategy.com

Discipline and strategy go together. It is obvious that strategies and tactics will never be implemented without dicipline.

For Collins, however, dicipline comes earlier. He points to the diciplines of

• choosing the right people and putting them in the right positions and
• structuring thought early on to confront and balance the "brutal facts" with the strengths of your organization in three areas: what you can be the best in the world at, what you are deeply passionate about, and economic results (Collins, page 34). Then, finally, comes disciplined
• acting on responsibilities and relentless pushing to achieve results.

Strategic Implications

Successful organizations are disciplined earlier in the process. They focus on people first, then plan (thought in Collin's parlance), and only then focus on action.

Reference

Collins, Jim. Good to Great and the Social Sectors. A Monograph to Accompany Good to Great. Harper Business. 2005.

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