JACK MIXNER STRATEGY

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Live dangerously. Tell the truth. Noonan talks about Reagan (Noonan, 212):

...Reagan thought honest words the only possible predicate for progress. ...He..remained consistent. The immature are always finding new truths, and the cynical are always discovering new philosophies to claim to believe in, but Reagan was neither immature nor cynical. And so was his consistency, which would have been impressive in anybody, but which was startling in a politician.

Let's parse out the important word, consistent. After his early union days in Hollywood, Reagan realized that his future evil empire was real. He stayed on message through those years and continued to stay on message through this GE speech-making days, his governorship, and his presidency. He stayed on message throughout. Now, as he became president, the Russians were looking for signs of how Reagan would act. Noonan thinks it was the air traffic controllers union strike that really started to turn the tide (Noonan, 222). The union threatened to close down American air space. Reagan said come to work or you are fired. They didn't come to work (at least most of them). They lost their jobs in short order.

I suspect that the Russians were expecting a blink, that Reagan would back down. Reagan saw the truth. The controllers wanted a huge salary increase. It wasn't right. He did the right thing. And the Russians watched.

This says quite a lot about being a leader. If you think little things - or big things, for that matter - are not important, you might want to reconsider. People are watching. The Russians watched Reagan and realized he was likely to do just what he said. Your team is watching you and making decisions as well. Make sure you are showing your true character at all times. And make sure your true character is the character of the right.

Reference

Noonan, Peggy. When Character Was King. A Story of Ronald Reagan. Viking. 2001.

Posted by jackmixner at 01:01 PM | Permalink

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Here is Moore's formula for creating a positioning statement (Moore, 161):

• For (target customer)
• Who (statement of the need or opportunity)
• The (product name) is a (product category)
• That (statement of key benefit-that is, compelling reason to buy).
• Unlike (primary competitive alternative)
• Our Product (statement of primary differentiation).

Reference

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperCollins Publishers. 1991.

Posted by jackmixner at 02:34 PM | Permalink

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Components: LEED 2009 for New Construction and Major Renovations (110 points total):

Sustainable Sites - 26 points

Water Efficiency - 10 points

Energy & Atmosphere - 35 points

Material & Resources - 14 points

Indoor Environmental Quality - 15 points

Bonus Points

Innovation in Design - 6 points

Regional Priority - 4 points.

Sustainability: "...a development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland Commission, 1987 in Our Common Future)."

Benefits of Green Building (Energy, Professional, 16)

Environmental Benefits

• Green Building consume 26% less energy
• Green building have 13% lower maintenance costs
• Green building have 27% higher occumpant satisfaction
• Green building have 33% less greenhouse gas emissions

Economic Benefits

• Green market grows from $36 billion to $96 billion by 2013
• 2% market in 2005; 10% in 2008; 20% 2013
• Price same as not LEED certified
• Sale price of building 10% higher

Social Benefits

• 27% fewer headaches from proper lighting
• Sales in stores with skylights were up to 40% higher than without skylights
• Students with most daylighting progressed 20% than peers on math tests, 26% faster on reading tests.

References

Energy and Environmental Solutions. LEED Green Associate One Day Training. http://www.e2-solutionsinc.com/home.php?id=1

Energy and Environmental Solutions. LEED Operations and Maintenance. http://www.e2-solutionsinc.com/home.php?id=1

Energy and Environmental Solutions. LEED Accredited Professional Exam Preparation 2 Day Workshop. http://www.e2-solutionsinc.com/home.php?id=1

U. S. Green Building Council. http://www.usgbc.org/

Posted by jackmixner at 01:51 PM | Permalink

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My old friend Don Phillips once asked me which player on a Pop Warner football team is the most important. My response, was, of course, "Oh, it's the quarterback." Whoops. Don very quickly asked me why. Well, the QB drives everything that happens on the field. In the pros, obviously, the QB is the highest paid player on the team. But, remember, we're talking about Pop Warner, not the pros. There's a difference.

In Pop Warner football, if the QB doesn't end up with the football in his hands, nothing happens. Kids aren't necessaryily dexterous, so there is actually a very good possibility that, if you don't have a very good Center, your team is never going to go anywhere. One of your best players might end up being the QB, OK. But another good player had better end up playing Center. If you as a coach want to spend time with individual players on the field, the Center is a very good place to start. That even goes before practice to actual team selection. If you can, make sure you have a good Center.

Jim Collins actually has a whole chapter on the people topic entitled "First Who ... Then What" (Collins, 41). He has some tough advice, especially in these times. He points to the ascention of Wells Fargo from regional has-been to national power house. From 1983 til about 1998, the bank out-performed other banks. The effort to grow healthier and then larger actually started back in the early seventies when the CEO Dick Cooley started to very carefully put together a team (Collins, 42). It took him more than a decade to put his team together. Their efforts, working together, sparked the ultimate growth. Collins' criteria for selecting folks are interesting (Collins, 52): Ruthless could be nice for some companies. Rigorous is better. Not sure? Keep looking. Not happy with a current team member? Make a change (Collins, 56). Put your best people on the largest opportunities, not your problem children (Collins, 58).

OK, you say. What's the next step? Start thinking about what goes into your plan.

References

Collins, Jim. Good to Great. Why Some Companies Make the Leap ... and Others Don't. Harper Business. 2001.

Posted by jackmixner at 10:47 AM | Permalink

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In preparing for a series of presentations to small groups of CEOs, I realized that, strategically, I had a problem. Each of the groups is composed of CEOs with whom I want to discuss strategy while at the same time sending them home with some action items for the day after our discussion. That seems doable until you consider that many, many CEOs are entirely booked for the next three or four weeks, let alone tomorrow. Giving them homework to do might be a stretch. What to do?

Since I can't really expect a CEO to drop what she is doing to quickly implement homework from a speech, I needed a work around. So let's go with what we've got. One simple question comes to mind, "What are you doing tomorrow?" Let have a look. My bet is that, if we follow the Pareto Principal, we'll find that eighty per cent of that CEO's productivity comes from twenty per cent of her activities. There may be a strategic implication that is useful: there may be some things you don't have to do tomorrow. If you didn't do them, would you have more time to do something else, maybe even something strategic?

The "Fire! Ready! Aim!" mantra comes to mind. This next day action plan is really a "Fire!" plan. You already know what you are going to have to do, so you have to go ahead and do it. My only request? Carve out some time to do something strategic in your busy day. How? Don't do something - one of those eighty per centers, maybe - so you are able to give some thought to how to proceed strategically.

Let's have another look at the three words in the mantra. Next comes "Ready!" and "Aim!" If you give yourself some time, getting ready for planning is a very good thing to do. If you've never done planning, what comes first? Pick a team to work with you. Meet with them. Decide together what to do next. Just make sure the dialog is strategic, not just an eighty per cent activity.

Posted by jackmixner at 09:56 AM | Permalink

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Let's get right to it. What are Drucker's five important questions (Drucker, ix)?

1. What is our mission?
2. Who is our customer?
3. What does the customer value?
4. What are our results?
5. What is our plan?

Now, we all like Drucker's work. How could we not? The latest edition of his Five Questions text is just icing on the cake.  Complexifying his five simple questions might not be a good idea. Let's just suppose, however, that we decided to break the rules. What would we add?

Two additions come to immediate mind. The customer question, basically, "What do our customers think?" could have two additional key points, namely,

• "What do the folks who work here think?" and
• "What do our stakeholders think (after Palermo, Do the Right Things..., 1-6)?"

These questions really read closer to,

• "Would you recommend this company to your friend as a place to work?" and
• "Would you recommend this company to you friend or business associate as a good place to buy goods or services?" Finally, stakeholders are asked something like,
• "Would you recommend our company as an investment (after Palermo, 1-6)?"

Now, as we know, Drucker kept things simple. However, considering things a little bit more closely makes some sense.

Reference

Drucker, Peter F. with Jim Collins, Philip Kotler, James Kouzes, Judith Rodin, V. Kasturi Rangan, and Frances Hesselbein. The Five Most Important Questions You Will Ever Ask Your Organization. Jossey-Bass. 2008.

Palermo, Richard C., Sr. Do the Right Things...Right. It Is That Simple. A Step-by-Step Guide to World-Class Performance. The Strategic Triangle, Inc. 2003.

Palermo, Richard C., Sr. Leadership...A Return to Common Sense. A Leader's Common Sense Playbook for Uncovering the Right Things...and then Doing Them Right! The Strategic Triangle, Inc. 2006.

Posted by jackmixner at 01:49 PM | Permalink

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Consultative selling is a very useful sales process. You spend quite a bit of time figuring out just what a customer wants before you do anything. Then you work with the customer to make sure that you are both on the same page. Then - and only then - do you propose on the customer's needs. It is a very useful method  based largely on The One Minute Sales Person (Johnson).

Palermo uses a similar methodology for change management. He says look first at the current state of the organization and then look at the new, desired state (Palermo, Leadership, 38) and identifies six generic stumbling blocks to actually making the changes you desire:

1. Reward and Recognition
2. Key Measures
3. Strategies and Action Plans
4. Focused Training
5. Role Model Senior Leader Behavior
6. Focused Communications.

The title of this posting could also be, "You Want Change. You Also Want Results. Now." If it were only so easy. Have a look at the list. Fail at any one of the six items and your initiative is likely to fail. A crucial suggestion: admit defeat early. Plan for success. Measure yourself as you go into the change initiative to make sure you are ready for all six steps. If you are not ready, rectify the weaknesses early in the process (Palermo, 10-4). Don't wait around. Your action plans will include measureable objectives. That makes sense. Your team, especially the ones that didn't actually participate in the design of your change plan, won't really understand what is going on. Paint them a picture (Bridges, 55). Visual aides work, of all sorts. Meeting and discussing with all the different constituents of the change process also makes sense. Face-to-face. That takes time, yes. It also ensures that your change process has a better chance of success.

References

Bridges, William. Managing Transitions. Making the Most of Change. Addison Wesley. 1991.

Johnson, Spencer, M.D. and Larry Wilson. The One Minute Sales Person. Avon Books. 1984. 

Palermo, Richard C., Sr. Do the Right Things...Right. It Is That Simple. A Step-by-Step Guide to World-Class Performance. The Strategic Triangle, Inc. 2003.

Palermo, Richard C., Sr. Leadership...A Return to Common Sense. A Leader's Common Sense Playbook for Uncovering the Right Things...and then Doing Them Right! The Strategic Triangle, Inc. 2006.

Posted by jackmixner at 10:11 AM | Permalink

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Planning with the "end in mind" will make for a better plan that actually is implemented. We all are used to the classic SWOT analysis where you consider your company's internal strengths and weaknesses and your external threats and opportunities. We all tend to focus on weaknesses because, let's admit it, they're easy to come up with. Threats are pretty obvious, but many times they come from sources we can do nothing about. Strengths - and let's hope there are lots of them - help you decide what to focus on. If you don't have a strength to support a strategy, maybe it was a very good strategy for some other company.

Some thoughts come to mind: A simple SWOT analysis on a flipchart with a few people gathered around may not be enough. Spending just a couple hours or days a year considering your strategy may be woefully inadequate. Polling the room for opportunities is nice. You may in fact come up with a few good ideas. However, unless those opportunities are tied to actual execution you are wasting your time (Barrow). Everyone is busy. Unless you really commit resources to executing the plan, nothing is likely to happen. Folks, after all, are already busy doing what they are already doing. How can you expect them to do more? Those woefully short days of planning are flawed because they don't include any plan for monitoring performance. Just having the plan is not enough. Implementing is nice, but it can't be implementing in a vacuum. You've got to tie your planning to periodic, repetitve re-visiting of your strategies and the action plans you have put together to carry them out. Those re-visits have to take place with everyone regathered in the room to talk about progress, what changes to make, and what strategies or portions of action plans to drop.

Other ways to consider strategy (Center):

• Spending some time considering how other folks in companies in your industry and in companies you admire - bench marking - can be very useful.
• Considering you company not as an individual entity, but as part of a business ecosytem makes for more comprehensive strategy. Consider customers, yes, but don't forget suppliers, logistics, human resources, information technology, customer service, along with manufacturing and service delivery.
• The more people you have involved in the process, the better. The receptionist knows more that you might think. So do the folks on the loading dock.
• Simple, actionable, dated goals are easier to refer back to. People will forget the particulars, however, unless you make the objectives more relevant to the individuals involved. Tell a story about how your objectives work at your company. Include more narrative or, literally, stand in front of a small group and tell a story and ask for their feedback on implementing the plan based upon the story's description.
• Keep a score card of performance on objectives may be useful. Posting it on the wall works. So does posting it on the wall with a neon sign. They've done it with safety results at steel mills for years (remember the signs "462 days without an injury"?). How can you do it with marketing results, or HR results for that matter, in a similar fashion?
• Mission statements, done properly, will focus your company on providing products or services that match the company's core competencies. Straying from your core competencies may rightfully cause you to re-consider whether such straying really makes sense.

References

Barrows, Ed. Four Fatal Flaws of Strategic Planning. Harvard Business Reveiw. 13 Mar 2009. http://blogs.hbr.org/hmu/2009/03/four-fatal-flaws-of-strategic.html

Center for Applied Research. Briefing Notes: A Summary of Best Practice Approaches in Strategic Planning Processes. 2005.  http://www.cfar.com/Documents/BestPract.pdf

Posted by jackmixner at 05:29 AM | Permalink

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Akerlof's Animal Spirits Table of Contents (Akerlof, v):

• Preface
• Acknowledgements
• Part One: Animal Spirits
• Confidence and Its Multipliers
• Fairness
• Corruption and Bad Faith
• Money Illusion
• Stories
• Part Two: Eight Questions and Their Answers
• Why Do Economies Fall Into Depression?
• Why Do Central Bankers Have Power over the Economy (Insofar as They Do?)
• The Current Financial Crisis: What Is to Be Done?
• Why Are There People Who Cannot Find a Job?
• Why Is There a Trade-off between Inflation and Unemployment in the Long Run?
• Why Is Saving for the Future So Arbitrary?
• Why Are Financial Prices and Corporate Investments So Volatile?
• Why Do Real Estate Markets Go through Cycles?
• Why Is There Special Poverty among Minorities?
• Conclusion
• Notes
• References
• Index

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

BloombergBusinessweek. The BusinessWeek Best Seller List. 7 July 2010. http://images.businessweek.com/ss/09/06/0611_bestsellers/10.htm

Posted by jackmixner at 10:01 AM | Permalink

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Traditionally, when the federal government battled a recession it had two main tools at its disposal, namely fiscal policy and monetary policy. You could reduce interest rates (monetary policy) and/or you could expand the money supply (fiscal expansion) (Akerlof, 86). When financial markets work, it is a straightforward task to stimulate aggregate demand using these two basic tools (Akerlof, 89). Unfortunately, because banks suddenly don't trust the system (and who can blame them) stimulating demand using these tools isn't working. Banks aren't making loans to business; they're keeping what funds they have on their balance sheets.

This time around the economy needs a greater boost than usual. Akerlof proposes a second target beyound aggregate demand, a target "for the amount of credit of different sorts that is to be granted. This target should correspond to the credit that would normally be given if the economy were at full employment. (Akerlof, 80)"

We all know why. Talk to any CEO and she will tell you that credit of any form is very tough to acquire. In order to book that new sale, a company needs to assure itself that it can actually produce what has been ordered and pay for the labor and materials related to the sale. Customers normally want terms for their sale, meaning, unless the company has funds to produce the order, the order isn't going to be produced unless someone supplies a credit line of some sort. Enter this new stimulus for credit.

For obvious reasons, banks pulled credit off the table. Interest rate reductions and increases in the money supply weren't enough to jumpstart the financial system, again. Enter federally provided (through non-traditional providers if need be) loans to reduce the credit crunch. Interest rate reductions and fiscal stimuli continue. Credit is added.

This is new. Some of the SBA lending guarantees currently available or discussed address part of the problem. So do guaranteed micro-loans (or not so micro loans). There may not be enough of them, but they are becoming available. If you need to leverage that new sale, look around for the funds. They are becoming more and more available.

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

Posted by jackmixner at 09:54 AM | Permalink

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John Maynard Keynes first tackled the concept of "animal spirits" in his description of how psychology effected the markets.

Keynes Confidence Multiplier - the Keynesian Multiplier - rated the propensity of a consumer to spend, especially her or his propensity to spend part of a stimulus package. You had a choice. Spend your portion of a stimulus package, or save your portion. The more people who decide to immediately spend their portion of a stimulus package, the greater the impact of the stimulus, as that expenditure allowed the person or entity which received your portion to immediately spend, and so on. The higher the propensity to spend funds, the greater the impact. As computers and modelling were growing economic tools during the Depression and the periods following it, there ended up being a multitude of multipliers like the consumption multiplier, the investment multiplier, a government expenditure multiplier, and a confidence multiplier (Akerlof, 16).

Akerlof expands the discussion of the Confidence Multiplier's effect on economies to include Fairness, Corruption and Bad Faith, the Money Illusion, and, finally, economic Stories that effect results. If you have thought about it much, you probably realize that portions of capitalism are unfair. That realization may require closer examination. Involuntary unemployment has an economic cause (or certainly a psychological one), but that doesn't make it fair. The disenfranchised - the involuntary unemployed - seeth at their status which effects consumption. Inflation has an effect - a fairness effect - on aggregate output, as well (Akerlof, 25).

Corruption is a little more obvious, as we have a series of scandals to point to, like the Savings and Loan fiasco in the 80s, the Enron fiasco in the 90s and, more recently, the Subprime Mortgage market. These scandals effected not only their immediate environment, but the whole system. Hear enough about what is bad about a system and you may decide that just maybe your stimulus funds are better put into savings than into a newly "corrupt" investment.

If accounting is the langauge of business, business isn't working very well. Why? Well, after quite a bit of discussion, Akerlof (50) shows that accounting doesn't take into account inflation. Leave out inflation and you don't know what your savings account will really be in five years, your estimate of the current value of a bond will be off, you projection of a stock's price will be erroneous, wage contracts will be spurious, prices will be off (especially those contractually set into the future), and, those wonderful statements your receive about your stock holdings will suddenly be a lot less useful than you had expected.

Economists are supposed to base their predictions on facts, not stories (Akerlof, 54). There is a flaw here that explains why confidence takes a dive during a recession. All consumers hear is statistics. They don't hear stories about what is really happening, nor what economists think should be done. What economists forget is that facts don't drive markets - stories do. Eighteen banruptcies in your zip code or census tract don't mean much until you see those people thrown out on the street (OK, that doesn't happen much any more, I know). Then, the story of their plight will guide your decision making. You want to help, yes. You also don't want to end up in the same position. That effects your relationship to a stimulus package: you'd better save, the story goes, even when consuming is better for the economy. The stories people tell are more important than the facts.

So, some recommendations for your stategizing this summer:

• Start with confidence. Maybe there is a reason to build your team up.
• Make sure things are fair. Sometimes, fairness takes some explaining. You want to be fair to your current team and you want to be fair to your new hires. Fairness to each of those populations may read differently.
• Corruption does have an effect. You have to stand back and decide whether the shrinkage you are undergoing is a boost to limited salaries - or theft. Both effect ultimate profitability in very different ways.
• Southwest Airlines made more money through the last years than other airlines because it made fair estimates of the oil price increases and built those future prices into its contracts. When prices spiked, they had fixed price contracts that helped them weather the storm.
• Stories matter. Employees listen to what you say. If you are going to tell a story, consider what the real message is. Make sure it is confidence building. And, remember, a confidence building story is sometimes hard to come by, so don't just wing it. Finally, remember that your team won't remember the statistics - they'll remember the story. Make sure it is a good one.

Reference

Akerlof, Geroge A. and Robert J. Shiller. Animal Spirits. How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism. Princeton University Press. 2009.

Wikipedia. Animal Spirits. http://en.wikipedia.org/wiki/Animal_spirits_(Keynes)

Posted by jackmixner at 03:04 PM | Permalink

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Here are the top twenty-five green companies in Orange County (OC Metro, 39): 

1. B. Braun Medical, Inc.
2. Towe Jazz Semiconductor
3. Sustainability Leadership Program, UCI Extension
4. Rent A Box
5. Stantec Consulting
6. The Costa Mesa Green Home
7. Yard House Restaurants
8. e-Recycling of Orange County
9. McCarthy Building Cos.
10. Miocean Fundation
11. Nova Vita Salon & Spa
12. OCB Reprographics
13. NuWa Textiles
14. Irvine Rance Water District
15. Kaiser Permanente Irvine Medical Center
16. Alere
17. Toshiba America Business Solutions
18. Waste Management of Orange County
19. Cox Communications
20. City of Irvine
21. Green Foam Blanks
22. The Irvine Co.
23. Poseidon Resources
24. UPS
25. Sharp Solar Energy Solutions Group and the city of Huntington Beach

Reference

Borgatta, Tina. The 2010 Green Team. OC Metro. June 2010. http://www.ocmetro.com/t-GreenCompanies_MAIN0610.aspx

Posted by jackmixner at 06:48 PM | Permalink

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"We're late on our software design project. What are we going to do?"

"Just add more people. More people means faster to alpha."

Ever had a conversation like that? Just throwing people at a project may not be the best solution says Fred Brooks in a now classic software design book. Brooks came out of IBM in the sixties where he managed the creation of big, main-frame software that took lots of time to create. Having seen it all, Brooks takes the time to share with us just what can go wrong on large software project - and how to avoid all the mistakes he watched happen over time. He has one basic premise. Actually, a bunch of them, but they all come back to the man-month.

Let's say management wants a computer program designed and implemented. They'll say, "Let's have it done by such-and-such date." Your job is to get the project done and the software implemented. Now, your company is like most others. It has a budget. So, wearing your best manager's hat you estimate how many hours you think the project will take. You do it pretty quickly, hand it in to the boss who approves it quickly, because, as we all know, the boss wants it done fast.

Brooks makes two points about the process just described: your estimate is always wrong because - are you listening? - you didn't plan enough for the ultimate implementation of the software (Brooks, 20). Interestingly, he says spend a third of your time planning before you even begin coding. Then, get the coding in a sixth of the time you have allocated to the project. "What?" you say. All the time should be spent on coding. Not if you want your software to work properly. You've planned it (and took a lot longer than you expected), you've coded it, and now, you want to implement it. You've forgotten half of the work, the early systems test (with the component test) and the late systems test with all the different modules in hand (Brooks, 20). They get half the work.

"OK", you're saying, "times have changed. We're making a different type of software than IBM made in the sixties." I agree with that. You've migrated to a different platform using all sorts of new bells and whistles, modifications and changes. I agree. My suspicion, however, is that Brooks has it right. Spend a third of your time planning, a sixth coding, and then, half of your time checking your work. That's Brook's first lessen.

The second one gets more interesting. When was the last time you delivered software on time? Never, right? Brooks has a formula for making up lost time. It's simple. Use the same number of - indeed, the same - coders. Extend the time. You can't do it right? It'll take too long. Well, adding more people won't save time. All you'll end up doing is messing up your time-line bringing people up to speed. The trainers are pulled from coding. The new coders never catch up (Brooks, 26). The only solution? I already told you: keep the same number of coders. Extend the time. Simple to do. Hard to sell to management.

What if you run a design firm? You have a job to do. Your firm's profitability depends on it. Estimate your project properly. Leave time for planning. Then, leave more time than you ever expected to test the result of your efforts before the code ever gets to a customer.

That's Brooks, 1982. The time has changed. The message has stayed the same.

Reference

Brooks, Frederick P. Jr. The Mythical Man-Month. Essays on Software Engineering. Addison-Wesley Publishing Company. 1982.

Posted by jackmixner at 03:23 PM | Permalink

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I spent a lot of time at the Medical Device and Manufacturing show back in the winter. One of the neatest machines I learned about was a new x-y-z printer that made prototypes out of stainless steel. One of the prototypes on display was a new hip joint that had been made entirely using the x-y-z process. It wasn't smooth like you'd expect - they had built in micro-ridges on the polished surfaces to retain lubricating fluids so the joint would last longer and feel better. When I saw the Capell (When Body Parts Call the Doctor) article, I couldn't help but think of the MDM show.

When a new joint is starting to wear out, it hurts. If you could program the new part to whine - via, say, WiFi to your Doctor's office - when things aren't going correctly that failing joint could be replaced before it advance to the pain stage.

These stories are the fun of medical device innovation. Manufacture better. Build in technology. The x-y-z printer cost $600,000 if I remember correctly, not a simple expense if you are trying to upgrade your prototyping facility. The electronics in that joint might force you to go through a whole new application process to the FDA. The negatives could out-weight the positives, unless you consider a few things. There will be lots of innovations in your processes over the next year. If you choose to consider carefully which ones to invest in, you are farther down the way. You will reject some new innovations; others will get the green light. How do you choose?

Corning says have an innovation team, not in your silo but at the corporate level. Include lots of folks on the team. Force them to deliberate - quickly. Then, once they like an idea, keep the idea before the committee. Force them to track progress. Demand reports back. And, this is important, allow efforts to succeed by giving them assets repetitively, not just once or twice. The x-y-z printer spent the money to buy machinery that they weren't sure a market existed for. The Corning folks invested in a new glass (new in that, while it was created initially in 1963 as an auto glass, then never touched for decades) by allowing expensive ($300,000 a pot) test batches, not once but a series of times. And yes, they pushed production of the lines to get the test batches. The team said it was worth doing, ran the numbers, and continued to follow up. If the CEO was the only advocate, he would've forgotten about it by the time came around for the second test batch.

Allow the ideas to percolate up. Prioritize them. Follow-up. Sounds too simple, but it works.

Reference

Capell, Kerry. When Body Parts Call the Doctor. Bloomberg Businessweek. 12 April 2010. 54. http://www.businessweek.com/magazine/content/10_15/b4173054256568.htm

Holstein, William J. Five Gates to Innovation. Strategy+Business. 1 March 2010. http://www.strategy-business.com/article/00021?pg=all

Posted by jackmixner at 03:09 PM | Permalink

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When my Grandmother had cataract surgery in the late sixties, it was debilitating, to say the least. She was hospitalized and they kept her in bed for what seemed a very long time. She never really was her old self again. Now a days, that surgery is an out-patient procedure with very little downtime, if any. About twenty years ago, optometrists had to look for something else to bill for. Enter Lasik surgery in all its different types and phases. That worked for a while. In fact, I still get a mailing from my Optometrist about every other month saying that now is the time for me to upgrade my eyes with some sort of surgery so I won't have to wear my contacts. If you wear contacts, you're getting the letter, too. right? OK, I'm a late adopter. My Doc is trying to upgrade me, yes. I certainly won't pay as much for my procedure as the folks twenty years ago, of course. So, if you think about it, you realize they're already thinking of the next step. In my mind, it's not just the next improvement to Lasik surgery. I want to have telescopic vision, just like my digital camera. And I'll bet somebody's working on it. What do you think?

What's happened here is that the eye surgery market has matured over time. Cataract surgery is now very mainstream. Lasik surgery is very mainstream. In order to make the margins they used to make, eye surgeons need to be looking to the next eye improvement like, maybe, telescopic eyesight. Or, they can change their focus to something else that is profitable. Soon (if isn't happening already) nurses will be doing Lasik surgery. The Doc's will need something new.

Geoffrey Moore lays out the whole scenario (Moore, 61). If you look closely, the same type thing is happening to your tech company. After a while, especially if you have an approved medical device, for instance, you focus not on the next new thing but on how to improve your manufacturing process. That's the next step for you if you follow the natural progression from early stage products to later stage manufacturing. Here is the fun part: if you put some effort into your research and development efforts, now, you are able to cycle back to early stage products and re-invigorate your profit margins while you do it. That's the opportunity for you. It's what's happening in eye products. Quit improving your product. Go back and re-think it. When you do, your profits will go up. That's a good thing.

Reference

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005. 

Posted by jackmixner at 11:27 AM | Permalink

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When you're dealing with an unknown, potentially lethal biologic sample, the last thing you want to do with it is to open the sample container to take a whiff. In some cases, such activity is a death sentence. Unfortunately, that (Peters, 238) is exactly to one of C. J. Peters' team members did with a sample he suspected was Ebola, a very nasty virus, indeed. When the technician (actually a highly trained physician) finally realized his error and confessed, it was days later, after lots of people had been, potentially, exposed as well. Not a good start to a very tough story.

The Ebola sample came from a large monkey colony at a test facility in Reston, Virginia, just outside of Washington D. C. The colony, after much and diligent effort, was eradicated, along with the Ebola virus.

So, what is the strategic point of this discussion? The Army team in charge of cleaning up the monkey colony was long on education and experience. They knew what to do and how to do it. They were experienced. This wasn't a case of a strong leader out ahead of the pack telling everyone what to do. Each person on the team knew what to do and when to do it. If they hadn't done things correctly, lots of people could have gotten hurt.

The point, to return to the question, is that there are strategies that require highly trained and experienced personnel to effectively carry out. Some of those strategies require true "outside-the-box" thinking. Some of them require the opposite, let's call it "inside-the-box" training. Two different types of people are required. Moore's Chasm talks about crossing the chasm from early adopters to the main market. Lots of that is outside-the-box thinking. Bureaucratic thinking, maybe even mainstream thinking like getting things done right time after time, is inside-the-box thinking, more like the repetitive strategies (like quality upgrades and just-in-time processes) in Moore's Darwin. Next time you do your SWOT for a strategic analysis, you might want to consider the folks in the room and whether they are insiders or outsiders. Who get assigned what may be the difference between success and failure.

Reference

Mixner, Jack. Expertise - or Talent? http://mixnerstrategy.com/blog/2010/05/post_4.html 

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperBusiness 1991.  

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005. 

Peters, C. J., M. D. Virus Hunter. Thirty Years of Battling Hot Viruses Around the World. Anchor Books. 1997.

Posted by jackmixner at 04:58 PM | Permalink

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We all know about neurons in the brain. They are, supposedly, the place where thought takes place. Have more neurons, have more intelligence, or so the theory went. Until scientists looked at Einstein's brain. His brain looked just like yours and mine in terms of neurons. Where it differed was in the number of cells that were not neurons. In some areas of the brain, his "not neurons" were off the charts (Fields, 7). That led to a whole new exploration of the brain. They used microscopes, binary microscopes and electron microscopes. The problem with all those systems was that they worked on dead tissues. If you've ever run an electron microscope, you realize that the beam has to be focused on specially preserved, especially dead, tissue. So how do you look inside brain tissue - at the molecular level - to see just what is going on? Enter Atari and the generation of scientists the Atari-like imaging spawned.

First it was home computers with their readily accessible controllers and color graphics (Fields, 52). Attach a home computer to a microcope to a video camera and interesting things began to happen. Add a laser system and even more things showed up. You could see what was happening inside a live cell. So, what do you focus upon inside a living brain cell? Calcium transmits information from outside brain cells to the inside of brain cells. All this new technology allowed scientists to see calcium migrate - and when (Fields, 52). When scientists added fluorescing calcium-detecting dyes to brain cells, they could see which cells lit up and what kind of signal caused the flash.

This took new traits in your scientist (Fields, 54). In the past, the good scientists took their time. Preparing samples for an electron microscope that are worth anything takes time. Now, real time science required real time decision making. Your test brain cells only remained alive for so long. While they were alive you had to figure out what to do with them. When you was something on your computer/camera/laser imaging system, you had to figure out what it was - fast. Speed was a new trait. Fixing things on your equipment came in a close second.

Reference

Fields, R. Douglas. The Other Brain. From Dementia to Schizophrenia, How New Discoveries About the Brain Are Revolutionizin Medicine and Science. Simon & Schuster. 2009.

Posted by jackmixner at 03:13 PM | Permalink

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Novartis spent more than $100 million, maybe a lot more (Miller, 146), during the years between the mid-eighties and 2005 on xenotransplatation, "the use of live animal tissues and organs to heal sick people (Miller, x)." Ending in 2005, Novartis' investment over three years in the final xeno company they supported, Immerge BioTherapeutics, totalled $30 million. During the period, Novartis never saw a return on its investment.

With all the stimulus funding sloshing around our economy, billions of dollars seem more the norm, but Novartis' $100 million was a lot to them. For their money, they received significant results. Specially grown pigs with special genes were able to provide kidneys and hearts to baboons. The organs weren't immediately rejected. One kidney, in fact, lasted more than two months (Miller, 207).

Immerge and companies like it were established because there is a need for organs. Human donations aren't keeping up with demand. It seems there might be a calculation here to ascertain if federal spending on xeno projects makes sense. Totalling the lifetime of expenses for the normal kidney dialysis patient might give some indication whether additional NIH investments makes sense. We all know the answer. It all makes sense. The problem is "Where's the money to come from?" Not an easy question.

Reference

Miller, G. Wayne. The Xeno Chronicles. Two Years on the Frontie of Medicine Inside Harvard's Transplant Research Lab. PublicAffairs. 2005.

Posted by jackmixner at 02:28 PM | Permalink

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Here's the story (Swan): hyper-active kid grows up, decides to become an adventurer and, because he read a lot of cool books as a kid about Artic exploring (and Antartic exploring, as well), decides he wants to retrace the steps of the original explorers in the Antartic. All good. We get that. All of us know enough about the topic to predict what happens next. Two things, actually. One, money is hard to raise for such an exploration. That's easy to figure out. Two, the explorers get in trouble. All this makes the story interesting. There's a twist in all this that makes it even better: the explorer becomes a green advocate and tries to change the world. Also predictable, if you think about it. I could stop now, but we need to consider the topic.

There are politics that make a solution for our green problems hard to solve. The science of our green problems is hard, as well. We don't know precisely what to do, especially when we balance the green problems with the capitalistic need for growth.

The federal government, in all sorts of ways, is trying to spur business to recognize the need for change, and more importantly, do something about it. In my speeches to entrepreneurs, I always try to make clear that there is no free money from the government. If you take a grant or a loan you're going to have to work to get it and then you'd better perform according to your business plan. Or you are in trouble.

So, we have to realize that the government is interested and that the government doesn't know what to do. We talked about capitalistic growth. Well, in less obvious terms, the government is pointing to an opportunity to fix things before it is too late. Take that government money or not, realize that the opportunity still exists for you and your company to do something. Think about it. What are you going to do? And how are you going to make it profitable?

Reference 

Swan, Robert and Gil Reavill. Antarctica 2041. My Quest to Save the Earth's Last Wilderness. Broadway Books. 2009.

Posted by jackmixner at 10:51 AM | Permalink

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Sometimes experience matters. There was a patient. She "didn't feel too good (Gawande, 1)." The medical student assigned to her had done his best. The nurses were watching. All seemed well. The resident wasn't buying it. His experience told him that that patient warranted close following, more than the medical student was providing, so he took it upon himself to continue to follow up. This time, the patient was lucky. The resident found a problem on one of his frequent, unscheduled, visits and made sure things were put right. A good result for the patient. A good result for the medical student. A good result for the resident.

Even without the resident's close attention, basically, the patient got the best care in one of the best hospitals. However, without the resident's willingness to admit that he didn't feel good about what was going on, the patient would have probably had a wholly different outcome. His experience - call it gut reaction, if you will - made all the difference.

So, strategically, what's the difference? Lots. We might say, "Trust your instincts and act," and we'd be partly correct. There's more. Follow-up takes work. Showing up and asking questions repeatly is a part of success. Training the staff - the team - that doing things by book might not be enough seems obvious. Sparking their interest in following-up is part of your job. Not easy, I know. However, relying on "following the book" isn't enough. So, it takes two things to succeed, at least in this instance. Do things by the book, yes. But, at the same time, you've got to focus on the patient and the book. Keep looking when things don't feel right. Showing up isn't enough. Show up engaged works better. The trick here isn't easy, however. You've got to figure out how not only how to motivate yourself to show up engaged. You've got to do the same thing with your team.

References

Gawande, Atul. Better. A Surgeon's Notes on Performance. Picador. 2007.

Posted by jackmixner at 09:26 AM | Permalink

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The stent has upset the perfusion market. It is cheap (well, cheaper). It is less invasive. It replaces surgery to fix arteries, veins and all sorts of major organz. All good things.

But, in its time, the heart perfusion machine - the heart lung machine - was an innovative device that helped millions to survive major surgery and to live long lives. By oxygenating blood outside the body, the machine allowed surgeons to make repairs that, until then, would have gone unrepaired.

Cate, George M. A Final Look at Perfusion in the 20th Century. AMSECT (American Society of Extra-Corporeal Technology) Today. December 1999. 1.

Posted by jackmixner at 11:08 AM | Permalink

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A decade ago we started to hear stories of kids with Type I diabetes. Since then, the prevalence of the disease in children has continued to grow. Of course, kids hate the testing related to diabetes. Enter a parent with an idea. Why not hook the testing to the very popular Nintendo DS video game (Weintraub)? That brainstorm led to the Glucoboy testing system and then to the Didget system from Bayer. The idea is to entice kids to keep testing on a regular basis. Available now in Holland, Australia (Glucoboy) and Ireland (Bayer), here's hoping the testing system catches on.

The biggest concern about any new product like the Didget is whether it will get the sales needed to propel it into the bigtime. The inventor came up with a new way of looking at an existing technology. He's hoping it catches on. Bayer - a world-wide pharmaceutical powerhouse - is hoping for more sales of all its diabetes products.

There are a couple flaws I hope the system overcomes. A disruptive product, almost by definition, is cheaper and has fewer features than existing products. It doesn't fit into the normal way a product is normally taken to market (Moore, 64). In the medical device arena, if a product is not cheap then, hopefully, it is on the list of insurance approved products. The Glucoboy/Didget is neither cheaper nor approved for insurance reimbursement (Weintraub). Kids who use it have very high success rates for managing their disease, that's true. Bayer is assuming "parents will spend anything" (Weintraub) to control their kid's diabetes.

Rooting for any device that reduces kid's problems with diabetes is a good thing. Here's hoping the Bayer Didget finds its niche.

Bayer Didget. http://www.bayerdidget.co.uk/Home

Glucoboy. http://www.glucoboy.com/

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005.

Weintraub, Arlene. Diabetes Is No Fun-But It Can Be a Game. Bloomberg BusinessWeek. 19 April 2010. 62. http://www.businessweek.com/magazine/content/10_16/b4174062706997.htm

Posted by jackmixner at 09:18 AM | Permalink

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It is tricky to say who defined terms first in the busines press. Value chains have been around for a while. Porter talked about them. So does Moore. Moore also shows why Christensen should have talked more about value chains in his work on disruptive strategy. Let's see if we can reconcile all this into a workable strategy.

Porter's model worked like this (Porter, 60): Inbound Logistics flows into Operations flows into Outbound Logistics flows into Marketing & Sales flows into Service. There are overlays of Firm Infrastructure, Human Resource Management, Technology Development and Procurement. It is handy to remember, as well, that Porter (Porter, 12) compared Competitive Scope with poles of Narrow Target and Broad Target, to Competitive Advantage with its poles of Lower Cost and Differentiation, to yield his Three Generic Strategies of Cost Leadership, Differentiation and Cost Focus/Differentiation Focus. I suggested recently that the Orange County Business Council use the Porter Value Chain model for research they are performing for the Workforce Investment Board because the methodology has been around a while and is seemingly bullet proof for workforce projections. Customers and competitors are crucial to the model, as a firm is always bench-marking performance against the norms.

Moore (Chasm, 12) talked about a bell curve comparing five sequential consumer populations: Innovators, Early Adopters, Early Majority, Late Majority and Laggards. The crucial section (Chasm, 17) described the near certainty that, while Innovators and Early Adopters might like your new product, if you ever want to make money, you'd better figure out a way to "leap the chasm" of failure for most companies and figure out how to sell to the Early Majority, as their buying habits were vastly different from the Early Adopters in crucial ways. In Darwin Moore applies the value chain concept to innovation (Darwin, 38) while enhancing his discussion of the chasm by describing its effects on complex sales and volume sales.

Christensen explores the evolution of the disk drive market (Christensen, 16), pointing to the inevitability that disruptive products (from new, smaller, more innovative companies) are nearly certain to replace sustainably improved products (from main-stream companies). His team at Innosight follows with a methodology (Anthony) to keep your main-stream, not very innovative, company disruptive.

The Boston Consulting Group compared relative market share with growth rate in its Growth Share Matrix (Boston). Question mark divisions become stars or dogs according to the their relative growth rate compared to the competition and the growth of the market. Hopefully, stars become long-term cash cows, not dogs. The message from this is that divisions migrate from section to section according to market conditions.

Moore very usefully attempts a mash-up of all this disparate information. He amplfies Porter's value chain with overlays for complex systems requiring consultative sales processes and for volume operations where the sales process focuses on a closed-end transaction (Darwin, 38). Then, he applies four innovation zones (Product Leadership, Customer Intimacy, Operational Excellence, and finally, Category Renewal) to the Chasm bell curve. For instance, he defines four different innovation technologies that apply to growth markets (Darwin, 73) in the Product Leadership zone of his Chasm bell curve and ranging up to mature markets: Disruptive Innovation, Product Innovation, Platform Innovation and Application Innovation. You have a choice in your company. If you are rapidly growing, focusing on just a few strategies in this range makes sense. If yours is a mature company or - horrors - a declining company, returning to the growth market strategies also makes sense.

Specific strategies are strengthed when you consider the stage of your technology - and your firm.

References

Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield and Elizabeth J. Altman. The Innovator's guide to Growth. Putting Disruptive Innovation to Work. Harvard Business Press. 2008. 

Boston Consulting Group. Growth Share Matrix. http://en.wikipedia.org/wiki/Growth-share_matrix

Christensen. Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997. 

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperBusiness 1991.  

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005.

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

Posted by jackmixner at 05:10 AM | Permalink

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When you facilitate the strategic planning process, you focus on six basic objectives for the corporation (Birnbaum, 128):

1. Financial
2. Marketing/sales
3. Product/services
4. Operations
5. Human resources
6. Community.

It's a good list as it includes all the obvious objectives you might want to form. Consider making a couple objectives under each major category and you're done. That's simple. Sometimes things are forgotten. Marketing always seems to come first as it drives the top line. Operations is melded into human resources in today's environment as your objective many times is to reduce the head count to increase efficiency. That head-count reduction might have worked over the last eighteen months, but by now it is wearing thin, as are your worn out employees. You could lean on your suppliers to reduce costs, or convert to a quality system of some sort that focuses, for instance, on continuous improvement. I'm thinking those are nice strategies, but didn't we take care of them in the eighties? What do we do now in operations?

There's a picture of an Chrysler automobile manufacturing line that says it all (Simpson, 280). It shows three seemingly different models of Chryslers (two Grand Cherokees, a Chrysler 300C, and a Chrysler Voyager) all going down the same production line. Chrysler, although late to the flexible manufacturing game, is following a platform strategy, that of focusing on the commonalities in a group of products in order to cross-pollinate each of the products with like parts and processes. They do it to save costs and therefore increase profitability.

So, where does platform strategy fit into your strategic plan? Under marketing and product objectives, you might consider what products you are going to manufacture. You make sure that you have the technology strengths to manufacture the products you are targeting, and then firm up your product line strategy by segmenting all the different products in different lines. Right here you have an option to add a platform strategy to what you are doing. If you can figure out a way to provide like parts to many of your different products and product lines, you are on the way to a platform strategy. When the New Beetle came out, for instance, it really wasn't so new (Marion, 84). It fit into a product platform inside the world-wide Volkswagen scheme composed of VWs, Skodas, Seats and Audis. It's new design and all the hoopla related to it fostered growth across the platform as the New Beetle's use of platform parts reduced engineering costs and production costs as the volume of parts used across the platform increased with the bump in sales of New Beetles.

Now, there are impacts as a result of this decision. You have to consider product architecture, design, manufacturing and sourcing, and, finally, customer service. If you do it correctly, however, the platform strategy allows you to reduce costs significantly while at the same time increasing the diversity of your product line and its utility to consumers.

Reference

Birnbaum, William S. If Your Strategy Is So Terrific, How Come It Doesn't Work? AMACOM. 1990.

Bowman, Daniel. Effective Product Platform Planning in the Front End. In Simpson. 19.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

Simpson, Timothy W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

Posted by jackmixner at 09:09 AM | Permalink

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My laptop blew out its screen recently and it looked like I was going to have to buy a new one. Since I wanted more portability, I looked at the netbooks. Since I had reported here about the one computer per child movement, I knew about Asus computers and their EeePC. I was focusing on the one with the new Intel chip, the 450N, because it seems that it had the longest battery life. All good. What was also good was that I was able to fix my old laptop and move on without buying another box. All this forced me to understand what the Taiwanese and other Asian businesses are discovering: Silicon Valley is a good place to do research and buy early stage companies. Why let the Silicon Valley VCs have all the fun? They can do it themselves.

And do it they are.  There's risk here, you say. Why would they want to take on this risk? And how can they compete with the VCs on the ground? Not possible. Possible! If you've dealt with Angels and VCs lately, you realize that they aren't investing like they used to, and, when they do invest, they are taking less risk. They feel more like bankers than VCs. What's an Asian tech company to do, especially when it wants access to new ideas and designs? Invest. And invest they are. That Asus computer I mentioned above used to be an unknown. They'd learned how to make the designs. All they had to do was make a complete box. They did it for others, now they are doing it for themselves. It all makes sense. Silicon Valley better get going. Now is the time.

Reference

Vance, Ashlee. Asian Computer Makers Move Into Riskier Ventures. New York Times. 15 March 2010. http://www.nytimes.com/2010/01/06/technology/personaltech/06valley.html?ref=global-home 

Posted by jackmixner at 12:57 PM | Permalink

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My friend Steve Maylish first referred me to an article (Marion) about the Chevrolet Corvair and platform strategy. I have to admit that early on, I was giving him a hard time because the Corvair, as we all know, has a storied past, what with Ralph Nadar and all. If you give the message a little time, it grows on you, however.

The Corvair was conceived in about 1955 as a Volkswagen killer. The Big Three in America realized that the foreign imports were doing something they hadn't even considered: selling small cars. General Motors decided to do something. The result was the Corvair. If you look a little more closely, you will notice that the Corvair isn't one car, but at least three or four depending on your definition of a car. There was a four door. There was a two door. There was a two door convertible. There was a van. There was a pick-up of sorts. Then, for most of the models, there was a souped-up version that was a lot of fun to drive. All new. All based on a new platform (when had we ever seen a rear engine car in America before, at least since the very, very short-lived Tucker?) with many shared parts across all the models. Now you have to squint a bit, but you will realize that the Camaro replaced parts of the offering, as did the Chevrolet Van. They were part of the platform, too.

Early on, the Corvair was disruptive in the industry. It was different, certainly. Cheaper, probably. It's smallness forced them to leave off some of the fins and chrome American autos were famous for at the time. It allowed General Motors to enter the compact market with a new design conceived from a blank piece of paper.

The platform part of the strategy allowed GM to use the engines and suspension parts across the whole product line, saving money and design time. Looked at another way, because they were focusing on fewer parts, they were able to invest more in each part.

Reference

Simpson, Timoth W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

Posted by jackmixner at 11:02 AM | Permalink

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Let's say the business press has been speculating about which firm in your industry will make a particular technological advance in an existing product line. The press is looking to identify the winner, as they speculate that the winner's stock value will go up when it announces this new incremental improvement. If you read between the lines - and you're the CEO - you might make the decision to invest heavily in the incremental improvement in order to take advantage of this hit to stock price. In strategic terms, we're talking about a sustainable improvement, one of many that have been made over the years in your product line. The question we're talking about still is "Does it make sense to invest heavily in this sustainable improvement in an existing product line, or is it OK to follow along as other industry participants make the incremental improvement first?"

Let's contrast this sustainable improvement with a disruptive improvement, an improvement made to a product in a small, emerging market. Let's underline the contrast again. Does it make more sense to invest in a sustainable improvement to a current product line, or does it make more sense to invest in a disruptive innovation in a product line that, while new, could grow rapidly?

Christensen tells us the answer (Christensen, 132). Invest heavily in the disruptive innovation to the new product line. The pay-off is twenty times as lucrative as the investment in the sustainably innovated product line.

In financial terms, we're talking about two types of risk, market risk and competitive risk (Christensen, 132). If you are going to invest for the biggest bang for your buck, invest in markets, especially emerging markets and products as opposed to investments in competitive situations where market leadership doesn't matter so much (Christensen, 132).

Reference

Christensen, Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997.

Posted by jackmixner at 12:06 PM | Permalink

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The New York Times just announced that the administration has the votes to pass the healthcare bill. Since I have just finished a book that includes whole sections on another chapter of the healthcare business history I couldn't help but look for commonalities.

Jim Clark helped found Silicon Systems back when. For his efforts (and after he was forced out) he made tens of millions of dollars. To prove he could do it again, Clark made hundreds of millions on the first Internet stock, the one that started everything, Netscape. Of course, as we all know, Microsoft slowly ate Netscape's lunch. So Clark had to do it all over again, with what they started to call Healthscape (later changed to Healtheon because some smart kid already owned Healthscape.com). Now, Healtheon was posed to really shake things up.

Jim Clark had drawn a picture that you can mimic easily on a napkin if you decide to (Lewis, 99). He put four dots on the paper. One was labeled Payers, another Providers, the third Consumers, and the final one Doctors. Pretty simple. You have to remember this was during the Internet boom. You didn't need anything but four dots to go public. So where was Healtheon in those four dots? Right in the middle, taking a portion of the flow of monies for every transaction flowing between the four dots. This was simple to do as this was the Internet. Everything would be automatic. 

Healtheon almost made it big, except for one problem: the Russians defaulted on some bonds, sending the whole market into turmoil and sinking many offerings, most forever. Healtheon ultimately sank too.

I promised commonalities between the Obama plan and Healtheon. I guess I won't be wrong if I say they are both big. Healtheon thought they had a simple solution that would work. The Administration may not be convinced that they have a simple solution, but they do clearly believe that they have a solution that will work. I am going to stop right there. All I will say is that something needs fixing in the healthcare mess and that, hopefully, the solution they are about to vote on will start the process of fixing some of the weaknesses. I suspect this will be even harder than we envision (someone told me the bill was more than two thousand pages long - amazing!), but the first step is always the hardest. Good luck to us all.

Reference

Lewis, Michael. The New New Thing. A Silicon Valley Story. W. W. Norton & Company. 2000.

Posted by jackmixner at 02:50 PM | Permalink

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Mike Bloomberg joined Salomon Brothers in 1966, fresh out of the Harvard MBA program. He counted securities for a while before he moved upstairs to the stock-trading department, working for Jay Perry, with whom he worked until Perry moved on the Dallas, allowing Bloomberg to take his job as head of Salomon's equities desk (Purnick, 26-32). Exile to the "information services" department in 1979 came as the result of serious in-fighting with the same man who was instrumental in exiling Perry to Dallas earlier (Purnick, 33).

Exile could have been the end of the story except for Bloomberg's interest in things any trader in his right mind in the seventies wasn't even considering: how to instantaneously use information to make more money. Manual was the norm. You made decisions based on gut feel and old data. No one was taking advantage of real time information very well. No one was making use of historical information at all. Enter Mike Bloomberg.

While still a trader, he started to figure out how to program the Quotron machines that Salomon had early on invested in. Ultimately, you could ask the machine "what if" questions, something no one had ever considered doing before (Purnick, 34). So Bloomberg's exile became a learning opportunity. The Quotron turned into desk top, personal computers for every analyst, something the rest of the firm still thought a foolish waste. Main frames staffed by staff in a back room were the norm. Bloomberg pushed and pushed and pushed for more personal computers. That pushing had an effect, just not the effect Bloomberg had expected. He still had enemies (remember the guy who exiled him to IT in the first place?) who, in a reorganization of the firm, finally pushed him out the door (Purnick, 36-37) for good in 1981. A nice thing was buried in the distaste of the firing: they handed him cash and securities worth $10 million and sent him on his merry (not too happy, probably) way (Purnick, 37). Bloomberg took two other Salomon values along with him: he didn't cheat, and he "wouldn't tolerate dishonesty" (Purnick, 37).

Drum-roll please! Enter opportunity.

Basically, we all know the story from there: Bloomberg and a small team sold their services to Merrill Lynch to program some computers. Merrill kept buying and investing in Bloomberg's firm long enough for him to reach the critical mass needed by an entrepreneur to succeed. Let's just remember that by the time he closed his first deals, Bloomberg had been working diligently not for a couple years, but for almost two decades. This was no over-night success.

Reference

Purnick, Joyce. Mike Bloomberg. Money, Power, Politics. PublicAffairs. 2009.

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We've been talking for some time now about the advent of a computer for third world kids. Slowly, the talk is turning into a reality. Negroponte reports (Negroponte, 81) that "1.4 million children in 35 countries" speaking "25 languages" are using the original $100 computer (which actually cost $175), the XO from One Laptop per Child. That circuit board had lots of pieces, maybe 900 or so. The goal? A circuit board with "only one chip" (Negroponte, 81). That's all. One chip. And, oh, the computer actually costs $100 this time around, hopefully.

Who cares? First generation XO's go home with their owners. Kids sleep with their computers. They're learning like never before. All 1.4 million of them. Think about that number. 1.4 million is a lot. And yet it is nothing when you consider how many kids there are in Africa. Or South America. Or Santa Ana. We have a way to go yet.

But that's the good thing. There are opportunities here. The XO sparked all sorts of things, from cheap screens to cheap electronics to small computers to wider band width to more kids sleeping with their computers. This next chapter will do the same thing. The next version XO won't be a laptop, it'll be a tablet (Negroponte, 81). You're thinking, "Apple already did that, so what?" Think again. A one chip tablet isn't going to be given to 1.4 million kids. I'll bet 140 million get one. Think about that. Negroponte got beat up last time around because the price wouldn't go down fast enough, because Intel jumped in and created a cheap chip of their own (the Atom, in all those netbooks out there), and because Asus said, "We'll move from chips to computers" and started to make a good competitor to the XO. Big deal. Yes, big deal. Negroponte pointed out a need, started down the production path, got beat up, sparked a new industry, kept going, and still has a vision for more change. He's one guy.

How come your design team isn't acting like that? "Oh, they're too busy," you say. Really? Have another look.

Reference

Negroponte, Nicholas. The Next $100 Laptop. Wired. April 2010. 81.

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Right now it is easy to take shots at Toyota. GM and Ford are taking pains not to, as they know what it feels like to be in the spotlight. But that doesn't mean that we can't have a look at what went wrong at Toyota. Now, we can point, look at the facts, and, realize that we aren't getting the whole story. Here's the story we're getting from BusinessWeek: Jim Press warned the Toyota brass in Japan in 2006 that there were quality issues with Toyota autos (Ohnsman, 34). Earlier, the company president "boasted of saving $10 billion in the previous six years by reducing operating costs (Ohnsman, 34)." Now, so you know, we have a Toyota. We like it for all sorts of reasons. And, so you know, I have stood back and tried to decide if I would recommend that we buy another Toyota. If you listen to the ads of satisfied new customers, Toyota is hoping that my decision - and lots of other folks' decision - will be to buy another Toyota. I guess the way I'll look at it is to try to figure, with all the problems we're hearing about, the Toyota I might want to buy someday is as good as or better than other autos on the market. That's how I'll make up my mind.

There are issues that apply to a well-run company that we all have to recognize. Continual focus on the bottom-line can ultimately have serious implications. Continuous improvement has to focus on improvement, not continuous cost-cutting. There is a difference. Sometimes it is hard to ascertain. The step that is missing is to realize the difference and act upon it. Just following along and removing every iota of quality to save money isn't what continuous improvement is all about. Reducing production time saves money. Reducing the number of parts in an auto, done correctly, can save money. Saving money is good. Ultimately, folks will notice if the quality isn't there. Toyota has gotten caught in a spiral. With effort they'll do fine. The real benefit is to notice what happened and make sure it doesn't happen to your company.

Reference

Ohnsman, Alan, Jeff Green and Kae Inoue. The Humbling of Toyota. Bloomberg Businessweek. 22 & 29 March 2010. 33. http://www.businessweek.com/magazine/content/10_12/b4171032583967.htm

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Occasionally, my pragmatic spirit gets in the way. In a quick stand-up planning session after another meeting recently, I changed my direction two or three times in seconds based on new information from others in the meeting. One of the women in the meeting said, "I'm never marrying you. You change your mind too much." That certainly caused this happily married man to pause and go "What?" And of course, from her point of view, my friend was correct. I do change my mind too easily, or so it seems. In my defense, I realize I am pragmatic - do what it takes, and all that - not hopelessly unable to make up my mind.

That "What?" allowed me to actually read Fish's comments about pragmatism, and caused me to ask my friendly research librarian to order Margolis' new book on pragmatism. The librarian was able to show that only six copies of the book existed, and that, really, did I want to order the book? Closer reading of the OpEd said, "No, don't read the book. You'll go nuts."

Pragmatism "is among the 'very small number of Western philosophical movements ... that ... never exceed the natural competence and limitation of mere human being (Fish quoting Margolis).'" That says there is a philosophy called pragmatism. We make pragmatic decisions all the time. We overlay other codes of conduct on our decisions, but, given a bit of flexibility, those codes don't have to be inflexible. Strategically, when you are working with a team, go with the flow. Have some plans that don't change - grow xxx per cent this year - but be willing to change, sometimes on the fly, what you are doing day to day. That's my read on the situation, anyway. But, and here is my personal caveat from experience with my friend, sometimes it pays not to change your mind too often.

References

Fish, Stanley. Pragmatism's Gift. New York Times. Opinionator. 15 March 2010. http://opinionator.blogs.nytimes.com/2010/03/15/pragmatisms-gift/?ref=global-home

Margolis, Joseph. Pragmatism's Advantage. American and European Philosophy at the End of the Twentieth Century. 2010.

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First, he sold bonds on Wall Street back in the late eighties. Then he wrote about the experience in Liars' Poker. Now he is back with a book about the recent debacle entitled The Big Short. Already targeted for production as a movie (Osinski, 96), Michael Lewis' latest plays up the few players in the recent market who really made money, the ones who figured out that there was something wrong with all those mortgages out there, and figured out how to short the mortgage market, all to derision, first, and for great wealth, later. Osinski does a little digging and quotes an optimistic Lewis the day before the bond market broke in January 2007 and compares the quote with Lewis' final realization that, whoops, was he wrong. Rubbing it in when someone takes a bad stand is always fun for Monday morning quarterbacks, as it were.

Lewis got it wrong way back when. Luckily, the star of his book didn't. Michael Burry, a resident neurosurgeon, typed his predictions of doom into the ethers of the web as it existed in the late 1990's (Osinski, 95). People noticed, and sent him money to invest. He continued researching, hitting ultimately on the realization that mortgages "would start to blow up...when the original teaser rates expired" (Osinski, 96). Burry figured out how to invest his point of view and made a fortune.

Contrarians are always interesting to review in hind sight especially if they made money. There are always grey clouds over booming markets. The trick is to know when the rain is going to start. Modern strategy says have a plan and invest heavily in it. It is sensible to realize that everything good ultimately goes bad. Having a plan - having alternative investments already cooking - makes sense in any market. Right now, that means, yes, continue to improve the products and services your current customers happily buy. However, realize that it makes sense to invest in simpler, cheaper combinations for markets you might not normally address. Left a market behind in the last decade? It might make sense to look back to those customers to see if they might be interested in what you are making today, but at a cheaper price/feature point. If they're interested, maybe you have a way to grow, even in a slow growth market.

References

Lewis, Michael. The Big Short: Inside the Doomsday Machine. W. W. Norton. 2010.

Osinski, Michael. The Subprime of Their Lives. Bloomberg Businessweek. 22&29 March 2010. 94. http://www.businessweek.com/magazine/content/10_12/b4171094664065.htm

Posted by jackmixner at 11:51 AM | Permalink

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Picture a middle-eastern bazaar on market day maybe in the middle of the eighteenth century. What do you see? People packing the square. Shouting. Cursing. Eying. Ignoring. Touching. Feeling. Negotiating. Settling. Paying. Carrying. Trusting. Not trusting. Knowing. Undecided. Decided. Rich. Poor. Packed. Tight. Close. Smelly. Smoky. Sensual. Nonsense. Cheap. Exquisite. Sunny. Shadowed. Wet. Rainy. Cold. Hot. Safe. Unsafe. Escorted. Unescorted. Free. Enslaved. Story. Sounds. Music. Singing. Horses. Monkeys. Pestering. Quiet.

Now picture a Target on a Saturday afternoon. How many of the adjectives above apply? Some of them just don't fly anymore. People want to be safe. They want a fair deal. Things have changed. Walmart the same way. The center of the retailing universe has become staid. Yes, the end-caps sell. So do the aisles, or, believe me, the items for sale won't remain at Walmart very long. But the experience has changed. Maybe it is a good thing. It might be what we really want.

Doc Searls (Levine, 76) says we really do want the bazaar, and that the bazaar has been re-created on the web. Want to argue? There's a place for you. Same with every one of the adjectives above. Quiet. Unsafe. Smelly. There's an idea.

Searls talks about a marketing assignment for a computer company that had spent years in the dark making their latest product. They wanted to make a big splash at the launch. There was no way. No one was interested.  They weren't part of the conversation, and, crucially, the conversation couldn't be created in an instant. My friend Shannon Barnes clued me in to The Cluetrain Manifesto. He does a good job with all the media out there. Twitter. Facebook, I guess. Linkedin, certainly. What's that mean for you? Want to launch a new product or service? Make sure you're part of the conversation (that might even be too simple - be part of the arguments) in today's bazaar, or have a very tough time marketing your new product.

Levine, Rick, Christopher Locke, Doc Searls and David Weinberger. The Cluetrain Manifesto. The end of business as usual. Perseus Books. 2000.

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A Table of Contents is sequential. Following from the first chapter to the second to the third is the idea. Want to innovate? Forget about the Table of Contents. Focus instead on making connections throughout the book - throughout your company and your clientele - to make things new and worthwhile to customers.

Remember the pictures of bicyclists racing on those big-wheeled bicycles back in the last decades of the nine-teeth century? Bicycling has been a popular sport for a long time. The designs have changed, but it is a reasonable bet that you rode, if not owned, a bike when you were a kid. So, if we are all bicyclists, why did we mostly stop bicycling by our twentieth birthday? Shimano, after looking at the problem a bit, found out (Brown, 13). Bicycling is a cyclic business, something most marketing folks with expertise in the bike business will tell you. You are going to have down years. Shimano wasn't willing to accept that as a given, so they tried to do something about it. The first thing they should have done, if they followed the chapter-by-chapter scenario, was to go to their marketing department (or maybe their research and development department) and ask for a new flavor of bike for next year. They chose instead to look for connections in the biking community to see if they saw anything interesting.

Their classic assumption was that they should focus on the high end of the market. After all, they had thought all those years, you make more profits on higher priced parts and components. That makes for more profits, normally. Instead they looked down market. People stop bicycling when they hit twenty for a reason. If you've bicycled lately, you probably know why. The seats hurt. Leaning over isn't comfortable on your back. They found out a whole list of things folks hate about the experience (Brown, 14): people hate comparing themselves to lycra-clad sales clerks; the complexity - and cost -of owning a bike isn't conducive to a quick weekend ride; cycling on a clogged city street is dangerous to your health; maintaining a bike is a pain in and of itself; everyone owns a bike, but it has a flat tire, or a broken cable that has been broken and abandoned for years. Fix all that and you might increase sales. Thus was born (or re-born if you think about it) the coaster bike for weekend warriors who want a simple ride. Shimano makes components, so they had to convince manufacturers like Trek, Raleigh and Giant to follow along (Brown, 15). They didn't just make stuff. They designed campaigns for local bike shops to start with their local government. Safe place to ride. Safe equipment. Safe rules. Safe sold more bikes.

A simple concept if you think about it. Don't "complexify" your product to sell more product. Simplify it. Throw out parts. Make it easy to maintain. Make it a cool thing to do in your community. And -oh, this is cool too - sell more bikes. I didn't say it would be easy. It takes time to sell more stuff. But it is doable. Think about it.

Brown, Tim. Change by Design. How Design Thinking  Transforms Organizations and Inspires Innovation. Harper Business. 2009.

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Table of Contents: The Innovator's Guide to Growth.

Forward - Clayton M. Christensen

1. Precursors to Innovation - Core business in control, growth game plan, allocated resources

Part One. Identify Opportunities

2. Identifying Non-consumers

3. Identifying Overshot Customers

4. Identifying Jobs to Be Done

Part Two. Formulate and Shape Ideas

5. Developing Disruptive Ideas

6. Assessing a Strategy's Fit with a Pattern

Part Three. Build the Business

7. Mastering Emergent Strategies

8. Assembling and Managing Project Teams

Part Four. Build Capabilities

9. Organizing to Innovate

10. Innovation Metrics

11. Conclusion

Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield, Elizabeth J. Altman. The Innovator's Guide to Growth. Putting Disruptive Innovation to Work. Harvard Business Press. 2008.

Posted by jackmixner at 03:42 PM | Permalink

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First, the rise of Europe as a power in the 17th century. Then, the rise of the United States of America in the late 19th century. Now, the rise of all sorts of economies around the world, mainly China and Asia and including India (Florida Flight, 236). Florida thinks things aren't so dire. We have a chance if - if - we have a "multi-polar (Florida Flight, 237)" strategy. "Cultivate new industry sectors, prepare people for the future, and most of all remain an open society (Florida Flight, 237)."

For decades America attracted talent from all over the world. Things have changed. Folks can go a lot of places to educate themselves. China. India. Scandinavia. Canada. Australia. All will compete. Florida say we have a choice. Restore creativity and openness. Succeed.

Florida's next book focuses on where to live if you're going to succeed. He has maps and formulas that say who's on top, and who's on the way down. Well, we already knew that Flint has a problem. If you take the time, however, there is a message. Americans have done it all along: migrate for economic reasons. Our county has immigration and emigration according to economic conditions. Florida (City) calls this a strength and recommends migration at will for economic reasons. His premise is that education and where you went to school aren't as important as where you end up living. He posits that living in the big mega-cities of the future ensures success  because of the vibrancy of the larger community. The World is Flat got it wrong, Florida says. Having an Internet connection isn't enough. You have to end up in a vibrant community. Then he proceeds to map out all the communities and suggest good locations for you according to your psychographics. Luckily, I appear to have ended up in a good place for my psychographics. Of the five people from my Fortune 500 company who migrated to southern California when I did, two, maybe three, have returned. This wasn't right for me. Interesting how it works. Florida recommends a strategy of deciding where you end up, as community dictates economic success. OK, I'll buy that. I also will buy that life is more fun when there is a bit of serendipity involved. Arrive somewhere and look around. Is it a viable community for you, your business, or should you move on? Have a look, especially before you put down roots you can't transplant.

Florida misses a big point. The high schoolers I talk to are considering relocating, all right, but not to NYC or LA. They're considering points all over the world. I can't blame them and, if we plan now, we can keep them here. It'll take a re-focus of American schools on creativity, not just science, technology, engineering and math. An interesting mix, not just a technical one.

Florida, Richard. The Flight of the Creative Class. The New Global Competition for Talent. HarperCollins. 2005.

Florida, Richard. Who's Your City? How the Creative Economy is Making Where to Live the Most Important Decision of Your Life. Basic Books. 2008.

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Eight key points for building a Web 2.0 Community (Libert, 127):

• Lead from the rear. Provide direction and then stand back. Let the crowd lead.
• Know when to step in. You'll know when you have to take action. You just have to pay attention.
• Form a club of like-minded people. Start with, for instance, satisfied customers.
• Don't even try to hide. You're going to make errors. Admit them, fix them - and move on.
• It's never going to be perfect. The coders will continue to improve things. Editing may take forever. (Here's a hint: late in the process, take control of the editing. It has to end somewhere).
• Stir things up. A little bit of heat in a discussion makes the out-put stronger. Make sure you have a pretty good idea where folks stand.
• Here's my favorite: Always say "Thank you." Pretty easy. I am amazed about how many people forget this simple step.
• Don't encourage folks to pass through. Figure out how to engage them in what you are doing.

Final comments: if you are going to create a Web 2.0 project, don't let the crowd decide what your mission is. Decide, then invite folks to help out. Otherwise, you'll waste time you can't afford to waste.

Not only is it fashionable right now to build Web 2.0 communities, it just makes sense. Give it a try.

Libert, Barry and Jon Spector. We Are Smarter the Me. How to Unleash the Power of Crowds in Your Business. Wharton School Publishing. 2008.

Posted by jackmixner at 03:58 PM | Permalink

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My friend Peter Agarwal and I were discussing a new word (for me) that came from India: jugaad. Together we figured out that it meant "workaround." You've got a problem but no support whether from personnel or capital, what do you do? Work around the problem. You've acting in a jugaad manner. It ends up that there's a book being written about jugaad. Newest fad? Yes. Useful? Maybe it is intuitive and we all are doing it. Might be useful to think about and see if your team needs a five minute story about it.

Peter sent me this definition from Wikipedia:

Jugaad (Hindi: जुगाड़ Punjabi(gharuka)) are locally made motor vehicles that are used mostly in small villages as a means of low cost transportation in India. Jugaad literally means an arrangement or a work around, which have to be used because of lack of resources. This is a Hindi term also widely used by people speaking other Indian languages, and people of Indian origin around the world. The same term is still used for a type of vehicle, found in rural India. This vehicle is made by carpenters, by fitting a diesel engine on a cart.

"Jugaad" is also colloquial Hindi word that can mean an innovative fix,often pejoratively used for solutions that bend rules, or a resource that can be used as such or a person who can solve a vexatious issue. It is used as much for enterprising street mechanics as for political fixers. In essence, though it is a tribute to native genius, and lateral thinking.

Even though in everyday life, a Jugaad can be a solution, in context of Management, Jugaad is essentially a person who has some special capability or access to a resource or even access to another Jugaad that can be useful under extreme or special circumstances. A Jugaadu person is one who has numerous useful and cashable Jugaads. 

Jugaad is also mentioned by Jana. Need to learn how to develop products more cheaply? Maybe you need to do a little research on jugaad methods.

Posted by jackmixner at 01:46 PM | Permalink

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Three factoids about the up-coming battle for executive talent (Fernandez-Araoz, 72):

• Tata Consultancy Services calculates the ROI of each new hire, by university. The best schools' graduating classes get blanket offers from Tata.
• China is working to attract scientists from around the world. Singapore is shifting itself from a host for exec talent to a home. Subtle shift. Big meaning.
• A European-based company just moved its entire management team to Singapore so they could see things "from the other end of the telescope."

In the early eighties Japan was the big nemesis. Today the rest of Asia is filling that role. The battles aren't done yet, but they will effect your hiring process in subtle ways. Now is the time to start planning.

Fernandez-Araoz, Claudio. The Coming Fight for Executive Talent. BusinessWeek. 7 December 2009. 72. http://www.businessweek.com/magazine/content/09_49/b4158080830272.htm

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You have one meeting with the top brass in your biggest sales target. How do you prepare (Lay, 6)?

• Lodge a provocation. Come prepared with information that will unsettle the potential client. "If you don't do this, now, this will happen."
• Capture their reaction. No reaction? Leave. Concern? Push your case harder.
• Give war stories. Tell them what happened with another client when they did it your way.
• The close? A diagnostic. Charge for the diagnostic. If you do this right, expect them to find budget, even when there is no budget.

Who do you take to the meeting? This is not consultative selling. In consultative selling, you save your best sales people for late in the dialog. Regular folks found out what is going on. The sophisticated closers come in late, to close. Not any more. Take the best people early on. Arm them with the best information you've got, including war stories. Make the close earlier, even when you are not sure there is budget to do what you want to do.

Provocation is compelling, with new information (Lay, 5). You know they have angst. Address it. State your case and prove it with hard facts. Keep it executive level. Dealing with a manager? Go higher. Provoke. Lead. Force issues out.

Lay, Phillip, Todd Hewlin, and Geoffrey Moore. In a Downturn, Provoke Your Customers. The companies you serve are slashing their budgets-but you can still make the sale. Harvard Business Review. 2009.

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More than a year ago, we extolled the virtues of the Pure Digital Flip video camera (Mixner). Since then, the camera has sold millions of units in a down economy. The company has since sold to Cisco for $560 million. The Flip is still riding high. Sales still continue to be "off the charts," competitors are taking notice (and failing in their efforts), and the company is carefully adding features as costs come down (there is now a high definition version of the Flip for basically the same cost).

Capps calls products like the Flip "good enough" products (Capps, 118) because they give eighty percent of the functionality for twenty percent of the price, or, more succinctly, "twenty percent of the effort, features, or investment delivers eighty percent of the value to consumers" (Capps, 118). He lists a whole series of similar products and services (Capps, 113-118):

• AutoCAD has a simple, cheap competitor called SketchUp that costs $500 versus AutoCAD's $4,000.
• 90% of Google's ad revenue comes from text ads: no pictures, no celebrities.
• Netbooks have minimal storage, minimal processing power, no graphics capability and they are cheap, small and light. Shipments are up seven-fold in 2009.
• Kindle isn't high resolution or complex graphics driven. It is slim and has hundreds of book titles. Oh, and $310 million in sales its first year out.
• Net calls aren't so hot. They are cheap, however. Skype sales are up forty-two percent year-to-year.
• Conlin talks about the new simple in healthcare: Doctors who make house calls. A trip to the emergency room costs $1,500 on average; a home visit costs $150 (Conlin, 071). In this case the quality and the price is there. Not bad.
• Wildstrom talks about Microsoft's new free virus scrubber. They tried to sell it and failed, so they are giving it away. It is apparently as good as Symantec's offering, but simpler and not as "invasive" on a computer.
• Markoff talks about I.B.M.'s entry into the genome business with a targeted $1,000 report. Cheap, simple genomes will revolutionize medical diagnosis and treatment. Let's watch and see if I.B.M. is actually able to pull this off. Their personal computer decades ago was successful because they assigned the project to a remote team and left them alone. Let's hope they decide to do that again.

I am interested in one flaw in the discussion. I said it a year ago, and it still appears to be true: only small companies can create disruptive strategies that work. It's true until you begin to examine things a little bit closer (beyond the Microsoft and I.B.M. examples above). Two big-company examples:

• Kaiser Permanente has a new clinic in Hawaii staffed by two physicians who are able to do eighty percent of what any walk-in customer/patient might need. What they can't do, they refer across town to the Kaiser hospital with full services. No one needs to cart around x-rays or patient records: they're digital and accessible everywhere in the system (Capps, 118).
• It used to be that attack fighters were fast, heavily armed and devastating to the enemy. The only problem is they can't stay over a battle field for hours. Predator drones are the opposite (Capps, 117). They're light and minimally armed. They are also able to stay put to watch 24/7 (via video) what is going on over the hill or over the mountain range. They either fire their simple weaponry or call in the troops or the fighters.

Both the clinic and the drone were created by big companies (Kaiser and General Atomics). This deserves more study. Disruptive strategies work for small companies. They also work for big companies.

Capps, Robert. Why Lo-Fi High Tech Will Rule the World. Wired. November 2009. 111-118.

Conlin, Michelle. The Return of the House Call. BusinessWeek. 16 November 2009. 70. http://www.businessweek.com/magazine/content/09_46/b4155070821061.htm

Markoff, John. I.B.M. Joins Pursuit of $1,000 Personal Genome. New York Times. 5 October 2009. http://www.businessweek.com/magazine/content/09_46/b4155070821061.htm

Mixner, Jack. Disruptive Technology: Smaller Companies Have the Edge. http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html

Wildstron, Stephen H. Microsoft Steps Up Its War on Hackers. BusinessWeek. 21 September 2009. 76. http://www.businessweek.com/magazine/content/09_38/b4147076993366.htm

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With risk comes reward. Collaborate at a high level, increase reward. There is a hierarchy of partnerships worth considering, from transaction based partnerships, shared learning, customer interactions through service innovation, and, finally, end-to-end collaboration (Tyagi, 131). Collaborations can focus on increasing market position, reducing costs, increasing responsiveness, growth and reducing time to market (Tyagi, 131-131).

Why bother? OK, increased profits are one reason. They're a given. In this marketplace, however, they're not enough. A brutal word might be more apt: survival. Collaborate. Survive.

Tisch talks about collaborating to help lower income potential employees to succeed as hotel workers by applying Workforce Investment Board technologies during the welfare to work process a decade ago. It's still working for him (Tisch, 21). This was a pretty high level rish for him, as he was making investments in up-grading his hotels to four-stars (five-stars were too expensive and too risky. Four star hotels have the ambience of five but without, maybe, a quarter of the staff.) The federal/company collaboration worked. He suggested it to other hotels nation-wide.

Tisch, Jonathan M. and Karl Weber. Power of We. Succeeding Through Partnerships. John Wiley & Sons, Inc. 2004. 

Tyagi, Rajesh K. and Praveen Gupta. A Complete and Balanced Service Scorecard. Creating Value Through Sustained Performance Improvement. Pearson Education Inc. as FT Press. 2008.

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Win the race. Make the whole team famous - and more valuable. Lose team. Re-build. That was the process facing Lance Armstrong after his first win in the Tour de France. That, and the press's reaction to his win. They claimed he had cheated by using drugs to win his victory. Wasn't so, but what to do? New team? Yes. New PR? Yes. Same Lance.

The new team was necessary because all the good folks retreated to other teams. They got paid more, after all. You can't blame them. The PR? That was necessary because no one understood how Lance had won. When they couldn't see or understand his training regime, they balked (Wilcockson, 282) and cried "Foul!" Same Lance. Yes, again. After his bout with cancer, Armstrong came back fifteen pounds lighter. That allowed him to attack the hills better. Less weight, less to drag up the biggest mountains. His legs were the same, capable of long courses.

Armstrong utilized two new stragies. They were pretty obvious, but no one else was using them effectively: training and cadence. He rode all the legs of the next Tour all by himself, attacking them over and over (think about: he was attacking thirty mile hills over and over again - that's training) again until he understood how to win on them. Some of it was cadence: pedal in a lower gear, increase the number of revolutions, be more efficient (Wilcockson, 262) while, at the same time, attack going down the steepest slopes (Wilcockson, 122). All while training more than all the other pros.

So, you're trying to win at your market for a second time. Look at your team. Practice more on the hard parts (the hills) and the easy parts (the down hills). Change the cadence (speed things up - or slow them down). Might work for you.

Wilcockson, John. Lance. The Making of the World's Greatest Champion. Da Capo Press. 2009.

Posted by jackmixner at 11:33 AM | Permalink

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Long term strategy takes a back seat, usually, to profits next quarter. That's the illusion, maybe even the facts. There are contrary examples worth remembering, however.

American pharma companies which wanted to sell more in Japan after WW II gave away tuberculosis medicine.  River-blindedness in Africa was solved the same way. They build recognition in a new market with the hope that that recognition would turn into profits down the way. It's happening again.

Traditionally, pharma companies have two methods: fund hugely expensive research and development operations and profit on the few drugs that make it through the process, or, as in public health initiatives, subsidize the distribution of drugs into a population unable to fund the pharmaceutical purchase itself. Both can make sense. There is another way.

Martin tells of a researcher who did it a new way that was just as effective (Martin, 109). The researcher examined drugs - old ones - that were no longer manufactured because they weren't profitable. She found new uses for the old drugs, got them approved, and took them to market in poorer countries. She built the model before she found the drug or the target market. Old drug, new market, new manufacturer. With a little bit of thought, the process may have applications in other applications, as well, maybe even in your industry.

Martin, Roger. The Opposable Mind. How Successful Leaders Win Through Integrative Thinking. Harvard Business School Press. 2007.

Posted by jackmixner at 10:18 AM | Permalink

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Strategic "success can only be achieved in collaborations where all partners understand the fundamental role of creativity in the strategic plan. Business leaders who view design as little more that an aesthetic "fix" for dull and naive business models might temporarily look good in the media, but their moments in the spotlight are brief. It takes a day to create a fascinating "study," but years to create a new strategic business (Esslinger, 33)."

Esslinger's been involved in design at Apple (he owns frog design who advised on the Macintosh), designed the logo for Microsoft's Windows, made ship designs for Disney, and on and on.

He talks about the strategy of design. It's not just making things look good. It's about the whole company. Want a new airplane seat to save space and weight? Might want to look at the whole design of the interior of the airplane, and, while you're at it, the waiting area, the ticket taking area, and, oh yeah, the website. It's not a little thing. It's a big thing that effects the bottom line, big time.

Esslinger, Hartmut. A Fine Line. How design strategies are shaping the future of business. Jossey-Bass. 2009.

Posted by jackmixner at 09:08 AM | Permalink

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Denning's book has a premise: story telling is the way to make your company grow. Interesting concept. Sometimes useful. Here is a worksheet (truncated) on formulating a story about where you want to take your company (Denning, 99):

One piece of paper, three sections. First section: Where we've come from. Second section: Where you are now. Third section: Where you are heading. A line connects the sections. It ties the story together, "the journey of your life" (Denning, 99).

Now tell a short story (sixty seconds) about the first section. Review it for relevance. Tell it to other people. Check out if they understand it and have suggestions. Repeat for the next two sections. You now have a three minute speech to tell your team. Need a longer speech. Prepare more one minute stories. Add them to your speech.

Seem too simple? Try it. You don't want a complex formulation. You want simple stories, one after the other, to engage folks. They'll actually listen and engage. That's good.

Denning, Stephen. The Leader's Guide to Storytelling. Mastering the Art and Discipline of Business Narrative. Jossey-Bass. 2005.

Posted by jackmixner at 02:21 PM | Permalink

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Kawasaki was the marketing person involved in the launch of the Macintosh computer at Apple. His book is full of lists on how to do stuff related to new product launches. Lots of lists. Here's a list on why hiring market research consultants aren't necessarily useful all the time (Kawasaki, 115):

• You probably know - or will recognize - the subtleties that a trained researcher will miss.
• Because you don't focus on research per se, you'll notice more. Hang around places where buyers congregate. Look for what they need. Figure out how to supply it. Kawasaki talks about market research for auto show rooms. Without a Mom on the team, it would forget that Moms would love to have a place to put the kids while they wait for a car repair, pr better, buy a car.
• Sam Walton strolled through lots of competitor's stores. He'd notice it. By the next Monday, it was happening at WalMart. The Saturday management meeting made sure of that. Fast to market. More profits.
• Use folks with lots of different experiences on your market research teams. If they're all the same, you get fewer useful ideas. More ideas, more profits. Makes sense.

Kawasaki, Guy with Michele Moreno. Rules for Revolutionaries. The Capitalist Manifest for Creating and Marketing New Products and Services. HarperBusiness. 1999. 

Posted by jackmixner at 02:08 PM | Permalink

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You'll remember that business engineering got a lot of press in the nineties. I revisited Hammer's book to see just what is applicable today. Here's Hammer's part of a list of things to do to make sure your process works (Hammer, 201-213).

1. Don't fix the process - change it.
2. Focus on process, not trivialities. Look for big issues to address, or don't bother.
3. Focus on values and beliefs as part of your process. Ignore them? Ignore your employees who are watching very carefully for a reason not to help you.
4. We talked about trivialities. Minor results are the same. Big results, or don't try.
5. Don't give up. Well, that's obvious, but how many instances can you supply where a company you are involved with gave up too quickly?
6. Don't constrain the scope. Everything is on the table, or nothing.
7. Move through, around, by culture if you must. Don't get mired down.
8. Bottom up doesn't work. Without the support of senior management, you've got nothing.
9. Now here's one that I don't like so much: Don't assign someone who doesn't understand reengineering to lead the effort. Well, remember, this book was written by consultants. They want you to hire them, and no one else. Remember that when you decide to hire them or not.
10. Reengineering has to be at the top of the agenda. Focus on the most important items that are likely to get the biggest results.
11. One project at a time, and only one project at a time. Concentrate your efforts if you want to succeed.
12. Don't stop when folks resist change. Resistance just might be healthy indication of results just over the horizon.
13. Get things done. Don't take too long. Get going.

Hammer, Michael and James Champy. Reengineering the Corporation. A Manifest for Business Revolution. HarperBusiness. 1993.

Posted by jackmixner at 01:55 PM | Permalink

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There is Wills on Washington (Cincinnaticus). There is Wills on Lincoln (Lincoln at Gettysburg). Then there is Wills on everyone else, a treatise on leadership discussing thirty-two good, and not so good, leaders. In this case, Napoleon is the good. We're going to forget about the bad and focus on the good of Napoleon.

Six key points that resonate with leaders today (Wills, 89-92):

1. Forget about victory for its own sake. Winning the battle, winning a town, without winning the war is useless waste of energy. Pick your battles.
2. "Attack in head-long lunges (Wills, 90)." Small groups, left to fight alone, lose energy and become fearful. Concentrate your legions. Give them drums and noise makers. Scare the enemy so they run before they engage.
3. "Fight toward supplies (Wills, 91)." Napoleon didn't travel with a lot of supplies. Ammunition, probably. Food, maybe not. If the troops wanted to eat, they had to fight their way to the food, which was always on the other side of the enemy.
4. "Fight only with preponderant force on one's own side (Wills, 91)." Mass your troops. Wait until your forces out-numbered the enemy. Split the enemy forces and fight them one at a time, never all at once. That meant he couldn't allow them to concentrate.
5. Here's one I like: simplify. Fight head on. Don't go around, forget about ambushes, and all the convoluted battle plans everyone else had. Attach. Head on. Now.
6. Finally, keep moving. If the enemy was fixed in a town, ready to sit it out, entrenched, find another army to fight. Keep moving. Don't lay siege, especially for a long time. Abandon, wait for the enemy to emerge, engage. Don't wait around if you can help it. Remember, if you are waiting around, you aren't fighting toward food. You're starving. Starving isn't good, especially if you didn't have supply trains coming.

Wills talks about Napoleon's first real campaign in Italy. He defeated two armies and was on his way to Vienna, having beat two other French armies to the punch. That wasn't supposed to happen, especially from an up-start like him. At the last minute, Napoleon stopped. He didn't attack Vienna. He just didn't have enough strength. Everyone at the time said he failed. Well, maybe so. Actually, if you look at it, he showed good decision making ability. At Vienna, he would have lost. Why fight a battle you're going to lose? Napoleon knew the answer to that one.

Wills, Garry. Certain Trumpets. The Call of Leaders. Simon & Schuster. 1994.

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It's pretty obvious that leaders have to have followers. Since we all watch CEOs in action, knowing when they are going to fail might be a good thing to know, yes? I think so. Wills takes the time to detail the leadership styles of thirty-two different leaders, half of them successful leaders, the others not so effective. Some of the leaders failed because they couldn't inspire any one to follow them. That's pretty obvious to see. Usually, corrupt folks are found out eventually. Not a very good leadership style. (OK, Madoff took a little bit longer, I'll warrant. He's an outlier, wouldn't you agree?)  What about the rest? They couldn't find followers. OK. Why?

There seems to be one effective predictor of failed leadership, namely, leaders and followers without a goal that they all agree on. Now, Madoff's staffers must have been following along, at least to some extent. Why they did it isn't clear. If they profited, why aren't they in jail, you ask? My prediction: they will be eventually. That's still an outlier example. Most CEOs, when they fail, fail because folks are not helping to create their company goals. The CEOs have followers, yes. But the followers aren't buying into - or, don't understand - the results the CEO needs from them.

Three key things to remember: There has to be a leader. There have to be followers. They have to have a common goal that they all agree to.

We could stop right here and call this the end of the lecture. Not so long ago we talked about failure in corporations (Mixner). We followed Block's description of failure. He said that effective leaders are stewards, not dictators. Stewards follow more democratic principles than dictators. As a result, because they allow their teams to make decisions - even about values and vision, usually high level tasks - on their own, their teams buy in to what they do and perform at a higher level, usually at much higher levels. That's good for everyone.

When we mix Wills (got to have a leader, followers and a goal) with Block (the best thing is to let the team make up their own values and actions with a little very high level training on how to do those things) we've got something very valuable. Let's combine terms, sort of like algebra: steward leaders, enlightened followers, high level goals that they create together and that they all buy in to. Now we're getting somewhere. Think about it.

Mixner, Jack. Democratic Strategy. References Block's Stewardship. http://mixnerstrategy.com/blog/2009/09/post_1.html 

Wills, Garry. Certain Trumpets. The Call of Leaders. Simon & Schuster. 1994.

Posted by jackmixner at 04:21 PM | Permalink

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I took a graduate class in comparative literature along the way. The idea was to understand how to evaluate a book quickly not only for its conciseness, but also for its applicability. We'd ask ourselves who the narrator was in important scenes, how knowledgeable that narrator was, and, further, what kind of axe that narrator had to grind. I find myself doing the same thing with strategic plans.

In literature, they examine the narrator's point of view. In strategic planning, we do the same thing. The omniscient point of view (the narrator knows everything, is all knowing) is pretty obvious sometimes, especially when the CEO dictated the plan without any input from the team. Objective point of view (tell what happens without stating anything else) (Literature) loses the feeling of it all. When you are discussing values, for instance, forgetting about feelings may not be a very good choice. Whether the narrator participates in the story either directly (first person) or indirectly (third person point of view) sometimes shows through.

Having an omniscient CEO isn't all bad, especially when you're going through tough times. It is dangerous, however, in the situation where all creativity of the team at all levels is wrung out of the system. Sometimes, sales people - and loading dock people, for that matter - know what is best for the organization. Not allowing them to make decisions on their own isn't a very good idea, even when they are making strategic decisions.

When you think about it, while we live in a democracy, our businesses aren't very democratic. Leaders sometimes stay leaders for many, many years. In a democracy, elections and term restriction limit the amount of damage any one person can do. In a business, that isn't always the case. When a CEO is saying, "I know what is right for the organization," and doesn't brook any real comment about what she/he is saying, watch out. Dictatorships get things done, yes. Sometimes, however, they forget to do the important things, like motivate employees to help the company succeed.

Literary Analysis Guide. Point of View. http://www.ci.maryville.tn.us/mhs/studyskills/CompGuide/LitAnaPOV.htm 

Literature. Exploring Point of View. Types of Point of View. http://www.learner.org/interactives/literature/read/pov2.html

Posted by jackmixner at 10:59 AM | Permalink

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My good friend George Morrisey, a professional consultant if there ever was one, suggested that I read the Zimmerman/Tregoe books on strategy back when I was first setting up my consulting practice. George was interested in the Tregoe explanation of Driving Force and how it applied to corporate strategy. The idea was to identify the driving force of an organization and, with it, the time frame for its application. Combine the force and a time frame into a quantifiable strategy. Critical issues were identified and planned for if there were supporting strategies that made sense.

Recently, I found the Zimmerman book in the library. It is interesting because it talks about culture and how to amplify its effects throughout the organization. My first impression of this discussion was that the strategy of spending a lot of time identifying the culture and then trying to communicate senior management's perception of values throughout the organization was just that - a strategy that took too much time to implement in this fast changing environment. That's my assumption, especially when it is amplified by Block's book on stewardship. Block, Tregoe and Zimmerman are all trying to effect positive change at an organization. Block uses management lightly, expecting them not to dictate a value system, but to open a dialog with customers and employees to deteremine what values and strategies are important to each part of the organization. No one grinds on results, because each person in the organization knows the metrics that are important to them and their individual customers and operates to them. Tregoe and Zimmerman are more analytical, spending large quantities of energy in examining the current belief system in an organization (Zimmerman, 219) and trying to effect its change to make it jive with management's point of view.

Zimmerman's team was involved in the turn-around at Harley Davidson in the early eighties. There is an entire chapter on what happened there. Basically, they realized that their bikes were over-priced and marginally shoddy, with, however, wonderful brand recognition. Their job was to fix the shoddiness and lower the price, something they were able to help the Harley team accomplish. Everyone was happy. Good story. Harley hadn't applied quality techniques yet; lean manufacturing was something that they couldn't even fathom early on. But they had craftsmen who cared about the bikes they produced. That was enough. Engaging teams of craftsmen to resolve they problems was enough to "kick-start" Harley for another twenty year run of success.

I feel like I have to say that I like the Zimmerman method better than the Block method, but I can't. I see value in both their points-of-view. Stewardship - letting the team figure things out, and do them without explicit direction - and beliefs set from above that flow throughout the organization are, in the end, be very similar. They feel different, but they're not. Interesting.

Block, Peter. Stewardship. Choosing Service Over Self-Interest. Berrett-Koehler Publishers. 1993.

Tregoe, Benjamin B. and John W. Zimmerman. Top Management Strategy. What It Is and How to Make It Work. Quickstone. 1980.  

Zimmerman, John Sr. with Benjamin B. Tregoe. The Culture of Success. Building a Sustained Competitive Advantage by Living Your Corporate Beliefs. McGraw-Hill. 1997.

Posted by jackmixner at 04:16 PM | Permalink

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Those of you have been following what I write will be aware that I am interested in Steven Jobs management techniques - or lack thereof - at Apple. After leaving Apple the first time in the mid-eighties, Jobs started a new computer firm, Next. He had money. He had time. He was mad. A good combination for starting a tech company. It didn't really work, unfortunately, and Jobs ended up selling some of the Next operating system to Apple in the late nineties, presaging his return as CEO. We know all that. I wanted to know about Jobs's time at Pixar. Did he act the same way? Was he as pushy? Or - and this is what really happened - did he just sign checks and leave folks alone because he couldn't really influence the art at Pixar, as everyone was better than him at animation. That's basically how it worked. Jobs ended up investing $55 million ($5 million to buy the company from Lucas Film (Price, 7), and $50 million over ten years to keep the doors open). Ultimately, his job was to stay out of the way, let the management in place run things, and, importantly, arrange for distribution agreements of Pixar animations through Disney, and, finally, the sale of the whole company to Disney. Along the way, Jobs was part of the reason that Eisner ended up leaving Disney, to be replaced by the more affable Iger, who Jobs could get along with, and, who, with Jobs nudging, bought Pixar for stock worth at that time $7.4 billion. Not a bad performance for Jobs. Patience paid off.

Price, David A. The Pixar Touch. The Making of a Company. Alfred A.Knopf. 2008.

Posted by jackmixner at 02:40 PM | Permalink

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A while back we talked about Machiavelli and John Bogle (Mixner).

Machiavelli says, basically, it is all right to break the rules, especially if you do so to reach your ends. Bogle says that the ends aren't your ends, they're society's. Character and courage don't count for much if they are all about you, instead of us.

Machiavelli was writing way back when, Bogle, last year. Bogle was trying to make sense of the melt-down in the financial markets over the last decade. Machiavelli was selling his services, his knowledge. Block adds words to the discussion that are worth reviewing here.

Democracy is all about people having a say in their future, capitalism not so much. Owners and managers - bosses - exert special powers in the workforce that vary from the democratic ideal. Bosses aren't elected to terms that are finite. Do it right, and a boss can hold on for a very long time. We assume that as we enter the plant gate, it is all right to leave some of your decision making ability behind. Bosses indeed do know better, and we'd better realize it - or else. No, it is not so blatant, but when was the last time you spoke what you were really thinking in a weekly review session, unless by chance, you were the boss - the manager - in the meeting?

Block has thought through a lot of this. His point of view is worth sharing. Normally, planning for the future of an organization takes place at the highest levels. A team - and, usually it is a team - of senior managers joins together to consider the values of the organization, its mission, its vision, objectives for the next years, and maybe even specific strategies for the organization to follow. The assumption is that the plan will be carefully articulated, shared with the organization, and, here things start to get sticky, implemented at all levels of the organization.

You know as well as I do that implementation is where all strategic plans begin to fail. Great plan, poor implementation. We see it all the time. We didn't have time to implement the plan. Customers were asking for stuff, so we didn't have time. Something like that, right? So, do you pitch the planning process and give up? Maybe not. But what to do?

Modify the process. Don't be dictatorial. Let the team determine what is important to them and their work. "Values spring from the top," you say. Maybe. Forcing the entire organization to use a time-clock may not make sense. Forcing the entire organization to follow edicts from headquarters may not make sense. We all say, "We knew that." Since you knew that already, what were you doing? You were defining some of the company's values locally, that's what. "You're caring for a sick child today. I'll cover for you." The work will get done. Control shifts from HR to individuals in their own work units. But "HR has to control," you say. Maybe not. Nor does a boss have to control if she does things right. Set parameters, yes. What customers, broadly, do we target? OK. Clarity, then is a management role (Block, 32). Value-added ways to address a market. Again, a management role (Block, 32). But the how and whys? They get answered not by senior management, but by the folks who know the answers. Reward goes down in the organization as it is no longer the carrot it once was. Punishment goes down too. The team rewards and punishes, not management. Direction goes down; clarity goes up.

So, who keeps their job in this new environment? People who understand that they are not subordinate, but equals, that's who. Want someone to protect you and your job? Not going to happen. Your responsibility is making sure a team wants you enough that they ask you to play in their game. That's not management's job. It's your job. Eventually, we'll need fewer managers, won't we? The teams will manage themselves. Some managers will realize that managing, even coaching, is an empty title. They had better be doing some work, not just managing. "But the reports due at the end of the month," you say. Is anyone reading them, anyway? Isn't it better to interact with customers, rather than managers, anyway? That's your job. That's management's job, as well.

Who leaves the organization? People who don't hold up their end of the bargain. Not interfacing with customers? Maybe it's time to leave. Don't know who your customer is? Maybe it is time to leave. Or, more properly, maybe it's time to find out, and do something about it.

Block, Peter. Stewardship. Choosing Service Over Self-Interest. Berrett-Koehler Publishers. 1993.

Bogle, John C. Enough. True Measures of Money, Business, and Life. John Wiley & Sons, Inc. 2009.  

Mixner, Jack. The Virtuous Leader. http://mixnerstrategy.com/blog/2009/01/the_virtuous_leader.html

Posted by jackmixner at 08:04 AM | Permalink

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Usually I am lucky. I visit the library about weekly to get another armful of books. I usually don't have to go farther than the new books shelf to find things that interest me. Lately, things haven't been so rosy. People aren't donating as many cool books, and, seemingly at the same time, the library isn't adding new, interesting books at the old rate. So, on my last trip, I had to visit the regular shelves to find new reading.

I lucked out. Of the four books I found, Hall's is the most creative. And that's what it is all about, how to spur creativity at your company. OK, that's not really what it is all about. It is really about how you can hire Hall and his team to spur creativity at your company. They do a good job, so that's OK by me.

Now, the biggest thing I learned from Hall is that the first step is not to take a first step. Silliness makes more sense than structure. He has all sorts of games and processes meant to foster good ideas for new products and new marketplaces. That's all good. There's one list I liked a lot. Since silliness is the root of all new product ideas, Hall suggests a series of silly questions to help out. Here are three of them. You'll have to get the book to read the rest. Remember, it is in the library. The three questions (Hall, 132): 

• What would be the simple solution?
• What would contradict history?
• What would be the most outrageous solution?

Consider: Hall is the sort of guy who, before he takes your gig, will visit a store where they sell your stuff (or your competitor's) and just watch people buying things on the same aisle as your stuff. He'll ask questions, maybe, but it seems that early on, he just watches. Simple enough. You could do it. But that is the point. You could do it, but you never will. Do it. Talk to people. Squeeze the Charmin (Hall worked for P&G, so maybe he really did squeeze the Charmin). Look around. Be creative. Take the day off and just watch. Don't act official. Be unofficial. Dream stuff up. Let it brew a while, then actually do something about your crazy ideas. A thing could happen: you give up on your crazy ideas. In the light of day, back at the office, they look trite, foolish. Well, remember Hall's admonition. Try crazy stuff. It works, I'll bet. At a minimum, it sure beats sitting around the office. More fun, too.

Hall, Doug with David Wecker. Jump Start Your Brain. Warner Books, Inc. 1995.

Posted by jackmixner at 01:42 PM | Permalink

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Hack: as a noun, a "project undertaken or a product built not solely to fulfill some constructive goal, but with some wild pleasure taken in mere involvement (Levy, 23)." 

The hacker ethic:

• "Access to computers-and anything which might teach you something about the way the world works-should be unlimited and total. Always yield to the Hands-On Imperative (Levy, 40)!"
• "All information should be free (Levy, 40)."
• "Mistrust Authority-Promote Decentralization (Levy, 41)."
• "Hackers should be judged by their hacking, not bogus criteria such as degrees, age, race, or position (Levy, 43)."
• "You can create art and beauty on a computer (Levy, 43)."
• "Computers can change your life for the better (Levy, 45)."

Levy, Steven. Hackers. Heroes of the Computer Revolution. Penguin Books. 1984. 1994.

Posted by jackmixner at 03:57 PM | Permalink

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Bill Gates, the philanthropist, is optimistic about world health (Coy, 46). Others say "people are no longer taking crazy, overleveraged risks, so they're less vulnerable to blowing up again.... For those reasons instability leads inevitably to stability (Coy quoting Peter L. Bernstein in Harvard Business Review, 44)."

So, has the pendulum started to swing in the other direction? Are the bad times over? No one is sure, so you have to be careful. Even more, even if things start to swing, no one knows how long this cycle will last, or, importantly, how high it will go. We'll just have to wait and see. Opportunities will present themselves. Our job is to be ready to take advantage of them when they appear. Have the right people on board. Have a plan. Be ready to implement quickly. Nothing has changed.

Coy, Peter. The Case for Optimism. BusinessWeek. 24 & 31 August 2009. 041. http://www.businessweek.com/magazine/content/09_34/b4144040812940.htm

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When they first tried to sell Jell-O, no one would buy it because it was new and made of "interesting" ingredients. When it was made up into the final product, it was sweet, tasty, and everyone who tried it liked it. But how to get people to try it, that was the question. They finally figured out how to get things started. Since they couldn't give out free samples door-to-door because of laws preventing salespeople to do such things, they gave out a free recipe book that drove folks to buy the product at the store in the center of town. Sales finally took off (Anderson).

This evolved into such things as giving away a razor so folks would buy razor blades to fit the razor - forever. Every MBA knows this as the "razors-and-blades" strategy. It works.

HP has done this for years with their ink jet printers. They sell the printer for give-away prices. Then they price the ink high. People buy.

Looks like HP's strategy is being challenged by the new cheapness of the American buying public, and businesses. Printing and imaging volumes are down twenty percent (Vance) from last year. So, is this the end for the HP printer business? HP is responding with tie-ins with MySpace and other web media. Something's got to give, somewhere. The ink strategy for HP has worked for a long time. It is going to take some effort to make it continue. Maybe focusing on related markets would work, or, more risky, new products into new markets. Let's keep watching.

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.  

Vance, Ashlee. H.P. Tries to Keep the Ink Flowing. New York Times. 19 August 2009. http://www.nytimes.com/2009/08/19/technology/companies/19hewlett.html?_r=1&ref=technology

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The first complete human genome cost $500,000,000 to decipher in 2003.

The seventh complete human genome cost $50,000.

The difference? The first one used 1975 technology and lots of time (Wade). The second one used current technology (the Heliscope Single Molecule Sequencer).  

Within five years, a complete genome will probably cost $1,000. When it hits that number, genome sequencing will hit the main stream. Revenues from sequencing will sky-rocket.

This is disruptive technology at its best. It's cheaper, simpler, faster, unique, and, most of all, hopefully, useful.

There are problems with the technology. It is not clear how useful knowing your genome will be at curing diseases. Diseases that were hoped to have simple genomic identifiers turn out to have more variables than expected. So, ultimate applications and usefulness will likely lag the availability of a decoded genome. Eventually, however, genomes are going to be very useful. We'll all want one.

Nicely disruptive.

Mixner, Jack. Disruptive Strategy: Small Companies Have the Edge. 23 September 2008.  http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html 

Wade, Nicholas. Cost of Decoding a Genome Is Lowered. New York Times. 10 August 2009. http://www.nytimes.com/2009/08/11/science/11gene.html?_r=1&hp

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Steven Jobs tried to be the good guy when it came to music piracy. Initially, you could buy an iPod, copy your CDs onto your Mac, and, then, download them to your iPod. You could also spend quite a bit of time putting stolen songs on your iPod. Jobs wanted something better. That something was iTunes.

Long story short, Jobs convinced the record labels to go along with his plan and ended up with eighty-five per-cent of the music on-line business very quickly. Oh, and by the way, the music labels made a lot of money, as well. After all, they got the bulk of the iTunes cash flow. Ultimately, the labels wanted more. They actually had the nerve to suggest that Apple should give them some of the profits from the iPod itself. Wrong move. Bad strategy. No one listened anyway. iTunes launched in April, 2003 (Levy, 010). By October, the Windows iTunes store was up and running. Apple had a home-run on its hands.

Fast forward to 2009. iTunes is still dominant. The labels have tried a couple times to raise prices and actually succeeded a bit. Not really surprising.

Through all this, everyone realized that there was a paradigm shift going on in the music business. I don't think things are done yet. When you read Anderson's Free and consider the model a bit, you come to realize that there is probably a way to distribute music that is free to the ultimate user and, still, very profitable to the labels - and Apple. I predict that that is the next step. It'll be some sort of advertising process or a gift to start the sale of something else, but my prediction still holds. Music will be free - legally - soon. We'll see.

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.

Levy, Steven. The Perfect Thing. How the iPod Shuffles Commerce, Culture, and Coolness. Simon & Schuster. 2006.

Posted by jackmixner at 01:10 PM | Permalink

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Rich and Gumpert created - in 1985 - one of the best books on creating a business plan to raise money. Here's a simple summary of a business plan outline (Rich, 33):

The Company: Current Status, Objectives, Management, Management Objectives

Markets and Competition: Present Market, User Benefit, Markets Near and Long Term, Summary of project market, Competition, Projected sales and market share, Sales strategy to reach goals.

The Products: Theory of operation, Applications, Performance data, Economics and advantages, Present status, Scale-up requirements, Patents

Selling: Current, near-term and long-term selling method, Sales support, Custom engineering requirements, Pricing and Warranties

Manufacturing: Facilities, Make/buy decisions, Purchasing issues, Secondary sourcing, Engineering support, Quality, Staffing

Financial Data: Financial history, Expansion requirements and budgets, Financial projections, Current shareholders and their shares

Investment: Use of proceeds, Description of offering,

Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.

Posted by jackmixner at 09:09 AM | Permalink

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Steve Jobs is back at Apple for the third time (once he battled Scully lost, and left; then, his illness last fall forced him out for six months or so this year). We've talked about Jobs return in 1997 (Mixner). His main job in 1997 was to refocus Apple on a few products, a few suppliers, and, mainly, success. It worked. Actually, that was a strategy similar to the one he followed in the early eightiesduring the Macintosh launch.

Let's remember the landscape. The Apple II had been a huge success for Apple, making Jobs a billionaire before he was thirty. The only problem was the Apple board thought Jobs was too abrasive for management and slowly forced him out of the Lisa project, the next new computer in the pipeline after the Apple II.

Jeff Raskin actually did the first concept work for the Macintosh. The idea was to fix the Lisa's mistakes of being too overblown and too over-priced (Levy, 109). He kept his head down as he sketched out what the Macintosh was and how it would work. Unfortunately, he didn't keep his head down far enough, as Job's figured out what was going on - something really good, basically - and forced his way in.

Jobs added a elegance to the Mac that we all still appreciate. His practice there is directly applied to the iPod and the iPhone. Even though it looked cool, the Mac was nearly a failure. It was priced too high (blame that on Scully, who added $500 just before launch (Levy, 180)). It didn't have enough memory. The floppies basically were toys, incapable of making back-ups easily. There were no expansion slots. Jobs hated expansion slots. All major flaws. However, even then, there Mac-o-philes who would take basically anything Apple created because it was cool and elegant (and the software, what there was of it, was truly cool).

So, why bring up Jobs again? His management style left a lot to be desired, or so you might say. However, his employees were honored to work for him. They knew they were changing the world even if they weren't treated so well. They got the product out the door - they actually shipped, something that was rare in many of the design heavy firms of the day like Xerox.

Ultimately, the Mac was reconfigured and became a wildly successful product. The delays left chinks in the Apple armor that MicroSoft and IBM happily took advantage. So Jobs did things wrong, too.

There's a yin and a yang here, with both sides of the story evident. We like to say that work today is all about teams and working together. OK, that's fair. But let's remember that there is also a role for inspired leadership that borders on dictatorship. Sometimes it actually works. It has worked at Apple three or four times now. Not a bad result.

Levy, Steven. Insanely Great. The Life and Times of Macintosh, the Computer That Changed Everything. Viking. 1994.

Mixner, Jack. Strategic Realignment. http://mixnerstrategy.com/blog/2008/10/strategic_realignment.html

Posted by jackmixner at 06:34 PM | Permalink

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Chronology of "Information wants to be free."

1984: "All information should be free" (Anderson, 94, and Levy).

1984: "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other (Anderson, 96, quoting Stewart Brand)."

2009: "Commodity information (everyone gets the same version) wants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive (Anderson, 97)."

2009: "Abundant information wants to be free. Scarce information wants to be expensive (Anderson, 97)."

Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.

Levy, Steven. Hackers: Heroes of the Computer Revolution. Penguin Books. 1984.

Posted by jackmixner at 09:29 AM | Permalink

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Posted by jackmixner at 07:07 AM | Permalink

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Class sizes are growing. Teachers have too many students. National testing forces school districts to focus on scores in math and reading to the detriment of courses like art and Greek. Focus on what you are graded on and forget the rest seems to be their mantra. Since high grades support more money for education, you can't blame them. There must be another way to get a good education, however.

Larger class sizes and concentration of students in specific courses allows for computerization in grading and teaching. Where teachers (and their unions) have allowed computers to grow in influence, computers are now teaching classes. Their class plans are the same in teacher led classes and computer taught classes. The tests are the same. Theoretically, the results are the same. That's a concentration strategy. Concentrate on what you're already doing. Forget the fringe classes like Greek and art.

This concentration yields two strategies for a disruptive company. The first is in tutoring all those students who don't get it the first time around in their teacher (or compute) led classes. Tutoring schemas in on the web can be modified to mimic the learning style of a student who doesn't keep up in a regular class. They can work at the pace of the student, not the state-approved syllabus. The second opportunity for the disruptive company is teaching all the classes regular instruction can't focus on, like the art and Greek we've been talking about. A student-paced computer can teach all sorts of topics that regular classes can't, at a pace the ensures that the student really learns. The computer, organized through the web, can find a human tutor who will make sure the student is getting what she needs. Maybe a Japanese high school student who wants to practice his English pronunciation but is good at Algebra II tutors an American student who has fallen behind in Algebra.  Everybody wins, including the company that is paid to put it all together.

Now, where's the sale get made? It's not the district - it's too worried about the bigger classes that drive the No Student Left Behind testing. It might be an Algebra teacher, a counselor, a parent, or another student. A referral is made, outside the normal scheme of things, and another student begins to really understand Algebra. Everyone wins. If you own a software company, how do you market? You don't market to the union or the curriculum committee. You market to referrers, to users groups, to tutoring organizations, any group that looks at individual performance and hopes for better. This isn't a hope strategy, however. It's the growth strategy for the future for any company that wants to sell more software to schools (Christensen, 38).

Christensen, Clayton M. Disrupting Class. How Disruptive Innovation Will Change the Way the World Learns. McGrawHill. 2008.

Posted by jackmixner at 05:41 PM | Permalink

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Some generic definitions of terms Christensen uses in many of his texts:

Solution Shop: "businesses that are structured to diagnose and solve unstructured problems. Examples are consulting firms, advertising agencies, R&D organizations and some law firms" (Christensen, xxiv). In medicine, these shops provide a diagnosis.

Value-adding Process Businesses: "take incomplete or broken things and then transform them into more complete outputs of higher value" (Christensen, xxv). Examples are in retailing, restaurants, and manufacturing. In medicine, the treatment after the diagnosis.

Facilitated Networks: "enterprises which people exchange things with one another" (Christensen). Mutual insurance companies are an example.

A "cascade" of disruptive strategies in health care might flow from the expensive general hospital (each with its Solution Shops, Value-adding Processes and funding from Facilitated Networks). It would cascade through Outpatients clinics, Doctors' offices, and, finally, patients' homes.

So what's the diruption? General hospitals are by their very nature, general. The more specific the treatment across the cascade, the more possibilities for lowering the complexity of the treatment and the clinicians, and thus, hopefully, the price of the interaction. Colonoscopies in a general hospital are expensive. While we don't expect to see them taking place in private homes, they are perfect processes to take place in a clinic set up to do just colonoscopies. The treatment speeds up, the price goes down, in theory.

As solution shops and clinics grow, the need for general hospitals will fall. Foreseeable problems include the large political clout of the hospitals which will resist clinics in retail stores and treatment shops set up to treat only one malady.

OK, so now you're saying, "We know all this. Where is the disruption?" Let's look at reimbursement. A simple statement might be that Doctors may do anything to treat a patient that they think makes sense. That's true, they may. But, if they want to get paid for their treatment, they have to follow very specific methodologies and approved treatments. If something falls outside what is approved, there are good odds they won't get paid for their efforts. So, obviously, doctors stay within the approved norms. Follow that by the fact that patients are shielded from the real costs associated with treatments, as their insurance, with its low co-pay, doesn't let them feel the pain as it were. An HSA is different. Set it up properly in a situation where an individual pays the full amount of an office visit from her HSA and suddenly she's upset about shoddy or unneeded service. Simpler solutions like a cheaper but just as successful medically clinic visit start to make sense.

The debate has just started. There is an interesting role for strategy in health care. Let's hope the health  care system is listening.

Christensen, Clayton M., Jerome H. Grossman, M.D. & Jason Hwang, M.D. The Innovators Prescription. A Disruptive Solution for Health Care. McGrawHill. 2009.

Posted by jackmixner at 03:48 PM | Permalink

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Three people are sitting on the marble steps outside a conference (Womack, 3). The recognize that a business problem, a big business problem, isn't getting the attention it deserves. They resolve to examine the problem and report on it. Simple enough so far. What happened next was what was interesting. Rather than begin their research, they approached the subjects of their interest and asked them to fund their endeavor. They didn't ask for a pittance; they asked for five million dollars (in 1984 dollars) and said the work would take more than three years. All their targets bought. My suspicion is that they actually didn't ask for enough in the first place. Nice story so far. Who was the target?

The target was the automotive industry. In 1984 or so, like most other sensible people, the conference attendees realized that American auto manufacturers had a problem. The problem was, however, that the manufacturers either couldn't - or wouldn't - take action to fix their problems. They needed a nudge. Thus the book.

Their final tome came out in 1990. It summarized lots of scholarly articles that had come before. They had visited with all the major auto manufacturers and visited maybe not all, but nearly all, the manufacturing sites in the world. They really knew what the problems were. They sketched the history of automobile manufacturing from a craft industry, through Ford's mass manufacturing, through the Japanese introduction of just-in-time manufacturing, and its final iteration, lean manufacturing. They even keyed in on the atmospheric warming effects of all the carbon spewed by millions of car's exhaust. Everything was there.

Some people listened. Ford got on board early in the eighties and began and evolution toward lean manufacturing. GM took a lot longer. Basically, however, no one listened. This wasn't a research problem, nor was it a writing or editing problem. The book is great. I'll bet however, that only ten-thousand or so volumes were actually published. Everyone yawned and did, essentially, nothing. Who's to blame. Why blame, you say? Think of the lost investments in the automotive business, and the growth of the Japanese industry.

So, all this boils down to a marketing problem. It's easy to say "The authors should have made a bigger stink." After all, these were MIT professors, the best in the automotive business. No one listened. Were they to blame? Nope they weren't, not really.

Even though the book pointed out all the problems in the automotive industry, it forgot to realize that, really, there was nothing the industry could to for itself. Everyone was so set in their ways and that real change was very hard to accomplish. Ford started and the others followed along, but, basically, they were far too late. The automobile industry had "sailed" without them - to Japan.

So, who could have solved the American auto industry's problems? Entrepreneurs, that's who. The auto makers were following a "sustain" strategy of making incremental changes each year without ever rocking the boat with real innovation. After all, everyone knew that the unions and suppliers, not to mention the auto manufacturers themselves, would never make substantive change. Entrepreneurs missed the opportunity of the century when they didn't step in with a disruptive strategy the focused, initially, on a simple car that was easy to manufacture, that the customer wanted, and, most importantly, was profitable after a few short years. No one did anything. OK, there was some action in the time period. The Delorean was a great car but it wasn't enough to stem the tide of the migration of a great industry from America to Japan. The Japanese had been disruptive for years, what with their cheap, simple cars early on, and later with their highly sophisticated offerings made in a lean way that the Americans didn't catch on to - or ignored - for decades.

Who's to blame for all this? Well, it's not really the Big Three's fault. They did what any other manufacturer would do. They just made little changes each year and ignored what was going on around them. The real problem, or shall we call it opportunity, was for entrepreneurs to take advantage and create a simple, American-made automobile using the lean manufacturing system. We'll see how this all shakes out, obviously, as time goes on. For now, there still are opportunities available (that the Japanese, Chinese, et al are taking advantage of in such sectors as hybrid and electric autos), but American entrepreneurs have to move quickly. Now. The opportunity is there.

Womack, James P., Daniel T. Jones and Daniel Roos. The Machine That Changed the World. Based On the Massachusetts Institute of Technology 5-Million-Dollar Study On the Future of the Automobile. Rawson Associates. 1990.

Posted by jackmixner at 10:38 AM | Permalink

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Weiss lists nine roles of a consultant (Weiss, 17) organized along two planes, Transfer of Skills and Resolution of Issue. They are: Analyst, Commentator, Interventionist (along the Skills plane) and Analyst, Counselor and Independent Expert (on the Issues plane). Combining the two, especially in the seasoned consultant, are Instructor, Proactive Advisor, Exemplar, and Collaborator.

Using the old fishing or teaching someone to fish analogy, Collaborator combines the best of both roles in that the consultant focuses not only on actually doing something for the client (fishing, for instance) or teaching how to do something so the consultant doesn't have to hang around forever (teaching to fish, according to the analogy. Analyzing, the simplest of all the consulting skills is well applied, but only as a beginning of an engagement.

So, in choosing a consultant, what do you do? Look first at what you need from the consultant, then hire according to need. You have to do some work before you begin the dialog, especially if you want to maximize your investment. Sometimes you just hand off a project and expect a timely report. Sometimes, you need someone to actually direct your team - an interventionist - who focuses on training his or her successor as much as accomplishing the task at hand. Need both? Look for a collaborator. Get deliverables, and train your team, both at the same time.

Weiss, Alan. Million Dollar Consulting. The Professional's Guide to Growing a Practice. McGraw Hill. 2009.

Posted by jackmixner at 09:47 AM | Permalink

1+714.673.8578.     www.mixnerstrategy.com

Kurzweil's Singularity Curve shows that computers will catch up with human intelligence in the near-term, probably in the next ten years or so (Kurzweil, 43). That's faster than we have been predicting because the curve is logarithmic, not the usual numeric. Things speed up, especially technical things, after they get going. Those are pretty much the facts. What makes those facts even more interesting is that some scientists are concerned because they think singularity - computers better than man - means that bad people will figure out how to use the new technology to mankind's horror. It's probably too late to think about it, so get used to it, scientists. Maybe a little control is in order, yes, but it's probably too late. Better to protect your systems instead.

Free spirits in Silicon Valley have their own way of responding, namely, Singularity University. Kurzweil is the Galactic Chancellor (do I detect a hint of Merry Prankster here?) of the University. An exclusive organization, they're pitching courses on nanotechnology, neuroscience, robotics, biotechnology and bioinformatics. People are lining up to take the - expensive - classes. Other people are complaining about the exclusivity of it all. Get used to it. Kurzweil, at long last, is fashionable. It's his time. Get to know him.

Hardwick, Chris. Know Your Future. Wired. July 2009. 034.  

Kurzweil, Ray. The Singularity is Near. Viking. 2005. [ Referenced in http://mixnerstrategy.com/blog/2009/04/singularity_and_modern_man.html  ]

Markoff, John. Scientists Worry Machines May Outsmart Man. New York Times. 4 August 2009. http://www.nytimes.com/2009/07/26/science/26robot.html?hp=&pagewanted=print

Posted by jackmixner at 05:19 PM | Permalink

1+714.673.8578.     www.mixnerstrategy.com

After the fact, all my investing friends admitted that they knew something was wrong some time before, and, luckily, left the market. They never bothered to tell me, of course, so I stayed the course. I lost some money, but, luckily, I left it in and some time later I was back even. The trigger for the 1987 crash was interesting. Some years before, some smart analysts figured out a way to insure their stock market holdings. Buy these stocks and hold them - and buy these holdings so that, if your original holdings lose value, your back-up holdings won't. You can't lose.

You can't lose. Ah, savor the words. If only they'd kept their mouths shut, or, more likely, could have shielded their investment strategy from the scrutiny of other investors bent on mimicry. Too much of a good thing (the protection strategy) fostered too much of a bad thing (a market that couldn't react quickly to declines because too many folks followed the protection strategy) and we all know the result, those couple days of catastrophic loses.

Now, fast-forward to today. They say (Wilmott) that the newest trick is fostering a new disaster, as if we need another one to add to our woes. They say that increasing the speed of trades to take advantage of arbitrage opportunities (something is mispriced in a market, so take advantage of it even if the mis-pricing only lasts an instant) will eventually bring down the market.

Two facts from my point of view: the market is going to fall some time in the future. It might actually be caused by this new lightening speed trading. My prediction is actually two-fold: the market will fall, probably before the end of Obama's second term. Why it will fall, I have no idea. But it will fall. It's almost a given. But the other thing, the cause of the fall, is unknown at this time. It might be caused by lightening trading (I sort of like the name, don't you?), but my bet is that it'll be caused by something else that is unidentified at this time. I wish that all the things we have seen in the markets in the last one hundred years (mainly over-leverage, and too much reliance on analysis hiding risk-taking of unknown levels) was going to go away, that we had learned our lesson. Honestly, I don't think anything is going to change. My only prediction stands: there will be a fall in the market in the future. You might want to give some thought about how to protect your investments from that fall. Maybe your plan will actually work. I hope so.

One last thing: the administration wants to regulate lightening trading (they're calling it flash trading now - I like that name even better, don't you?). They're chasing solutions. Unfortunately, it's too late. Even if they regulate flash trades, traders will just move on to something else. Unless we change the underlying trading mentality, the deal-making mentality, nothing will change, really. Is that good? Well, I don't know. For a while there, a couple of months ago, I might have answered that the deal-making mentality had to go. Now, I'm not so sure. Capitalism is based on deal-making, isn't it? We'll have to see what happens.

Sorkin, Andrew Ross. S.E.C. to Seek Ban on Flash Orders, Schumer Say. New York Times. 4 August 2009. http://dealbook.blogs.nytimes.com/2009/08/04/sec-to-seek-flash-trading-ban-schumer-says/?pagemode=print

Wilmott, Paul. Hurrying Into the Next Panic? New York Times. 4 August 2009. http://www.nytimes.com/2009/07/29/opinion/29wilmott.html?pagewanted=print

Posted by jackmixner at 04:42 PM | Permalink

1+714.673.8578     www.mixnerstrategy.com

Bibliography on the Healthcare Cluster

California HealthCare Foundation. Medi-Cal County Data - Delivery Models. California HealthCare Foundation. 2003.  http://www.chcf.org/topics/medi-cal/index.cfm?subsection=countydata&itemID=20451

Christensen, Clayton M., Jerome H. Grossman, M.D. & Jason Hwang, M.D. The Innovators Prescription. A Disruptive Solution for Health Care. McGrawHill. 2009.

County of Sonoma. Public Health Division. Frequently Asked Questions: The Managed Medi-Cal Planning Process. 2008. http://www.sonoma-county.org/health/ph/mmc/faq.htm

Hurley, Robert E., Cheri Rice. An S.O.S. for the COHS: Preserving County Organized Health Systems.  Mercer Government Human Services Consulting with Pacific Health Consulting Group. 2004. http://www.pachealth.org/docs/PackardReport0504Final.pdf

Legislative Analyst's Office. Analyis of the Budget Bill Health: County Organized Managed Care Health Programs. Legislative Analyst's Office. 2004. http://www.lao.ca.gov/analysis_2004/health_ss/healthss_anl04.pdf#page=103

Marsh Mercer Kroll. County Organized Health System (COHS) Fiscal Year 2007 - 2008. Rate Range Development and Certification. State of California. Mercer. 2008. http://www.dhcs.ca.gov/dataandstats/reports/Documents/MMCD_Fin_Rpts/CA%20COHS%20SFY08%20Rate%20Range%20Cert%20010208%20FINAL.pdf

Schauffler, Helen and Sara McMenamin. Baseline 1997: A Survey of Medi-Cal Managed Care Plans in County Organized Health Systems and Two-Plan Counties. Medi-Cal Policy Institute. 1999.

Posted by jackmixner at 02:45 PM | Permalink

1+714.673.8578     www.mixnerstrategy.com

Block, Peter. Flawless Consulting. A Guide to Getting Your Expertise Used. Pfeiffer. 1981. 

Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.

Shenson, Howard L. Shenson on Consulting. Success Strategies From the "Consultant's Consultant". Wiley. 1994.

Weiss, Alan. Getting Started in Consulting. Wiley. 2009.

Weiss, Alan. Million Dollar Consulting. The Professional's Guide to Growing a Practice. McGraw-Hill. 2003.

Posted by jackmixner at 02:16 PM | Permalink

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http://www.cruiseindustrywire.com/HNR-pop.html

http://ats-sea.agr.gc.ca/us/4120_e.htm

http://www.cruiseindustrywire.com/article36526.html

http://www.cruiseindustrywire.com/article36547-The_State_of_the_Cruise_Industry_in_______Well_Positioned_for_Challenging_Times.html

http://www.cruiseindustrywire.com/HNR-category-category-Trends.html

http://www.cruiseindustrynews.com/annual-cruise-industry-report.html

http://www.cruiseindustrynews.com/cruise-news-articles.html

http://www.people.cornell.edu/pages/rjk34/Research/Carnival%20Cruise%20Lines%20Burnishing%20the%20Brand.pdf [ free version: http://www.allbusiness.com/accommodation-food-services/1190122-1.html ]

http://gttp.org/docs/HowToWriteAGoodCase.pdf

http://www.gttp.org/index.html

Womack, James P., Daniel T. Jones & Daniel Roos. The Machine That Changed the World. Maxwell Macmillan International. 1990.

Posted by jackmixner at 11:22 AM | Permalink

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When I was growing up, we used to take road trips in the family Pontiac. I remember sitting in the back seat, stiffling, hungry, and ready to be there, asking into the front seat, "Are we there yet?" And I remember the response. Early on it was a wry smile and no comment. Later on into the trip, say, two days later, the response came a little more quickly, "Stop asking!" And that's what I feel like right now. Actually, I have two questions to ask: "Are we there yet?" and "When we get there, will things be different from what I remember?" The market has rebounded nicely. Actually, we have a long way to go, but at least it doesn't look like things are going to go down that much farther, if any. We just finished four weeks that summed to a gain in the stock market, the first in a while.

So, are we there yet? Will things be different when we arrive? Some say consumers are more frugal (Kliner, 1). Some companies are making "gutsy bets on new strategies" (Weber, 37). There will be "more startups, fewer giants, and infinite opportunity" (Anderson, 99). That's what they say.

We're just going to have to wait and see. In the interim, make sure you have the right people on your team, join with them to make a plan and implement your plan. Now.

Anderson, Chris. The New New Economy. Wired. June 2009. 99.

Kleiner, Art. How Real Is the New Normal? strategy+business. Summer 2009. 1.

Weber, Joseph. Hunting for Growth. BusinessWeek. 22 June 2009. 37.

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Growing up, my family had a record player. You could carry it around, as it had a handle on the outside of the case and the arm could be clipped down. Everything was one piece. Then we got a new record-player. It was in a cabinet of something like mahogany. It weighted a ton, but it had better speakers and a better turn-table. It was great until our deaf cleaning-lady turned up the volume so high that she blew out the speakers. If you played it quietly, you never knew it was broken, something that was just fine with my father. When I got my first stereo things were different. I got the speakers from one manufacturer, the amplifier from another, and the turntable from yet another. When I put it all together, it had great fidelity (it was stereo, after all) and it was a lot harder to blow out the speakers (not to worry, we still managed to blow out one of them). It was a modular system in which the pieces added up to a better total unit that a system made all by one manufacturer. My first computer was the same way. I bought an IBM PC (couldn't go wrong, right?) added floppy disk drives, a printer, a memory card, and a graphics card and I was ready to go. That worked pretty well, except it sure cost a lot. My next five or six PCs were off the shelf - the manufacturer put it together and I bought it as I had to keep up with technology. The costs fell with each successive machine. Cars have never really been modular in quite a while. Yes, during the sixties, we added performance parts and stereos all the time, but as I have gotten older, all that just hasn't been important. Too, the manufacturers increased quality significantly, so I went along with whatever they were selling, basically.

Mann's article shook me up a bit because it reminded how much more I like my modular stereo and my modular computer, and, yes, hopefully my modular car. Today you can't really get a modular car, but that may change. Detroit, with the ultimate reorganization that is happening today, won't be able to spend the big dollars to create the cars of the future. Each system - the propulsion system, the breaking system, the batteries, the communication systems, etc. - will need to come from a different manufacturer. They envision just snapping things together, testing it for safety, and delivering it to me. Well, that doesn't go far enough for me. I want to buy the braking system myself, along with the engine, and suspension and windows etc. and have it put together to my specifications. I'll want simple, cheap, and economical. You might want sleek, fast, cool, with money as no object. But we both, I predict, will want to specify what goes into the car - ourselves, just like when we bought our first stereos or our first computers. That's my prediction. Now we get to wait and see how it turns out. Things are going to change, that's for sure. Get ready. Smaller, inventive manufacturers are going to shake things up, and we all should benefit. Some risk will be there as smaller firms are more likely to fail and not support their products, but that is part of the price we will pay for getting the cars that do what each of us wants. That's what I think, anyway. I'm hoping for the time when I can snap together the car I want, maintain and repair it easily, and then rebuild it or recycle it easily. We'll see.

Mann, Charles C. Detroit. The New New Economy. Wired. June 2009. 101.

Posted by jackmixner at 05:15 PM | Permalink

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We've been enamored of Jim Collins books for some time, as they give solid advice that is actionable. His new book, How the Mighty Fall,  at first blush seems like just another book to extent the line of hits. Haven't read it yet, so we'll see. He does reinterate some things we've seen before, like how to get the right people in the right seats (Collins, 38): Choose people that fit the company's core values; don't tightly manage them; the right people realize they don't have jobs, they have responsibilities; the right people fulfill their commitments; the right people are passionalte about the company and its work; the right people display window and mirror maturity (if it is going well, it's the team; if it's not going well, it's their responsibility). We all know that when you watch a company for a long time, decline is inevitable. Collins is trying to figure out why, and, then, prescribe what to do about it. It seems that the prescription isn't what matters, it's the realization that something can be done. The real task is doing it, especially in the instance when things seem like they are going just fine. About three years ago we began working with a Fortune 500 home builder. Their plans included growth with nary a mention of the possibility that the market could turn against them. We pointed out that their growth plans (they envisioned growth of one hundred per cent a year) weren't realistic in a cyclic business. When we asked to see their lay-off plans, they thought we were nuts. Well, someone got that on wrong. And that's the point. Hubris born of success isn't a good determinate of future success. In fact, according to Collins, it is the first signal of decline. He got that one right, for sure.

Collins, Jim. How the Mighty Fall and Why Some Companies Never Give In. BusinessWeek. 25 May 2009. 27.

Posted by jackmixner at 04:52 PM | Permalink

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Apologia. Today the term "apologist" is colloquially applied in a general manner to include groups and individuals systematically promoting causes, justifying orthodoxies, or denying certain events, even of crimes. Apologists have been characterized as being deceptive, or "whitewashing" their cause, primarily through omission of negative facts (selective perception) and exaggeration of positive ones, techniques of classical rhetoric. When used in this context, the term generally has a pejorative meaning (Wikipedia).

That word pejorative at the end the definition says it all. Holstein's book is an apologia about Wagoner's management of General Motors. Dumped as CEO as part of the bail-out process leading up to the recent bankruptcy, the book makes a case that he was the right man for the job and should have been allowed to finish the task of righting the GM ship. Well, it took to long, Mr. Wagoner. It was in fact time to move on to new management. From a strategic point of view, Wagoner had one neat win, the OnStar system. GM broke company rules big time early in the creation of the system. The strategy wasn't dictated in advance; it was allowed to become apparent over time. They didn't spend a lot of money; the initial investment for the alpha system they bought from General Magic was $15 million. The strategy for OnStar wasn't an automotive strategy; it mimicked the electronics world more closely with its continual improvement and continued innovation. Customers had complained about any remote control of their auto; OnStar began that control in a benign way that customers didn't complain about. It saved lives, after all (Holstein, 157-168). Benighted by Clayton Christensen in a Harvard case study, the OnStar success is a good example of a disruptive strategy that worked (Holstein, 169). The keys to a good strategy? Initial management wasn't told what to do; they figured it out as they went along. It wasn't top-down at all. Secondly, Wagoner ran interference between the traditionalists at GM and the new technologists. Finally, and maybe most importantly, OnStar stood alone. It wasn't assigned to any division. Yes, Cadillac was the first installation. However, over time, OnStar was rolled into most of the autos at GM. Wagoner proved he was a good manager when he championed a new technology. It was his championing old technology, namely, the "way things are done at GM" that proved his ultimate downfall.

Holstein, William J. Why GM Matters. Inside the Race to Transform an American Icon. Walker & Company. 2009.

Posted by jackmixner at 01:28 PM | Permalink

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For George Shultz, Secretary of State in 1987, globalism was a theme he returned to over and over again during interactions with Congress and, as important, the Soviet Union (Mann, 241). His definition? Shultz talked about "the information revolution, the impact of ever-faster computers and telecommunications, the speed with which money and capital flowed from one country to another, and the way which manufacturing could be transferred around the world" (Mann, 242). This would be really cool if Shultz was trying to impress CEOs in Silicon Valley, or, say, Hong Kong or Shanghai. He wasn't. Shultz's target was the Soviet Union, and, more specifically, Michael Gorbachev and his ministers (Mann, 243). The point of all the dialog was the interesting part. Based on research and discussions started by Theodore Levitt at Harvard, whose article The Globalization of Markets dated to 1983, Shultz was pointing out that international societies would have to adjust to a changing reality. Democracies would have a hard time. But, and this is the interesting part, Communist governments and closed societies would no longer be able to control what their citizens saw or heard (Mann, 243). It doesn't take a stretch of the imagination to realize where the revolutions in Eastern Europe came from. Global information was having a political effect later to be equaled - or actually surpassed if that is possible - by the economic effect. An aide to Shultz, Richard D. Kauzlarich, copied a telling sentence from a shipping label into a State Department memo (Mann, 243): "Made in Singapore, Taiwan, Mauritius, Thailand, Indonesia, Mexico, Philippines. The exact country of origin is unknown." In 1987, no one realized the impact of these discussions except, tellingly, Gorbachev, Shultz, and Reagan who was trying to "spook the Soviet leadership" (Mann, 244). If we fast-forward from 1987 to today, we find a similar message directed not at the Russians, but at the United States, and from the Chinese, not the Russians. The US dollar continues to dominate international exchange. The Chinese want to change that (LeVine). This feeds two questions: Do the Chinese concerns mean much to a world marketplace dominated by the dollar? and If so, what is the implication for the long-term health of the US economy? Globalization was a strength of the US in 1987. It still is a strength of the US in 2009. The tough part? Leveraging that strength in a difficult economic environment. How we respond dictates in large part our future vitality.

LeVine, Steve and Dexter Roberts. China's Doubts About the Dollar. BusinessWeek. 8 June 2009. 24.

Mann, James. The Rebellion of Ronald Reagan. A History of the Cold War. Viking. 2009.

Posted by jackmixner at 10:15 AM | Permalink

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At the Allen & Co. conference in Sun Valley, Idaho in 1999 (Schroeder, 15-21), Warren Buffett explained - to derision from the tech CEOs in the room - that he didn't think that much of the tech boom. They listened politely, but weren't buying. Buffett talked about the fact that the market was at 874 in 1964 and at 875 in 1981, the decline of horses ("I wish I'd shorted horses"), the fact that the airplane didn't make any investor rich, oil prospecting, the apparent over-valuation of internet stocks, Edgar Lawrence Smith's 1929 view that stocks always yielded more than bonds, and more. No one could really refute what Buffett said, but not many agreed with him. Schroeder's book has attracted a lot of interest in the press. If you want, you could read all 830 pages, or you could just read the second chapter on the Sun Valley Conference. It all boils down to the fact that Buffett really wanted to succeed at making money, that he continually learned all he could about investing, that his family life was different but successful in the end if you squint a little bit, that he was a contrarian investor at the right times, that he looked, early on, for under-valued stand alone companies to buy, and later on for bigger companies with special plays. Ultimately, as folks started to mimic his style, he found it harder and harder to invest the hoards he earned and was entrusted. For me, the best part of the story is understanding the joy Buffett finds in learning about companies and investing for profits. He's given away most of his money, so clearly he about more than money. He needs people, family - and investing.

Reference

Schroeder, Alice. The Snowball. Warren Buffett and the Business of Life. Bantam Books. 2008.

Posted by jackmixner at 02:13 PM | Permalink

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Here are fifteen strategies to reduce carbon dioxide build-up in the atmosphere. Picking just eight - any eight - of them will solve our carbon dioxide problem. Pretty simple, yes? Now look at the list and then answer the question (Friedman, 212-213).

1. Double fuel efficiency of two billion cars from 30 miles per gallon to 60 mpg.
2. Drive two billion cars only 5,000 miles per year rather than 10,000, at 30 miles per gallon.
3. Raise efficiency at 1,600 large coal-fired plants from 40 to 60 percent.
4. Replace 1,400 large coal-fired plants with natural-gas-powered facilities.
5. Install carbon capture and sequestration capacity at eight hundred large coal-fired plants so that the carbon dioxide can be separated and stored underground.
6. Install carbon capture and sequestration at new coal plants that would produce hydrogen for 1.5 billion hydrogen-powered vehicles.
7. Install carbon capture and sequestration at 180 coal gasification plants.
8. Add twice today's current global nuclear capacity to replace coal-based electricity.
9. Increase wind power fortyfold to displace all coal-fired power.
10. Increase solar power seven-hundred-fold to displace all coal-fired power.
11. Increase wind power eightyfold to make hydrogen for clean cars.
12. Drive two billion cars on ethanol, using one-sixth of the world's cropland to grow the needed corn.
13. Halt all cutting and burning of forests.
14. Adopt conservation tillage, which emits much less carbon dioxide from the land, in all agricultural soils world-wide.
15. Cut electricity use in homes, offices, and stores by 25 percent, and cut carbon emissions by the same amount.

Still think the green problem is easily solved? The problem is defined, the first step in a strategic solution. Now we know what to do. 

Reference

Friedman, Thomas L. Hot, Flat, and Crowded. Why we need a green revolution - and how it can renew America. Farrar, Straus and Giroux. 2008.

Posted by jackmixner at 10:34 AM | Permalink

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Economists sometimes make interesting assumptions. They assume "perfect competition" is the best model for the allocation of resources and rewards (Drucker, 184). Most times, however, imperfect competition rules. The learning curve is a good example. If your economy gets on the learning curve faster on a new technology, for instance, than its competitors, it is almost a given that your economy will dominate that technology over time. Economists assume that an economy is defined either by consumption or investment (Drucker, 184). In a knowledge economy, however, neither consumption or investment are good measures of success. There are three kinds of knowledge: continuous improvement of current processes, exploitation of existing knowledge to create new products and services, and, finally, real innovation (Drucker, 185). Positive economic returns require that the three knowledges work in tandem. The business press assumes they operate independently. It hawks the technique of the day over the technique of the century at its peril. So what do we do, especially since measuring a return on knowledge is so crucial on the one hand, and impossible on the other? How do we increase the output of knowledge? Knowledge productivity requires a long "gestation period" (Drucker, 191). The big bang for the buck comes at the end of a long period of activity. How do we know how long to wait? Long term productivity is measured by short term results. Set the expectation of results along the way early in the process. Don't invest in the long term unless there is a short term. Now, how do we do that? Well, part of it involves applying what we already know, i.e. connecting what we learned along the way to the problem at hand and, this is the hard part, trusting ourselves and our teams to apply knowledge in productive ways. The first step? Become a better problem definer than a problem solver. The definition part takes longer sometimes than the solution part. Spending more time earlier in the process on definition makes for a more productive outcome later (Drucker, 193). Making knowledge productive is crucial to competitive success. Let's consider the current Green initiatives.

We need to consider how to receive a huge ROI for our knowledge of the green problems confronting us. While I am leery of suggesting that we pause and plan before we attack the green problems facing us, that is precisely what I suggest. Since I am peripherally involved in Orange County discussions about green initiatives for the near term, this does provide me with some insight, and hope. My first observation is that this is not an arithmetic problem. It's logarithmic. What's that mean to me? The solutions we start now are going to take some time to have an effect, so pick wisely or we may not have time to re-visit our planning efforts effectively. Yes, we can depend on technology to solve some of the problem. Fuel cells, batteries, and solar devices are going to get more efficient. That is going to take time, however. We need to act now. What to do? There are two entrenched constituencies involved in the green problems and solutions, industry (both green technology manufacturers and industrial energy users), and individual consumers. Legislation is the first step, not locally, but nationally or globally. Since the US has resisted all the existent accords, there are low-hanging fruit to pick. Sign up for the global initiatives and force industrial users and consumers to begin to clean up their acts using existent rules and technologies. That will begin aligning the US with the rest of the developed world. Second, and this is both a strength and weakness of America, is begin to lead - now. Get out ahead of everything every other country on the planet is doing. Make green initiatives hurt. Much like the monetary crisis facing us, the hurt, if it doesn't kill us, will make us stronger long term. Friedman's suggestions (Friedman, 212-213) are a good place to start. Read his list (Mixner) and make your decision on how to begin. Then begin. This is an interesting example of ROI from knowledge. We have been avoiding obvious truths for quite some time. We can continue to ignore things until it is too late, or we can do something. This is a group decision. It is going to take leadership. Unfortunately, we don't have a lot of time for discussion. We have to act now.

Reference

Drucker, Peter F. Post-Capitalist Society. Harper Business. 1993.

Friedman, Thomas L. Hot, Flat, and Crowded. Why we need a green revolution - and how it can renew America. Farrar, Straus and Giroux. 2008.

Mixner, Jack. Green Problem - or Is It Solution? - Defined. http://mixnerstrategy.com/blog/2009/04/green_problem_or_is_it_solutio.html

Posted by jackmixner at 09:41 AM | Permalink

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We've been saying all along that once you have chosen your management team and created a plan you shouldn't wait around too long to implement your plan, and, as well, that the pace of implementation shouldn't lag, or, you're leaving money on the table. Today, that money on the table might actually represent your whole profit margin. Who wants to miss out on profits in a tough economy? Your pace of implementation speeds up if you have a coach involved to keep you focused on what is important. "Now," you say, "my plan keeps me focused. I don't need help."

Kolata talks about running the Boston Marathon. Her times didn't start to improve even though she trained regularly until she joined a coaching program related to the Marathon. She showed up for coaching - religiously. They pointed out things she hadn't considered and kept her accountable for the commitments of time and training she was making to herself. All along we have said, chose the right team, have a plan and speed up the pace. There are three ways to do that: set date quantified objectives and strategies, be ready to actually follow your plan, and finally, dump the things that aren't working quickly if it makes sense so you are able to focus on what is working. This is where coaching comes in. Chose your team using outside advice. Get more than one opinion on new hires. Hire for talent, not experience. Don't trust gut instincts. Create you plan while making sure it represents the best of what is available in your industry. Change your plan according to your own rules and - this very useful - realize that sometimes you have to keep sticking to the plan even when it isn't working. A coach will point things out from other situations - from your competition and other similar companies - that will help you keep focused. Actually implementing your plan is the first step. Making changes - informed changes - is the next step. And keeping focused on a plan that isn't delivering as much as you'd like makes sense, especially when the pay-off is long term. Building heart in a marathoner takes longer than you might think. Building share in a tough economy also takes time. Both present opportunities to take advice about implementation and opportunities for improvement along the way.

References

Kolata, Gina. Want to Go Faster? You Need a Trainer. New York Times. 23 April 2009. http://www.nytimes.com/2009/04/23/health/23best.html?_r=2

Posted by jackmixner at 09:31 AM | Permalink

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Porter's Five Forces Driving Industry Competition (Porter, 4) have been around awhile:

1. Potential Entrants - Threat of new entrants
2. Buyers - Bargaining power of buyers
3. Substitutes - Threat of substitute products or services
4. Suppliers - Bargaining power of suppliers
5. Industry Competitors - Rivalry among existing firms.

Why do they matter today? I mean, they were derived in the Stone Ages of Strategy, way back in the seventies, weren't they?

We used them today to help decide how to plan to spend some stimulus money that will soon flow into Orange County. We originally had the great idea that the best way to stimulate the "green" industry in OC was to pass a law that said that planning departments could only approve plans that followed a  model green abatement plan. Look closely and you'll notice that the abatement plan to decrease negative green impacts on the community focused only on buyers. It ignored potential entrants, substitutes, supplier and competitors. Something got left out of the plan, didn't it? What to do? Include them in the plan. How to do it? There's a question. The first answer is to decide if a plan is required at all. The Libertarians out there will be saying that government doesn't need to interfere in the markets. They'll be alright by themselves. Now, we know that's not so. If we let the markets control things, there are some odds that LA would still be choking on smog - or worse. So, there is a role for regulation. Is there a role for regulation effecting the green industry. Maybe. Working with the planning departments isn't such a bad idea. But there is a whole list of things that might not be such a good idea: don't interfere with the markets with subsidies or protection.

In OC, it is hard to interfere with macroeconomics, so we can't even bother there, but on the national level interference  on the macro level isn't going to help. Getting the green manufacturers to work together to share solutions sounds pretty cool, doesn't it? Wrong. Porter say it best, "Encourage new competitors; discourage cooperation (Porter, Competitive Advantage, 681)." Fierce competition is best for everyone. Yep, some companies will fail. The ones that survive will be stronger. Actually, my gut tells me that in fierce competition, there will be fewer failures, actually, because the competition will foster higher wages (how can that be good?), lower prices (again, how can that be good?), and better quality (doesn't quality cost, everyone says?). How does a government help if it wants to improve a competitive environment? Three steps, all long term: encourage better education so there will be more qualified, high level, employees; if you have enough money, invest in infrastructure, especially smart infrastructure, maybe even if you don't need it yet; consider ways to increase capital formation for smaller companies who are starving for cash in this environment. If you do it right small companies will get to profitability (and revenues, obviously) without huge venture capital infusions. If they can pull that off (and basically, in today's environment, they have to) they will be healthier, more long lasting, and more likely to create lots of very useful jobs. Sure there is an attitude. Some rules are OK, yes, but focusing on making the environment conducive to rapid growth in an environment that everyone, including the public, wins.

Porter, Michael E. Competitive Strategy. Techniques for Analyzing Industries and Competitors. The Free Press. 1980.

Porter, Michael E. The Competitive Advantage of Nations. The Free Press. 1990.

Posted by jackmixner at 08:31 PM | Permalink

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Ray Kurzweil writes books that you realize, as you read them, are beyond the thinking you have indulged in - ever. He has written books on health and the impact of technology on growth. His last book, written in 2005, takes everything he has written before and adds to it in crucial ways. Gordon Moore has Moore's Law. Encapsulated in Kurzweil's the law of accelerating returns (Kurzweil, 35), Moore's law says that the amount of computing power that can be crammed into an integrated circuit doubles every year. Lately, the doubling is even accelerating. Kurzweil takes that doubling and thinks, not about the technology involved in the doubling, but in the result of the doubling. We all learned about arithmetic progressions way back when when some teacher said something like, "Which would you rather have, two tons of gold every year, or, an ounce of gold that doubles every year." Everybody wants the two tons of gold, and, of course, they picked the bad choice. Arithmetic doubling is a wonderful way to get rich, especially if you're doubling gold. So who cares? In ends up that, while most people don't give it much thought, all this doubling effects all sorts of things. DNA was discovered in the fifties. In the early nineties, they started work on the human genome, expecting to take fifteen years to decipher it. One team started late - way late - but still ended up in the same place, only much faster, because they re-arranged their thinking and methodology. Ask a scientist when genomics are likely to significantly effect man-kind (as if they weren't doing so already) and she's likely to say, "fifty years from now, give or take." Kurzweil says that nonsense - we'll be using genomic solutions much quicker than that, because of the doubling effect. It took us fifty years to get the genome, yes, but it won't take us fifty years to put it to work. Focusing on shapes of paradigm curves, Kurzweil describes a three step curve of slow growth, rapid growth, and, then finally, a leveling off (Kurzweil, 43). What we forget is that, when stacked end-on-end, all those curves really represent an exponential sequence, not a doubling sequence. Once things get rolling with a new technology and new iterations are created as a next chapter, so to speak, those chapter sum to rapid growth, to exponential growth. He plots out the telephone industry, the cell phone industry, dynamic ram, dynamic ram price, and on and on.

The point of all this is interesting. Allow yourself to be boggled at this point because you're not going to believe what I am going to say next. Eventually, and it is not going to take too long, computer's computing - thinking - processes will catch up with man's. And it is going to take less time than we think. Kurzweil's Theory of Technology Evolution says that there is a migration occurring toward everything becoming information - everything. Nanotech manufacturing processes will allow embedding of information everywhere. So the question becomes not when will artificial intelligence become useful, but when. Then we have to decide what high level artificial intelligence means for us. Now, consider what I just said. AI is going to make significant contributions to thinking. Is that a threat? By now you probably realize that I don't always see threats, but opportunities. And I think this AI will be useful, and perhaps, the ultimate opportunity. HAL, yes. But a useful HAL. Wait and see. Or profit now. Interesting.

Kurzweil, Ray. The Singularity is Near. Viking. 2005.

Posted by jackmixner at 10:09 AM | Permalink

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Three symptoms of a converging world: there is ample band-width, worldwide, there are enough platforms, again, worldwide, and finally, there is interest in local folks to utilize applications freely available on the web to manage workflow remotely. Word, Outlook, Netmeeting, 3D Studio MAX and, especially, Google, allowed game developers to thrive in India (Friedman, 219). It started in simple things like medical records and tax returns. It's going to game production. Ultimately, and this is the interesting part, the focus is shifting back to India, to games for the Indian market, made by extremely competent engineers - Indian engineers - for the Indian market.

Let's have a little fun with future convergence, a pair of words I just made up. The computer I am working on was assembled in China from parts probably sourced in, at least, China, Taiwan, Japan, and the US. When I had a complaint, early on, it was handled by a call center in India. They were nice, they spoke may language, and I didn't have to raise my voice to get what I wanted.

Let's just suppose, however, that China wanted to, finally, absorb Taiwan (Friedman, 586). Are they likely to do that, given all the profit motives that exist for them to co-exist? What about the conflicts between China and India? Same story as China and Taiwan? How about the US and China? All these ties based on trade make it less likely that threats will turn ugly. What will really happen? Can't tell yet. Ultimately, politics may trump business and personal relations. The odds of this go down as long as we are all playing on a level playing field. Make the rules universal and everyone will follow the rules. That's the theory. Let's see how it plays out.

Friedman, Thomas L. The World is Flat. A Brief History of the Twenty-first Century. Farrar, Straus and Giroux. 2007.

Posted by jackmixner at 02:28 PM | Permalink

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Long term goals at Berkshire Hathaway are just that, long term goals (Berkshire):

1. Maintaining financial position with its excess liquidity, modest near-term obligations, dozens of sources of earnings and cash.
2. Widening "moats" around operating businesses for durable competitive advantage
3. Acquiring and developing new and varied streams of earnings
4. Expanding and nurturing the cadre of outstanding operating managers.

That's the list. Finance. Competitiveness. Earnings. Managers. Not a bad list.

Of course, Warren Buffet still puts in his two cents. At the end of the letter, he exhorts attendees at the shareholders meeting (Berkshire shareholders' meetings have a country fair-like feel. They're held in a big arena with a trade show of Bershire companies in the convention center next door.) to buy lots of stuff made by Berkshire companies. "Make your neighbors jealous." There's a goal.

Reference

Berkshire Hathaway, Inc. To the Shareholders of Berkshire Hathaway Inc.: http://www.berkshirehathaway.com/2008ar/2008ar.pdf

Posted by jackmixner at 01:42 PM | Permalink

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Jack Welch's "Differentiation Vitality Curve" says to praise the top twenty percent of your employees, watch the middle seventy percent of your employees, and ditch the bottom ten percent of your employees (Welch, 159). OK, I don't much like that, but I do understand what Welch is up to.

Let's just suppose, however, that you own a basketball team. You have a guard that can't (or doesn't) shoot, but, oh, can he guard. In fact, he is liable to go scoreless when he guards Kobe Bryant. Why is he on the floor? Because he holds Kobe - and folks like him - to their worst nights of their careers. So, he doesn't shoot much, but he guards spectacularly. Boos - or applause from the front office? There is only one answer - applause, big time. Guarding Kobe takes special analytical skills. The successful guard has to be where Kobe makes his best shots, forcing him into parts of the court where he makes the least number of shots over an evening.

We say pick your team very carefully. In this case, the front office picked Shane Battier for one reason - the teams he play on win (Lewis). Maybe some of their statistics aren't so hot. That may mean, however, that the player doesn't need changing. In fact, you may need a new record keeping system instead. In this case, the Houston Rockets didn't have money to hire a star as they already had two of them in Yao Ming and Tracy McGrady. They needed somebody who was cheap and who got the job done. But what job? Battier, "can't dribble, he's slow, and hasn't got much body control (Lewis)." The job Battier does is guard the best play on the opposing team. He's a guard. He's defensive. He keeps the opponents stats down while the rest of his team focuses on scoring.

Now, in business we talk about offense a lot. It might be in order to consider your defense as well. While you're at it, it might be in order to consider the statistics you are using. Those two tactics worked for the Rockets.

Lewis, Michael. The No-Stats All-Star. New York Times. 15 February 2009. http://www.nytimes.com/2009/02/15/magazine/15Battier-t.html?pagewanted=3&hp

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

Posted by jackmixner at 04:26 PM | Permalink

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Goran Matijasevic is a Prof at UCI. He invites the community to sit in on his classes on entrepreneurship. It's a pretty cool class in that it seems that most of the students are at the graduate level, many of them PhD candidates. It's fun to watch for what they listen to, or don't listen to, as the case may be. He has a speaker, normally a CEO or C-level executive, every class. On the surface, the ones who garner the most attention have the coolest jobs. The coolest jobs aren't necessarily the ones you might think. Interestingly, the speaker who generated the most interest was a the President of NPI Services, Inc., Judy Greenspon. Not only is she a cool person (Peace Corps professional, entrepreneur, traveler, successful business woman) she runs an interesting company that makes prototype circuit boards for every major company in the high tech arena. Pretty cool. Just don't get her mad.

She was incensed that no one in the room had read The World Is Flat. Since I hadn't either, I couldn't smile smugly. So I got the book and have started to read it. It's thick, It's heavy. But it is a very good read.

After reading much of the book and reflecting a bit, I realize that Goran's students really don't need to read Friedman's book because they are the book. The basic premise is that the world is now a level playing field - it is flat. Opportunities abound all over the world, ripe for taking advantage of. When people in Goran's class ask questions, sometimes the speakers don't understand their accents. That's because they're from all over the world. They understand flatness because they are taking advantage of it. Also, what PhD candidate has had the time in the last four or so years (the book came out in 2005) to leisurely read a six hundred page book. These students certainly haven't. They've been publishing so they won't perish. That's my bet.

There is an economic development challenge here. In the past, we relied on the fact that students, first, wanted to come to America to study, and, second, that after they finished their studies, they would stay to staff our high technology companies. There's a breakdown going on here. Some of it is caused by the restrictions placed on immigration by 9/11. Some students aren't coming. Others are going home when they can't get a visa to stay.

Disaster for America? I don't know. I did like President Obama's comments last evening (24 February 2009) in his speech to Congress about increasing the number of technology graduates in American universities to a level above that of any other nation - a huge, go-to-the-moon-like goal that feels good when you think about it. It's a good start.

I do know this much: I have enjoyed Goran's class and every one of the students I have been learning with. They're pretty cool. So is our flat world. It's all Goran's fault that I read this book. I am glad I did.

Friedman, Thomas L. The World Is Flat. A Brief History of the Twenty-First Century. Farrar, Straus and Giroux. 2005.

Posted by jackmixner at 09:07 PM | Permalink

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That's a line - a chapter title actually - from Galbraith's classic The Great Crash 1929. In Goldman, Sachs We Trust. The idea of a trust was that a bunch of investors would pool their cash by buying stock in an investment company (Galbraith, 47). Not a bad idea on the surface. The investment company's management was supposed to be better at picking stocks than the average investor because, supposedly, they had better information. The trusts were initially big in England and Scotland (Galbraith, 48). Through the early twenties, there were very few trusts in the United States. That was to change, however.

The first trusts in America had rules. They'd tell you what stock they were going to purchase, place them in a real trust, and tell you what rules they were going to follow in managing the assets of the trust Galbraith, 48). You could trust them. Sounds pretty good, doesn't it? The rules didn't last.

Ultimately, the management of a trust sold you some sort of stock or bond representing ownership of a trust. You didn't know what they held. You just trusted management. There were "secrecy" reasons why they wouldn't tell you what they held - just like the South Sea Bubble stock funds, in fact (Galbraith, 49). Pretty interesting parallel if you think about it.

Then things got really interesting. You could now, for instance, buy five hundred dollars of stocks in a trust for two hundred dollars. You owed the owners of the trust three hundred dollars that you paid off over time (Galbraith, 53). This was genius. In a rising market, your money rose even faster. Markets always went up, didn't they? Well, for a time in the twenties, they sure did. People made a lot of money.

Then, things got even better. Trusts started new trusts. They didn't buy stocks in corporations. No, they bought stocks in other trusts. When you did that, you essentially leveraged your investment more. Now, when stocks went up, so did you trust holdings. But, and this is really neat, they went up even more than before. This was really neat.

It was all predicated on a rising market. When everything was going up, everyone made out. When things were going down, however, they really went down. That's what happened, essentially, in the fall of 1929. Things went really down - fast. A lot of people got hurt.

That's what unregulated leverage does. That's what it did in 1929. Why did I mention Goldman, Sachs in the title? While they entered the trust game late, they started one of these trust pyramids that lost a whole lot of people a whole lot of money. It took them more than thirty years to regain what had been a fine reputation.

Galbraith's summary lays out a lot of the problems and points to solutions (Galbraith, 177):

1. Incomes weren't equitably distributed. Some five per cent of the population received some thirty per cent of all the incomes. They had to spend it, first on consumerism, and then, on investments.
2. Businesses weren't run properly. They hosted "an exceptional number of promoters, grafters, swindlers, impostors, and frauds (Galbraith, 178)."
3. The banking structure was bad (Galbraith, 179). There were too many banking units. When one failed, runs began on others. Things dominoed. Not good.
4. Foreign nations owed a lot of money to the United States. Banks loaned a lot of money to them. There was graft. There were defaults (Galbraith, 182). Not good for U. S. banks.
5. Economic intelligence was flawed (Galbraith, 182) or non-existent. No one knew what companies or trusts were really doing. There was too much "trust". Bad idea.

The thing about this that bothers me, and ought to bother you, is this has continued to happen. Maybe it is not shocking so much as inevitable. There are answers. Unfortunately, we are having to live through a very similar marketplace and discover the answers all over again. Amazing.

Galbraith, John Kenneth. The Great Crash. 1929. A Mariner Book. Houghton Mifflin Company. 1954.

Posted by jackmixner at 08:06 PM | Permalink

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Formulaic books can be tricky. Follow these seven steps and succeed at innovation. Well, sometimes it doesn't work that way. So, how to decide whether Lafley's book is worth a read? How about this simple self-quiz from the back (Lafley, 280):

1. Do you set organic growth goals that cannot be accomplished without innovation?
2. How do you ensure that the consumer/customer is really the boss in the process of innovation?
3. How good are you at integrating the end-to-end process of innovation, within your area of responsibility?

There are more, seven other questions to be exact. P&G's results say that their process works for them. Their game-changing process relies on innovation in ways other firms are missing. If you need to rely more on innovation, both organic with incremental changes or disruptive with massive new changes, Lafley may be useful to you.

Reference

Lafley, A. G. and Ram Charan. The Game-Changer. How You Can Drive Revenue and Profit Growth With Innovation. Crown Business. 2008.

Posted by jackmixner at 12:12 PM | Permalink

1+714.673.8578     www.mixnerstrategy.com

Two people said it was time. Luckily, they were the ones who count.

Larry Page and Sergey Brin, the founders of Google, decided to have a look at their strategy. They really didn't like process that much, but the IPO forced their hands (Battelle, 231).

The Tablets

Page and Brin sat by themselves and came up with notes on a tablet that formed the basis for the Google strategic effort. Batelle says the included "high-level stuff" ... about ... "principles and values (Battelle, 231)."

Then, with the help of their resident strategist, Shona Brown, they began a longer process of examining all of Google's processes (Battelle, 231).

The result? A methodology to grow the company from three thousand employees pre-IPO to a company ten times that large in the future (Battelle, 231).

The impression I get from reading the press is that Google has a pretty centralized management structure. Maybe it hasn't really changed that much since the IPO. My bet, however, is that the structure allows individuals to take action based upon company values and principles in ways that will continue to support the growth of the firm.

In a few years, we'll have more evidence. For now, things seem to be working.

The point is that strategy makes sense even if things are firing on all the cylinders. If things have slowed, it makes even more sense.

Reference

Battelle, John. The Search. How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture. Portfolio. 2005.

Posted by jackmixner at 11:57 AM | Permalink

1+714.673.8578.     www.mixnerstrategy.com

When you make inferences on the current state of the economy based upon someone's book, you have to realize that you're "looking through the rear view mirrow" in order to drive your car - or the economy, for that matter. If you're going to do that, you had better trust the information you're getting, and it had better be as current as possible.

Given those facts, here are simple recommendations based upon Paul Krugman's (Krugman, 186) analysis:

1. The $700 billion (it has since grown) won't be enough because it is too small relative to the economy. This is based upon the Japanese experience a decade ago.
2. There is a "shadow" banking system that is largely unregulated. That system is the one that needs the money most. It may not get what it needs.
3. The banks are likely to receive money from the feds and sit on it as opposed to handing it out in the form of loans. That doesn't do anyone any good. The Fed may actually have to make direct loans to business by buying commercial paper.
4. Eventually, we'll have to make the recapitalization wider and broader and become closer to a nationalization of the banking system, if only for a short time.

The bottom line seems to be there'll have to be more money to turn things around. You gotta trust someone. Krugman's advice might be a good next step.

Reference

Krugman, Paul. The Return of Depression Economics and the Crisis of 2008. W. W. Norton & Company. 2009.

Posted by jackmixner at 11:27 AM | Permalink

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On Friday, 14 March 2008, Bear Stearns was worth $30 a share or thereabouts.  On Monday the 16th, it was worth $2 a share (Lewis, Panic, 341-342). No one had a clue.

Why (Lewis, Panic, 343-344)?

In good times, financial firms make too much money. In bad times, financial firms aren't worth anything.

The fact seems to be that in good times CEOs of firms like Bear have to ignore the fact that their most profitable products are very risky, because in bad time their firms hemorrhage money.

The average of the two, boom or bust, defines the market.

Something is about to give.

Lewis pointed out problems in March 2008 that, basically, still haven't been resolved. His analysis points to a problem CEO's in the industry have: Their best assets go down the elevator each evening. If they want to retain control of those folks, they have to let them do what they want, a formula that may lead to the boom/bust cycle. His point? If you regulate, it is in this environment that you have to start.

Reference

Lewis, Michael. Panic. The Story of Modern Financial Insanity. W. W. Norton & Company. 2009.

Lewis, Michael. What Wall Street's CEOs Don't Know Can Kill You. Bloomberg News. 26 March 2008. Also in Michael Lewis Panic.

Posted by jackmixner at 11:02 AM | Permalink

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Here's how to create leverage in a hedge fund (Morris, 113):

1. Raise cash by selling partnership shares.
2. For every $1 invested, borrow $4 for equity investments. Leverage is now  5:1.
3. Buy $100 million in first loss bonds underpinning a $2 billion CDO, $20 million of hedge fund equity, $80 million in loans. This results in a 20:1 leverage.
4. Combine the 5:1 and 20:1 leverages and you end up with 100:1 leverage.

Now the good part, or maybe not so good: lose 1% on your CDO investment, wipe out the partner's equity.

That's what 100:1 leverage does. Miscalculate your investment, lose all your money - fast. Multiply your risk and now you have a real problem when the market turns against you. As we all know, the market will turn against you. If you don't have time to recover, you're wiped out. That happened to Long Term Capital Management in 1998. It happened to Bear Stearns in 2007 (Morris, 114).

Welcome to real world high finance.

Reference

Morris, Charles R. The Trillion Dollar Meltdown. Easy Money, High Rollers, and the Great Credit Crash. Public Affairs. 2008.

Posted by jackmixner at 06:41 AM | Permalink

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In 1950, General Motor's management wanted to create a pension plan for their employees. They had two options for the kind of funds they created (Beatty, 157):

"Defined benefits" gave you a fixed portion of your last salary.  If the fund went up, GM paid less. The idea was that GM would pay less- forever.

"Defined contributions" did it differently. GM paid a fixed annual sum into the plan. The retiree either received a fixed stipend, or a variable one with the success of the fund.

Defined benefits won out after the Board finance committee reversed management's defined contribution recommendation. This did two things. It forced fund managers to focus on returns. It also built up enough funds in both the GM fund and all the other ones that followed it to stoke the buy-out boom of the 1980s (Beatty, 158).

Drucker pointed out that in a hostile take-over, the big pension funds supported the buy-outs because of a bribe they received. The raider bought some stock of a company and then offered to buy the company. The company refused as it believed it could manage things better. Then the raider offered to buy the stock of other stockholders for a premium over the current market. The seller here was usually a pension fund after that bigger return. The purchase of the stock was paid for with a huge loan. When the buy-out was successful, the new management loaded the company with new debt to pay off the huge loan.

All this started the miserable cycle of self-protection, including golden parachutes for senior management, later in the 1980s. Companies ran themselves to fend off a raider, not to be profitable. They ignored stockholders who then were only too happy to support the raider. Miserable is the correct word. The result was miserable, ultimately, for everyone.

Reference

Beatty, Jack. The World According to Peter Drucker. The Free Press. 1998.

Posted by jackmixner at 06:06 AM | Permalink

1+714.673.8578     www.mixnerstrategy.com

PC sales are forecast to recede 5.3 percent in 2009. Intel has to sell three netbook processors for the same profit as a notebook processor. Microsoft gets $13 for netbook software versus $50 for a notebook (Hamm).

Whoops. Somebody got hit by a disruptive technology. Enter the netbook. Smaller. Fewer features. Cheaper.

There is going to be a shakeout, no question. It'll be interesting to see who gets left standing. Even Apple notebooks are selling one percent less than last year (Hamm). Interesting time.

Next step? New processor. New software. Not from Microsoft or Intel. Opportunity for new manufacturers, if they take the risk. 

Reference

Hamm, Steve. Why the PC Market Is Suddenly So Weak. BusinessWeek. 26 January 2009. 082. http://www.businessweek.com/magazine/content/09_04/b4117082616113.htm

Next Steps Checklist:

Practical Marketing. 7 Steps to Blast Through a Down Economy.  http://freshisgood.blogspot.com/2009/01/7-steps-to-blast-through-down-economy.html

Posted by jackmixner at 08:24 PM | Permalink

1+714.673.8578     www.mixnerstrategy.com

The Law of Unintended Consequences

Pass a law. Do good things.

The US Congress wanted more University research to be commercialized. It also wanted professors and the companies they started to get rich. The Bayh-Dole Act, passed in 1980, intended that federally funded research leave the public sector and enter the private sector. Ownership would transfer from public entities to private entities (Heller, 59). The un-intended consequence? Less business is getting done. Fewer inventions and discoveries are put to use because scientists are protecting their inventions instead of sharing them. Now, this isn't about keeping scientists from benefiting from their discoveries. It is about figuring out a way that they keep their discoveries and put them to use.

What to do? We learned how to proceed in this case in Kindergarten. Share. It is as simple as that.

 Let's say a new drug is envisioned by a pharmaceutical company. It includes tests that include thirty different genes, all patented by different organizations. Getting all thirty companies to agree to the pharmaceutical company's request for access for testing is just about impossible. Everyone wants to be the hold-out, the last one to agree, because theoretically, the last one to agree makes a lot more money than everyone else. The problem is, the musical chair like dance is so complex and time consuming, the drug company says "I'm getting out of the gene business" rather that complete the negotiations. Everyone loses, especially the poor person who has the disease, but doesn't have a drug to treat it because all those patent holders can't agree on how to work together.

We already said the word: Share. It looks to me like the law has to change. Now would be a good time.

Bill Gates' Creative Capitalism

Stanford professor creates unlimited supply of precursor to drugs that treat malaria. No one will support his research. Enter Bill Gates Foundation (Hamm). $42.6 million later, they're on the way to producing the drug. The Foundation acquired corporate support to figure out how to develop the active agent and get it ready for production.

That's quite a story. It could work in genomics. A third party acts as intermediary between all the owners of the different gene patents. They figure out how to work together. New treatments for diseases are created. Everyone makes money. No one makes a disproportionate profit. Mankind benefits. Everyone wins.

It could happen. 

Reference

Hamm, Steve. 'Creative Capitalism' Versus Malaria. BusinessWeek. 2 February 2009. 083. http://www.businessweek.com/innovate/next/archives/2009/01/the_world_vs_ma.html

Heller, Michael. The Gridlock Economy. How Too Much Ownership Wreaks Markets, Stops Innovation, and Cost Lives. Basic Books. 2008.

Posted by jackmixner at 03:54 PM | Permalink

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The Author 

Over time, it appears that anyone who knows anything about Goldman Sachs has resisted the opportunity to write about the history of the firm. Charles Ellis, a strategic consultant to the financial industry worldwide, finally decided that he had important things to say. He wrote a long, in-depth history with strategic analysis of Goldman Sachs that is detailed, people focused, strategy focused, and results focused. It should be required reading for every managing partner and CEO of larger professional firms, no matter what their specialty.

Pick the Right People: Goldman Gets It Wrong

Unfortunately, Goldman Sachs had to learn the hard way about hiring the right people. Goldman had lost leadership and capital with the departure of Henry Goldman at the beginning of World War I. Henry Goldman had supported the Germans during the ramp-up to war. He left the firm when it began selling war bonds to finance the war (Ellis, 15). His departure hurt as he had supplied much of its capital and his deal making ability. That hurt, but what was to come next hurt even more.

Waddill Catchings joined the firm in 1918 (Ellis, 19). An "articulate optimist" he had two things going for him: early success, and leverage (Ellis, 19). Having held back from the speculation of the 1920s, Catchings finally enthusiastically plunged into the market with a $100 million investment trust which with mergers, emerges as a $244 million trust within three months after initial sales of stock to the public (Ellis 22-23). Ellis uses the word house of cards late in his description - the house fell when first one then another of the stocks held in the trust failed to pay a dividend (Ellis, 25). Shares in the trust ultimately fell from $326 to $1.75. Size (meaning lack of ability to respond to crisis) and leverage (meaning much of the money was borrowed and therefore subject to margin calls) ultimately burst of the trust (Ellis, 26) and the firm's investment.

Let's remember why we're talking about the Goldman Sachs Trading Corporation. Waddill Catchings was hired to help expand the firm. His enthusiasm for investing in the late 20's, after a long period of conservative investing, proved disastrous. He made decisions on his own, even after being counseled to hold back (Ellis, 27), that almost brought Goldman Sachs to ruin.

Put Your Principles in Writing and Manage to Them: Goldman Gets It Right

On November 3, 1976, Gus Levy, the Managing Director of Goldman Sachs died. One of his largest accomplishments had been the creation of a large block-trading business that supported Goldman Sach' rise on Wall Street (Ellis, 180).

John Whitehead and John Weinberg succeeded Levy. Whitehead focused on high-level strategy, Weinberg focused on clients' operations (Ellis, 181). That's all great. Whitehead's contribution was to be long lasting. Now, remember we're reading a book written by Charles Ellis a strategist with long experience in the banking field. It was clear that he was thinking strategically when he wrote the chapter entitled "Principles." Whitehead, on a Sunday afternoon, filled a yellow pad with ten principles of the firm. Other partners suggested a few more for his list. What he ended up with is a simple list that they refer to in the annual report, in mailings to new employees at their homes (Ellis, 184) for everyone to see, and to, logically, their customers. They are on the Goldman Sachs website today.

You and I both know that Values and Principles are sometimes misused. Highly touted, rarely followed, or, maybe, ignored. Goldman Sachs seems to be different. Fiercely competitive, they drive their employees hard. They hire the best and expect the best from them. Try this: mention Goldman Sachs to friends of yours who know the investment community. See what they say. My experience shows that Goldman Sachs follows what they John Whitehead wrote back in the seventies. Teamwork, dedication, profits. It is all there. And - this is the big part - folks continue to live by the Goldman Sachs Principles today. Employees are expected to understand the Principles and use them in their decision making on a daily basis. They allow actions to take place in the fast-paced environment of a trading floor that reflect the views of senior leadership while allowing individuals great latitude in how they are applied (Ellis, 187).

Principles Applied - Jon Corzine: Goldman Sachs Lives By Its Principles

The Long Term Capital Management fiasco effected a group of senior firms on Wall Street because they had extended credit to LTCM that it used, in a highly leveraged environment, to build one of the largest hedge funds on Wall Street. The only problem was LTCM became too large and its bets too hard to un-ravel when the market began to turn bad. Yes, they could have waited for their bets to turn (as in fact they would turn) but the leveraged effects of their investments meant that margin calls almost forced them out of business. The Treasury Department forced a recapitalization of LTCM that called for Goldman Sachs to loan $300 million to LTCM, money that Jon Corzine, without authorization, invested (Ellis, 607).

That investment was "the straw that broke the camel's back" so to speak. Corzine, part of the six person senior management team, acted like the CEO he thought he was. He wasn't. The Goldman Principles said, basically, do the right thing, but remember the firm and your partners. He didn't and because of that, he had to leave the firm. The LTCM loan was just part of it. He was too "freewheeling" (Ellis, 609), and forgot that, while he was popular amongst the partners, he was ignoring the executive committee who called the shots. Wrong, un-Principled move. He left for a better opportunity as NJ Senator which ended up being a good move for everyone involved.

One final comment: If you read one book on strategy this year, read this one. It's long, yes. It is a well written book that you may apply to your firm - now and in the future. It shows how decisions you make now effect your firm for years and years, and delineates processes that are useful and applicable. It is no wonder that Goldman Sachs is so well regarded. Ellis brings that regard to light.

References

Ellis, Charles D. The Partnership. The Making of Goldman Sachs. The Penguin Press. 2008. [Other books by Ellis: Winning the Loser's Game, Capital and the biography of Joe Wilson.]

Goldman Sachs. Principles. http://www2.goldmansachs.com/our-firm/about-us/business-principles.html

Posted by jackmixner at 01:58 PM | Permalink

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Criteria of a web start-up with possibilities:

1. High quality start-ups have better than average success rate right now. There is no number two (Maney, 27).

Why are "hard times" start-ups more likely to succeed?

1. During hard times, they're more likely to be more purposeful.
2. A well managed start-up attracts more attention during a down-turn. It actually has less competition.
3. History shows hard times are a fine time to begin. HP started in 1939 (Maney, 28). Microsoft launched in 1975 - one of the worst environments ever (Maney, 28). Same for Cisco in 1984 (Maney, 28). After 2001 how about this list: LinkedIn, MySpace, Six Apart, Vonage, Wikipedia (Maney, 28)?

My read on the situation?

• Be a high quality start-up.
• Companies with good management have a better chance. If you've done it before and succeeded, money, obviously, is easier to get.
• Disruptive technologies will help you succeed (Mixner). A disruptive strategy can be a very big deal.
• So will a very experienced management team.
• If you need to raise money, figure out how to sell something early on.
• Then make some profits.
• More profits? Better odds of VC or Angel funding.
• Aren't experienced? Work very hard to attract an A list advisory board.
• Then attract management that will come on board when you are funded, or before.
• Then brag about both the board, and the management.

Need to confirm your target for a new product? Have a look at Practical Marketing's hot-off-the-press survey.

Maney, Kevin. Best of Times. Conde Nast Portfolio. 9 February 2009. Page 27. http://www.portfolio.com/news-markets/national-news/portfolio/2009/01/07/New-Economy-Needs-Innovation

Mixner, Jack. Disruptive Technology: Smaller Companies Have an Edge. http://mixnerstrategy.com/blog/2008/09/disruptive_technology_smaller.html

Practical Marketing. Growth Sectors for 2009. http://freshisgood.blogspot.com/2009/01/growth-sectors-for-2009.html

Posted by jackmixner at 06:29 PM | Permalink

www.mixnerstrategy.com

Posted by jackmixner at 04:49 PM | Permalink

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When you describe Orange County to folks from out of town, describing the politics as Libertarian is a good way to start. Most politicians - and business folks, for that matter - agree that less government is good government. The simpler things are for business, the more possibilities to make more profits. Profits are good.

Then comes an idea that is preposterous on the surface. Create a US Department of Innovation. More bureaucracy. More folks on the government payroll. More. More. More.

What about more patents? Would that be good? Of course.

How to reconcile bureaucracy and patents? The real question is, "How do we help more businesses survive the brutal first years so they can afford to patent their ideas - and get rich?"

The simple answer? Forget about it. A company with a good idea will succeed. Yes, we're have a momentary (from the long point of view) problem finding venture capital for start-ups. And yes, the problem seems to be even harder for round two funding. Lean and mean still works. Yes, it's harder right now, but compared to what? Some companies will fail. Their founders will go on to create new things somewhere else. Progress will continue.

Now, if we were to do one thing related to all this, what would we do? Invest in K-12 education so more folks are prepared to do the tough math that ends up patentable. But that's another story.

Reference

Revkin, Andrew C. Does Obama Need a Department of Innovation? New York Times. 10 December 2008. http://dotearth.blogs.nytimes.com/2008/12/10/do-we-need-innovation-department/

Posted by jackmixner at 11:02 AM | Permalink

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Katie Couric taught us all that colonoscopies are important, so we all rushed out to get one. While life-saving, they also require a day or so of uncomfortable preparation, maybe anesthetic, and an invasive procedure. They are also profit centers for hospitals, some of which have established stand-alone centers to handle the volume.

I heard recently about another alternative, the CT scan colonoscopy. While it apparently requires similar preparation, it is less invasive. The only problem with it is that, if they see something, your Doctor will probably recommend that you now have the regular procedure you were trying to avoid.

Olumpus has another wrinkle to the mix, a new colonoscopy camera combined with digital technology, that differentiates internal anatomy better and shows tissues of interest more clearly. The only problem is that the new cameras is more expensive than the regular camera. That's not a good thing for Olympus as it is trying to sell more in a down market.

Is any of this disruptive technology that is likely to storm the market and sell lots and lots for huge profits?

Normally a disruptive technology is cheaper, simpler, easier to use, limited in features but usable.

The CT scan colonoscopy is simpler, cheaper (maybe), easier and limited in features, but a positive result forces you to go to the regular scan. Not mentioned much, but still something to consider, is that the CT scan comes with some added exposure to X-rays, something you really don't need more of.

The new Olympus camera, while showing lots of new features, isn't cheaper, simpler or limited in features.

So, is anything here disruptive? It doesn't look like the new Olympus camera is disruptive. It really is a new addition to Olympus' regular line, a sustainable technology, not a disruptive technology.

The CT scan might be disruptive if it is cheaper, as it is simpler and a bit easier on the patient, especially if it doesn't show anything to follow-up on. If I were going to go that route, I'd make sure the CT scanning camera was a very low dose imaging device.

What should a hospital do?

• First, clearly, make the regular colonoscopy as easy-to-take as possible and market that fact. After all, like Katie Couric has told us repeatedly, colonoscopies save lives.
• Second, examine the utilization rates of their CT scanners. If some are under-utilized, there may be some possibilities for their use as colon scanners. We do need more information on how many CT scans need follow-up with a colonoscopy. If that rate is pretty high, the CT may never be a good option.
• Finally, and unfortunately for Olympus and the patient this comes last, they might consider the new Olympus camera, especially if they need to replace their regular cameras.

Here's my challenge for Olympus: make the new digital camera cheaper than the regular camera. I'll bet that happens in the long run, anyway. Do it now, or some other technology will eventually overtake their cameras, I'll bet, and ace them out of the market entirely. Alas, that won't be easy for Olympus, as flipping from a sustainable R&D scheme to a disruptive one almost never occurs successfully.

Reference

Weintraub, Arlene. The Inside Track In Medical Cameras. BusinessWeek. 15 December 2008. 070. http://www.businessweek.com/magazine/content/08_50/b4112070229819.htm

Posted by jackmixner at 03:56 PM | Permalink

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A sheik wanted a bridge - in the middle of the desert. The engineer told him he didn't need a bridge. The engineer's competitor built the bridge. The sheik was very happy as he got what he wanted: more public glory (Maister, 171).

Maister's book is one of Peter's favorites. It's not an easy read. It talks about building a big firm, a good market for Maister, but not really useful to all of us. But it is one of Peter's favorites. Why?

Two reasons:

• You come first, not your client. Are you in the right business? Are you cruising or losing? And, here's a big question, are you willing to be managed?
• Once you figure out where you stand, the focus shifts to your firm. Are values enforced? Are there things you are intolerant of? Does everyone in your firm know what they are?

Is this useful in your firm? Yes, especially if you want to grow into a firm that gives its clients what they want and does it in an honorable manner.

Listening, especially to clients, is part of it. Understanding yourself is another part. Understanding your firm is important, too. Maister's taken the time to think it all through.

Your attitude toward your values in important. Your attitude toward your firm's values is important. Your attitude toward your client's values is also important. Three different sets of values. All important. Not all of them are obvious. Watch and listen carefully, especially early in a business relationship.

References

Maister, David H. True Professionalism. The Courage to Care About Your People, Your Clients, and Your Career. The Free Press. 1997. 

Peters, Tom. Reinventing Work The Professional Service Firm 50. Borzoi Book. 1999.

Posted by jackmixner at 10:11 AM | Permalink

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This is one of those books I wish I'd read a long time ago. E. B. White used to be a favorite of mine because of his concise way of putting words to paper. Strunk and White's Elements of Style took conciseness to a new level. Systematic conciseness it might scientifically be called.

Ogilvy's book could have been written by White. It's simple, to the point, entertaining, and oh so useful.

What works? What doesn't? It's in the book. Best thing for me? First, reading about advertising makes for better advertisements. Read one book? Yes. Read multiple books? Yes, as well.

Something's changed, however, hasn't it? Advertising is not as important as it once was. The web is taking over. Advertising is dead.

Reading Ogilvy reminded me that advertising is not dead. The web folks today would to do well to start with Ogilvy as they create websites for all of us. Why? That's tricky. One reason might be the honor of it all. Ogilvy reminds us that the sole intent of advertising is to sell stuff, that's true. But he never tries to sell the idea that chicanery of any sort makes sense. You and I both know that when you go on the web, you have to watch a bit to make sure something doesn't happen to your computer. Cookies and all that might do more than we expect. Ogilvy couldn't rely on trickery as much. A good ad sold because it was a good ad. There wasn't another reason.

His messages about simplicity, design, directness, density, and targeting still resonate. They are still applicable. The words "Think small" worked for Volkswagon. They might work for you. Ogilvy points out, however, that Volkswagon got lucky. You might want to know why as it effects your next campaign, web based or not. Have a look.

Reference

Ogilvy, David. Ogilvy on Advertising. Vintage Books. 1985.

Posted by jackmixner at 09:43 AM | Permalink

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Bill Walsh's three Super Bowl wins in the eighties made him famous. After the last one, in 1989, he announced his retirement. He had created the West Coast Offense (based on preparation, planning, precision, and poise) and was at the top of his career. Then he decided to write a book. Now, this isn't just any book. It tells how to be a football coach. It has first meeting lectures, and plays. It even has a lecture to give the secretarial staff about how to act. The book has everything.

The book also spends a chapter on what the value system for a winning team ought to be. This is Walsh's "philosophical counsel" (Walsh, 15-19):

• Be yourself. Take advantage of your strengths; diminish your weaknesses.
• Be committed to excellence. Work hard.
• Be positive. Teams respond better.
• Be prepared. The most important aspect of coaching.
• Be organized. Don't waste time or resources.
• Be accountable. Take responsibility.
• Be a leader. Develop a vision; establish a strategy to meet the vision; inspire everyone to carry it out.
• Be ethical. Have a strong value system.
• Be flexible. Adapt.
• Believe in yourself. Have confidence in yourself and your system.

The best story in the book is about a training camp for coaches. Sid Gillman, who was going to win the Super Bowl that year, spent a day at the chalk board with Vince Lombardi learning how to run the sweep. He sat in the front row. He listened. He concentrated. He asked questions. One of the best was learning from the best. That's winning football (Walsh, 31).

Reference

Walsh, Bill with Brian Billick and James A. Peterson. Finding the Winning Edge. Sports Publishing Inc. 1998.

Posted by jackmixner at 08:23 PM | Permalink

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Akio Morita was one of the founders of SONY after the war. He ended up building the world-wide marketing effort that made SONY what it is today. Read his book and you end up thinking "this was a guy who was able to let others make up their own minds, and act themselves." That was all true except for one product - the SONY Walkman.

When the Walkman was initially designed, no one at SONY thought the unit had any prospects - except Akio Morita. He became their one man focus group. Luckily he was high enough up in the company that he got his way on the Walkman and was able to bring it to market (Morita, 80-82).

He dictated most of the specs: lightweight, reliable (of course), miniature headphones, two output jacks so a couple could share the experience (that one didn't really sell Walkman's but it seemed like a good idea at the time), but not the name. Morita was traveling while other people on his team dreamed up the name and then went ahead and created all marketing materials. As he was objecting, it was too late - the materials were already printed and ready to go (Morita, 81).

Of course, many dominant CEOs get their way with new products. The one in more recent times, however, is Steven Jobs. He really is the one person focus group (Kahney, 53). He seems to do it a little bit differently than Morita. Jobs' method uses multiple iterations until the product is ready to ship. He'll look at the look, the feel, the utility, the quietness (no fans in the early Macintosh, even if the thing almost burnt up inside), the software - everything.

On introduction, the Apple new product usually isn't much customizable by outside suppliers. The iPod basically isn't, although there are lots of cases and such-like available. Finally, Jobs has lightened up, clearly, in that Apple allows third party software folks to create software, especially for the i Phone, and sell it, once approved, on the Apple site.

I bring up SONY and Apple for another reason. Early on, Morita got his way. Jobs did, too, then he left. After they gave up control, things started to flounder. SONY is floundering, as did Apple until Jobs returned in the late nineties.

So what's the solution? Not clear.

What is clear is that, sometimes, one person focus groups are best. The Walkman, the iPod, and the iPhone prove it.

The hard part is competing with a one man focus group.

Reference

Kahney, Leander. Inside Steve's Brain. Portfolio. 2008. 

Morita, Akio, Edwin M. Reingold and Mitsuko Shimomura. Made in Japan. Akio Morita and SONY. E. P. Dutton. 1986.

Posted by jackmixner at 04:09 PM | Permalink

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Read a book. Learn all about the Dodgers during the time Jackie Robinson joined the team. That was the idea.

The Boys of Summer is a classic. Kahn tells two stories, one about himself growing up in Brooklyn, and the second about interviews he completed with many of the Dodgers during the Robinson days.

The reviewers liked either the first story or the second. Not, usually, both. Me, I liked the second story about the players and the epilogue about what happened later. They're all interesting, actually.

Race was a pretty big issue in the fifties. Might still be if we wanted to talk about it.

The real story here, however, was about how a bunch of baseball players came to respect each other and understand that life isn't necessarily easy for anyone, and that being together - and working together - is a good salve.

References

Kahn, Roger. The Boys of Summer. Perennial Classics. Harper Collins. 1971.

Posted by jackmixner at 05:16 PM | Permalink

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First, there were the individuals: Ken Lay, Jeff Skilling, and, last but not least, Andrew Fastow.

The first, the founder and cheerleader for the energy business, claimed ultimately not to really understand what was going on around him.

The second, the consultant who was smarter that everyone else ended up being CEO. He resigned just before things began to unwind.

Finally, the last was ultimately the CFO, but earlier the creator of many of the off-balance-sheet financings that kept Enron going for so long, and whose financings made him rich without anyone higher up knowing - or so they say.

Then there was accounting experts, Arthur Andersen. Their problem? They were paid too much. All that money (Enron was one of their largest clients) jaded their protective stance toward the stockholders. When pushed to approve something they didn't like or didn't have enough time to inspect, they didn't push back vigorously enough. Then, there was no Arthur Anderson after all its clients left.

The analysts were experts on the stock had buy ratings up until the very end (Mclean, 407). They claimed "Enron lied to them" (McLean, 407). For years.

The banks and the investment houses all wanted part of the action. Even when they knew something was wrong - they could smell it, I'll bet - they stayed in the deal. They too relied on "good-faith accounting judgments that were reviewed by Arthur Andersen" (McLean, 407). Merrill Lynch and four executives were charged by the SEC. Merrill paid fines "without acknowledging that it had done anything wrong (McLean, 408)."

The Board said it was management's fault. It "was duped" (McLean, 408).

Always - always - it was someone else's fault.

The big challenge today is to ensure that it doesn't happen again.

One bit of trvia about how Enron made money during the energy crisis in California in 2000. Normally, some company would produce energy in California and sell the energy in California. Enron figured out a way around this: they'd buy energy in California, ship it out of state and then reimport the energy to California - at much higher prices (McLean, 274). And they got a way with it for a time. They were applauded for good business practices at the home office. Amazing.

Reference

McLean, Bethany and Peter Elkind. The Smartest Guys in the Room. The Amazing Rise and Scandalous Fall of Enron. Portfolio. 2003.

Additional Information on the more recent energy market company:

IntercontinentalExchange Inc. https://www.theice.com/homepage.jhtml

ICE CEO says banks' CDS capital needs to increase. http://www.marketwatch.com/news/story/story.aspx?guid={02d2d43d-1e61-4a31-a363-56e75f2cd7ca}

TESTIMONY OF JEFFREY C. SPRECHER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, INTERCONTINENTALEXCHANGE, INC., BEFORE THE HOUSE AGRICULTURE SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT COMMITTEE ON AGRICULTURE. JULY 12, 2007. https://www.theice.com/publicdocs/press/PR_ICE_HOUSE_TESTIMONY_071207.pdf

Posted by jackmixner at 03:53 PM | Permalink

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Three years ago Nicholas Negroponte proposed building a $100 laptop for third world kids. Then he actually set about creating one. Interesting things happened on the way to final delivery. Mary Lou Jepsen joined Negroponte as Chief Technology Officer. She discovered that the laptop could be a lot cheaper if she made it with a cheaper, new technology screen.

Eighteen months ago Asus introduced its eee PC (easy to work, easy to learn, and easy to play) netbook. A cloud computer, it was designed to be a simple, lighter version of the big old laptops we're all familiar with.

Negroponte got there first with the $100 laptop (that now costs about $300 or so because $100 wasn't possible).  This laptop has lots of simplicity built in, so much so that some folks say its too simple. But the concept, cheap, easy to use especially in third world environs, wasn't such a bad idea.

Asus took the idea and created a cheap laptop for all of us, not just third world kids. Asus calls its new product the netbook. Prices are falling pretty rapidly and may approach the $100 laptop's $300 price (especially after the holidays).

It's all disruptive technology. The laptop folks continue to focus on sustainably improving their laptops. They tweak this, increase the speed of that, add a new color. Everyone is happy.

Well, just about everyone. Third world kids needed a new box. So did folks that don't really need all the capabilities of a big laptop. Thus the $100 laptop and the netbook small, light-weight machine.

Not quite as good. Not all the capabilities. But still, very useful for the folks that "get it".

Now there is a new disruption. Pixel Qi, Jepsen's follow-on company is now disrupting the screen technology. She realized in the $100 laptop program that the screen was the limitation. She's asking, and this is the new part, old line LCD manufacturers, to use her new, patented technology to bring cheaper screens to market.  Old line folks using new technology that isn't really as good as what they've got, the normal test for a disruptive technology.

The whole idea is disruptive. And that's the idea. Take what you've learned and make things simpler and cheaper. All three of these technologies do that. Asus started a new market. So is Jepsen. $100 laptops started it all.

One idea, smaller, cheaper laptops, has gone lots of places. Watch for the next installment in stores near you. There will be one.

References

Copeland, Machael. Disruptors: The 'netbook' revolution. Asus created a new market with a small, inexpensive portable computer for soccer moms and their kids. CNNMoney.com. http://money.cnn.com/2008/10/13/technology/copeland_asus.fortune/index.htm?postversion=2008101614

Greene, Kate. Simplified Displays. Mary Lou Jepsen is developing technology originally created for the $100 laptop project. Technology Review. 7 October 2008. http://www.technologyreview.com/printer_friendly_article.aspx?id=21472&channel=computing&section=

Posted by jackmixner at 12:06 PM | Permalink

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IDEO started out as a design firm. They designed Apple's first mouse and the first soft-handled toothbrush. Now they teach other firms to be more innovative. Some of what they do you've heard before: talk to customers and see how they are using your product or service before you make suggestions.

Sloan-Kettering in New York wanted to make it easier to use their cancer treatment services. They hired IDEO to have a look (Dvorak). Two things became apparent:

1. What Sloan thought was wrong - long wait times - wasn't a big problem from the patient point of view.
2. The problem was actually stress. Some tests were two step processes. Take a blood test. Wait around for the result. If the result was positive, you were able to receive chemo that day. Flunk the test and you had to wait for your next treatment. The two steps, both on the same day, were too stressful for patients. Something had to change.

What to do? Let patients come in for the pre-test a day early and go home. Call them back if they could proceed to chemo that week. What's the big deal? Patients could handle the waiting. What they didn't like was the wait for the test results.

Sloan changed the order of things and everyone became happier. Not a bad result.

The solution didn't take IDEO long to come up with. All they did was ask a few questions, watch what was going on, and then, finally, make a couple suggestions.

The IDEO process is pretty straight-forward (Dauphinais, 271-281).

1. CONFLICTS. The first step probably wasn't actually looking at what was going on or listening to Doctors or patients. It was forming a consulting team that was likely to ask questions that conflicted with what everyone was thinking. That meant forming a small team that left IDEO headquarters and moved into the hospital to watch.
2. FUTURE FOCUS. The small team went through training that focused on what was likely to be available in the future. In this case, they saw that a one day process is shorter and less stress inducing if it actually could take two days. Part of that future in this case was increased interaction between the nursing staff and patients. Somebody had to make that stress-reducing call after the test. When they did that, everyone was happier.
3. PROTOTYPE RAPIDLY. The IDEO team didn't wait around to test things. Right off the bat, they had customers calling in for results. Now, it was illegal for patients to call nurse's cell phones (Dvorak). The customers did it anyway. All IDEO had to do was fix the hospital's phone system to make it interact with nurses better. They failed a couple times, but no one complained. The result - faster communication about whether to come tomorrow and when to prepare the chemo drugs - saved everyone, patients and nursing staff alike, time and stress, a good result.
4. GET PHYSICAL. You've asked questions. You have an idea what the solution looks like. Go ahead and make up an actual, physical prototype. The prototype for the X-1 aircraft was a 50 caliber bullet. The prototype for the Aerobie football (it always is a spiral) was actually designed with straight fins to make it easier to stand the football up for a kick-off (Kelly, 109-111). Only after they made the prototypes and tested them did they realize that the X-1 was probably pretty stable and that the Aerobie was straight every time.
5. PLAY. This one sounds like a cliché, and I guess it is. Make team work - and all creative work takes place in teams - fun. Turn it into play. The simple stuff like having toys in the office, field trips to museums and competitors, training on new topics all seem to work. IDEO takes pride in their "greenhouse" where they grow new ideas (Kelly, 121). If the prototype is huge - like a rail-road car, for instance - work in the car itself (Kelly, 129). Every project gets a logo. Job's had a pirate flag over the Macintosh design center (Kelly, 130). One of my clients always brings lots of nerf toys to planning sessions. Get too serious, and you're likely to get hit in the head with a football from across the room. Retaliation is encouraged.

It all works. IDEO is getting a lot of press lately. That's fine. You can put their ideas to work without them. Try it.

References

Dauphinais, G. William and Colin Price, Editors. Straight From the CEO. The World's Top Business Leaders Reveal Ideas That Every Manager Can Use. Simon & Schuster. 1998.  

Dvorak, Phred. Business Take a Page From Design Firms. Wall Street Journal. 10 November 2008. http://online.wsj.com/article/SB122608904288009265.html?mod=googlenews_wsj#articleTabs%3Darticle

Kelly, Tom with Jonathan Littman. The Art of Innovation. Lessons in Creativity From IDEO, America's Leading Design Firm. Doubleday. 2001.

Posted by jackmixner at 10:10 AM | Permalink

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Rhetoric speaks. Jack Welch used a speech writer to put into words all the things he was thinking when he ended up CEO at GE.

Sometimes, we think all of strategy is a team effort. Lane makes the case that Welch, working all by himself, decided what to say. He just needed help in saying it. Welch realized that without "world-class" (Lane, 108) communication, GE wouldn't grow the way he wanted it to.

Unsaid in the review of Lane's book is any mention that Welch is normally an introvert. Maybe he wasn't. But he was smart enough to know that everything he said and forum he said it in, had to be properly scripted.

Interestingly, in the Welch's column this month is BusinessWeek they talk about how deleterious being an introvert can be to your career. Their advice? Fight it. Present every time you are able. Ask for advice on how you did. Don't be a wall-flower.

Welch is just giving advice he received in the early eighties. It seems to have worked for him.

Reference

Lane, Bill. Jacked Up: The Inside Story of How Jack Welch Talked GE into Becoming the World's Greatest Company.  http://www.strategy-business.com/press/article/08408a?pg=0 . Best Business Books 2008. Strategy+Business. Winter 2008. Page 108.

Welch, Jack and Suzy Welch. Release Your Inner Extrovert. BusinessWeek. 8 December 2008. 092. http://www.businessweek.com/magazine/content/08_49/b4111092962041.htm

Posted by jackmixner at 03:53 PM | Permalink

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Microsoft had a problem. Its 90,000 employees and $60 billion in annual revenues weren't enough to leverage the company into cloud computing.

Enter Ray Ozzie. An old techie friend of Bill Gates, Ozzie has begun a transformation at Microsoft to take advantage of the disruptions taking place in the market as companies migrate from desk top bound software (like the Microsoft Office products) to a web bound process where things are a bit different.

Way back when, Microsoft successfully migrated to the Windows environment. Then they migrated successfully to the web environment. All along, they still provided software that you installed on your computer for your personal use.

A great example of a cloud product that has been wildly successful isn't a Microsoft product at all. It's from Apple: iTunes. You install it on your computer to use it as an off-line media organizer. Then you go on-line to buy songs, stream stuff, and get recommendations (Levy, 174).

Now comes the red shoes.

Normally, when Microsoft does something, everybody gets involved. That guarantees slow launches with - maybe - plenty of bugs. How to solve the fast, bug-free problem? That's where the red shoes come in.

Ozzie created a company within a company right on the Redmond campus. One thousand engineers are focusing on four new product lines all by themselves. They don't have to report to anyone else. No one else gives them permission to do stuff. They just do it. Sort of like Nike's old slogan - just do it. They all needed a uniform, thus the red Nike shoes.

Company-within-a-company. No rules. Just do it. Must be be odds against success for Microsoft to take the risk of such an organization.

Big risks translate into big pay-offs. It looks like Microsoft is about to succeed at this new risk.

We'll see.

Reference

Levy, Steven. Ray Ozzie Has a Plan. Wired. December 2008. 170.

Posted by jackmixner at 03:16 PM | Permalink

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Open sourcing your software makes sense. So does open sourcing your hardware, and your services, too.

Why do it? Open sourcing is tough to make money at, per se. Where the profits come from is the knowledge you gain by being the center of the action relating to your project, whether it be software, hardware or services.

References

Cook, Scott. The Contribution Revolution. Letting Volunteers Build Your Business. Harvard Business Review. October 2008. 60.

Thompson, Clive. Build It. Share It. Profit. Wired. November 2008. 166.

Posted by jackmixner at 08:39 AM | Permalink

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Pitching a business plan? Consider (Business Briefing, R2):

• It's hard to fake excitement about your plan. Make sure it shows.
• If they can't wait to break into your conversation, they're listening. Listening is good.
• If they are mirroring your gestures, that's a good sign. Mirroring is innate. Everybody notices what's going on. Take advantage of it.
• People can read your fluidity, the consistency of your presentation. Practice far in advance. People notice.

The bottom-line: Face to face dialogs are where the decisions get made. If you are attempting to work via email, reconsider your strategy. Spend more time at the water cooler.

Reference

Executive Briefing. The Power of Nonverbal Communication. Wall Street Journal. 20 October 2008. R2. http://online.wsj.com/article/SB122426675804545129.html

Posted by jackmixner at 07:52 AM | Permalink

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Two key facts (Engardio, 23):

1. The assumption that innovation and productivity alone will sustain the American standard of living may prove erroneous.
2. Real incomes have declined over the last decade, even as productivity increased.

Two interesting solutions:

1. Look for more state - and international support for - investment in production capacity in growth industries like autos (yes, there is growth coming), nanotech, and renewable energy.
2. That support will likely flow to companies in GDP producing industries: you've got to make something to survive.

Two interesting opportunities:

1. Position your company as a problem-solver in industries that will support high-paying, high technology jobs that create wealth.
2. Use that positioning to team with the government in high capitalization industries. Look for more government regulation in financial industries and manufacturing industries. If the government is going to provide subsidies, they are going to require new efficiencies that increase productivity - and GDP.

Reference

Engardio, Pete. Forget Adam Smith. Whatever Works. BusinessWeek. 27 October 2008. 22. http://www.businessweek.com/magazine/content/08_43/b4105022816429.htm

Posted by jackmixner at 07:28 AM | Permalink

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The financial crisis we are witnessing today was fed by greed, lack of leadership, lack of controls, and a whole lot more. All this has happened before. sometimes at some of the most well known companies in America. Sometimes, it is hard to remember that well-respected people were making all sorts of bad decisions, decisions that sometimes led to personal and business failure.

Archer Daniels Midland Company has been a well respected pillar of the chemical, food and agricultural community for a long time. Things were wrong there in the early nineties. ADM's story is important because it reminds us that, while things have gone wrong today what with the financial mess we are experiencing, they have gone wrong in the past as well. That this has gone on in the past is not a pretty reality exactly.

The story boils down to this: a president of a division at ADM was stealing from the company to the tune of about ten million dollars over some years. To cover his tracks, he made up a story about someone from abroad threatening his family - and called the FBI. The FBI investigated, and, to continue to cover his tracks, the president reveals a whole series of illegal indiscretions the company has made and that he was privy to: price-fixing on an international scale and theft of company funds on a large scale (Eichenwald,30).

The story is intriguing and interesting. The facts are proven. People went to jail. Careers were ruined. That's all well and good.

The message of all this, while blatant, is subtle at the same time. Let's call it the "slippery slope" we are all so used to.

At ADM a culture grew in which both theft and price-fixing were accepted. Everyone did it. No one objected. It appears that some people left, but not many. The FBI was astounded that one person would reveal so much - the president of a division, no less - and further, that no else in this very large scheme even considered saying "This is wrong, we've got to stop," much less called the FBI. Some of the players were internationally known business leaders with contacts very high in the federal government. OK, greed played a role. The "I deserve more - this is a good way to get it," mentality grew too large. Lots of people participated.

This book should be required reading for all sorts of managers. Business schools should require it. Why? Because it reminds us all how easy it is for things to go very wrong in the management of a company. It happened to ADM. It can happen to your company, or mine, as well.

Reference

Eichenwald, Kurt. The Informant. A True Story. Broadway Books. 2000.

Posted by jackmixner at 02:06 PM | Permalink

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Gap is a specialty casual retailer; Old Navy is a value-oriented family store; Banana Republic is a moderately priced designer retailer (Rubinfeld, 299). 

You knew that already. But Gap, Old Navy and Banana Republic didn't know that until Paul Pressler left Disney and moved to Gap Inc. His first move was to clearly define the core values of each of the brands.

Once you know what the value of your retail operation is, now figure out how to turn your brand's values into growth. Rubinfeld plotted out the growth of Starbucks early on in his tenure during the period when Starbucks grew from one hundred to four thousand stores. Values first, yes; then lay out a framework that takes those values to the mundane of such issues as store daily opening and closing. Starbucks uses demographics to choose locations. Then it examines the parking lot of suitable locations. Oil on the tarmac? Good. That's evidence of lots of traffic which helps build sales. Cluster your stores. Budget opening properly. They've thought of it all (Ehrenfeld, 7).

Innovation is part of all this. Your insights - especially in retail - define your innovation path (Rubinfeld, 300) :

• Prove you have the license to expand the category or enter a new one by planning far in advance.
• Time your entry properly. Now, what with the changing financial statistics related to recession, might be a good time to dust off old plans and re-examine the possibilities that you have had time to consider before. Things, obviously, will turn around eventually.
• Finally, if you are abandoning your current demographic or expanding in to a related one, make sure your plan - and your products and facilities - make enough room for profits in the new one.

References

Ehrenfeld, Tom. Starbucks and the Power of Story. How the coffee retailer uses its own narrative to brew global success. strategy+business. 10 October 2008. http://www.strategy-business.com/press/article/08211?pg=0

Rubinfeld, Arthur and Collins Hemingway. Built for Growth. Expanding Your Business Around the Corner or Across the Globe. Wharton School Publishing. 2005.

Posted by jackmixner at 01:35 PM | Permalink

1+714.449.1040     www.mixnerstrategy.com

Steven Jobs always gets the easy jobs.

• Create a new industry with the personal computer.
• Implement new technology for the first time with the MacIntosh computer.
• Battle with a CEO - and lose - in his battle with John Sculley.
• Return to a broken company with the aim of turning things around. 

In the first quarter of 1996, Apple Computer lost $69 million, laid off 1,300 staffers, fired their CEO, and, finally, brought in Gil Amelio as the new CEO. Amelio continued to cut out the pork in Apple's operation by reducing the number of projects from three hundred to about fifty. Amelio needed a new operating system for the Mac so he bought Jobs' NeXT computer because its operating system was up and running and perfect for the Mac. Apple had forty different product lines, a confusing, unfocused array that needed culling.

After a series of losing quarters, the Board asked Amelio to leave and hired Jobs as CEO (Kahney, 22).

When Jobs came on board, Apple had forty product lines. His job: reduce the forty to the profitable few. Make a profit. Now. How'd he do it?

Job's Seven Key "Realignments" (Kahney, 26-33)

• Replace most of the Board with tech industry allies, including Larry Ellison from Oracle.
• Resolve the suit with Microsoft about similarities between Apple's operating system and Microsoft's. Persuade Mircosoft to invest in Apple to show good will.
• Hired a new marketing company - TBWA/Chiat/Day - to create a new, bold marketing campaign.
• Dump the clone business relationships. No more non-Apple computers shipped with the Apple operating system.
• Simplify the pipeline. Just four products for the company: Consumer Portable and Desktop and Professional Portable and Desktop. Every thing else got dumped, inclu