01 October 2017

Interrupted or Disrupted?

"Disruption is a process. not an event, and innovations can only be disruptive relative to something else."

--Clayton M. Christensen


There are different kinds of interruptions in our lives.  Some involve personal and family matters.

Others are work-related as when colleagues step into cubicles to ask a question, or just chat.  "The average American worker has 50 interruptions a day, of which seventy percent have nothing to do with work," said W. Edward Demings, a statistician and best-selling author.    

What about the time a colleague was interrupted as they were speaking? 

Overtaken by a corporate ADD, managements have been known to interrupt their strategies, and plans to get there, after reading a book, or going to a seminar, or having a new member join the team.  

Most of the time an interruption is something we initiate and therefore control its frequency. 

Defining our terms

What about disruptions?  They're largely external to the business. 

Most are familiar with the book, The Innovator's Dilemma, published in 1997.   The main idea is that "disruptive innovation is one that transforms a complicated, expensive product into one that is easier to use or is more affordable than the one most readily available," according to its author, Dr. Christensen who is quoted above.

That type of disruption makes it possible for a wider population to have access to products (Warby Parker--eyeglasses) and services (Spotify--music) previously reserved for certain market segments based on cost. (Innosight)

Another definition which quickens the pace of destructive forces is called "big-bang disruption."  As the theory goes that kind of disruptive behavior doesn't come from competitors in the same industry or even from companies with a remotely similar business model.  (Downes and Nunes:  Big Bang Disruption)

And switching from one product to another was a matter of weeks, not months or years.  To illustrate their point the authors highlight free navigation apps, preloaded on smartphones, doing a quick number on TomTom, Garmin, and Magellan.

Navigating disruptions

In an economy as large as the U.S., with an estimated 2016 Gross Domestic Product (GDP) of $18.5 trillion, there's room for several disruptive theories.  Regardless of which idea you subscribe to, if any, what are ways incumbents can survive, or even thrive by becoming a disruptor?

S
ome thoughts:

1. Beware mortal threats.  External markets and customers continually send out signals as to shifting interests.  However, those caution flags, which can become red flags, are only helpful if someone pays attention, interprets the signals properly, and passes on the intelligence. 

Is anyone listening?

The caveat is that consumers didn't know they wanted a minivan, a PC, or an iPhone until the products were placed in front of them.    

Being part of an inner circle is a disadvantage when it comes to minimizing disruptions.  Those positions are generally too far removed from the changing tastes of ordinary people.  

If there's any good news it's that the pace of major disruptions, from appearance to impact, is slower than conventional wisdom suggests.  Big-bang disruption not withstanding.  (Leinwood and Mainardi). 

Nonetheless, the arrival of a disruptive force (Netflix waiving late fees against Blockbuster),  aimed in your direction (digital cameras providing instant gratification), potentially becomes a mortal threat (Facebook leveraging its platform to compete with SMS Messaging).  

2. Stay close to current users.  No business should take its customers for granted.  Customers today can be former customers tomorrow.  That's why building relationships carries greater weight than mastering a particular kind of social media.    

The taxi industry had only to explore their customers' wants and needs to limit the damage inflicted by Uber and Lyft.  Apparently no one in the surface transportation business bothered to look in the direction of convenience.    

Consider Amazon's philosophy: "Pay attention to competitors but obsess over customers."

3. Get close to potential users.  Current customers are one source of growth but have their limits.  Screened carefully, potential users are another way to grow profitably.  

What do you know about potential customers?  Their thinking?  Their practices?  Their current suppliers?  What are they dissatisfied with where they currently buy?   When is the last time anyone on the management team held a series of in-depth conversations with prospects and circulated those findings?      

4. Keep improving.   Corporations may contribute to their own disruption by holding on to the status quo.  Being good at manufacturing or services can be detrimental to the health of an enterprise as success is taken for granted. 

The current business model may need to change to take on new types of competition.  

How to improve the execution of current strategy?  That's a dedicated meeting waiting to happen.    

5. Don't panic.  What good does it do to hit the panic button when you see disruption coming?  

In September, there were numerous meteorologists in Florida helping us through Hurricane Irma. Working long hours, they offered spaghetti maps and cones, provided tips on safety, but just as important kept encouraging everyone to stay calm.  

Brian Shields, WFTV (ABC), Orlando, repeatedly said, "We're going to be okay."  Without  diminishing Hurricane Irma's potential threat, Brian was a source of emotional strength.  

When it comes to being disrupted, be realistic, but don't panic.

What else to learn?

If you're not capable of disrupting then look for holes in existing markets where competition is scarce.  "Non-disruptive creation," promoted by W. Chan Kim and Renee Mauborgne, may be a third option as it's not always necessary to beat the current competition. 

Sometimes the way forward is finding new markets like The Honest Company.  After the birth of her first child, actress Jessica Alba, couldn't find high-quality, eco-friendly baby products, so she started a company, now with a $1 billion valuation, to produce them. 

Create your future and not let others do it for you.  

Hear this

It comes from Anshu Sharma, a venture capitalist.  In a recent interview with The Wall Street Journal, Mr. Sharma offered:

"In terms of who wins in a given market, the fundamental question is and has always been, who understands the user better?"



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01 September 2017

The Duties of a Leader

"The goal of thinking hard about leadership is not to produce great or charismatic or well-known leaders.  The measure of leadership is not the quality of the head but the tone of the body."  

--Max Dupree


In 1993 I had the privilege of attending a conference sponsored by Leadership Network in Orlando, Florida.   This was an opportunity to learn from some of the better minds about sound behaviors related to leadership and management.

On the program were two men of distinction who have had a lasting impact on a large number of individuals--Dr. William Bridges and Max Dupree.   

Dr. Bridges, who passed February 17, 2013 at age 79, was known for his pioneering work which transformed the way people think about change.  The title of his first book, "Transitions," was written after the loss of his wife, Mondi.  It has sold over a million copies.  

The thesis for Dr. Bridges teaching is simple:  It's important to understand transition (internal) as a way for organizations to be successful when undertaking change (external).

"It's not the change--it's the transition"

Harvard educated, Dr. Bridges was low-key in his approach to transition--always with practical applications.  The context for that presentation in 1993 was that the topic of "change" happened to be all the rage.  Books were flying off the shelves (few e-books then) from "experts" telling all who would listen that their businesses needed to change and offering ways to make that happen.  

Along comes William Bridges to remind us that if you want to be a champion for change it's critical to allow for the emotional and psychological responses (transitions) which employees, and organizational cultures, go through at different speeds.  

An important insight.

An absence of corporate jargon

Next came Max Dupree,  author of the best-seller, "Leadership is An Art," first published in 1989.  Mr. Dupree died August 8, 2017 at the age of 92.  

Mr. Dupree was chief executive officer (CEO) of the office-furniture maker Herman Miller, Inc., Zeeland, Michigan, from 1980 to 1987.  He was also a son of the company's founder, D. J. Dupree who started the business in 1923.

The signature thought in "Leadership is An Art:"

"The first duty of a leader is to define reality.  The last is to say thank you.  In between the two, the leader must become a servant and debtor.  That sums up the progress of an artful leader." 

Max Dupree's writing was informed by his work in the family business and his Christian faith.  

Suggesting corporate leadership embrace "oddballs" and form "covenantal bonds" with employees was outside the mainstream for management books nearly three decades ago.   However, his clear thinking and fresh ideas resonated with many. "Leadership is An Art" has sold over 800,00 copies in hardcover and paperback, influencing a generation of business and nonprofit leaders. 

Character-shaped principles 

Here are some principles which guided Mr. Dupree's life:

1. The signs of outstanding leadership appear primarily among the followers.  Are the followers reaching their potential?  Are they learning?  Serving?  Do they achieve the required results?  Do they change with grace?  Manage conflict?

2. Try to think about a leader, in the words of the gospel writer Luke, as "one who serves."

3. Leadership is a concept of owing certain things to the institution.  It is a way of thinking about institutional heirs, a way of thinking about stewardship as contrasted with ownership.

4. The art of leadership requires us to think about the leader-as-steward in terms of relationships:  of assets and legacy, of momentum and effectiveness, of civility and values.

Leaders should leave behind them assets and a legacy.

5. People are the heart and spirit of all that counts.  Without people there is no need for leaders.   

6. Leaders are responsible for future leadership.  They need to identify, develop, and nurture future leaders.

7. Leaders owe a certain maturity.  Maturity as expressed in a sense of self-worth, a sense of belonging, a sense of expectancy, a sense of responsibility, a sense of accountability, and a sense of equality. 

Another way to think about what leaders owe is to ask this question:  What is it without which this institution would not be what it is?

Final thoughts from Max Dupree

No doubt humility plays a role in the progress of an artful leader.  At least that was my impression after hearing Mr. Dupree speak. 

What do his closing words below say to you?

"In a day when so much energy seems to be spent on maintenance and manuals, on bureaucracy and meaningless quantification, to be a leader is to enjoy the special privileges of complexity, of ambiguity, of diversity. 

"But to be a leader means, especially, having the opportunity to make a meaningful difference in the lives of those who permit leaders to lead."


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01 August 2017

An Address about Justice

"The essence of justice is mercy."

--Edwin Hubbel Chapin


Here's a commencement address delivered on June 3, 2017 by U.S. Supreme Court Chief Justice, John G. Roberts, Jr.  It's given at the Cardigan Mountain School, Canaan, New Hampshire.  Chief Justice Roberts' son, Jack, is in the graduating class.

Cardigan is a school of privilege where graduates are going to hear from the Chief Justice about the need to experience "injustice" at some point in their lives: 

"I hope you will be treated unfairly, so that you will come to know the value of justice."

The wisdom in his speech is useful for all ages.



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01 July 2017

Tracking the Economy

"Stocks opened at a record high Monday, June 19, 2017, with the Dow Jones Industrial Average topping 21,453 as tech stocks rebounded from a lackluster prior week." 

-NBC News

We keep reading headlines about the Dow Jones Industrial Averages hitting new records. 

What is the Dow?

The Dow is a stock index made up of widely traded large companies created by Dow Jones & Company editor and co-founder, Charles Dow, in May 1896.   From that beginning only General Electric remains on the list.

There are close to a 100 indices (Nasdaq, Russell Indexes, Standard & Poor's).  But the Dow Jones Industrial Average seems to get most of the attention. 

Ever wonder what companies make up the Dow 30?  Here's a look at the current list:


MMM 3M

AXP American Express

AAPL Apple

BA Boeing

CAT Caterpillar

CVX Chevron

CSCO Cisco

KO Coca-Cola

DIS Disney

DD E I du Pont de Nemours and Co

XOM Exxon Mobil

GE General Electric

GS Goldman Sachs

HD Home Depot

IBM IBM

INTC Intel

JNJ Johnson & Johnson

JPM JPMorgan Chase

MCD McDonald's

MRK Merck

MSFT Microsoft

NKE Nike

PFE Pfizer

PG Procter & Gamble

TRV Travelers Companies Inc

UTX United Technologies

UNH UnitedHealth

VZ Verizon

V Visa

WMT Wal-Mart



Source:  CNN Data Dow 30


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01 June 2017

Remembering Harry Handley

"Statistics are no substitute for judgment."

--Henry Clay

I recently received word that a former colleague and friend, Harry Handley, passed away. 

If I created a list of brilliant people personally known in this life Harry would be at or near the top.  Our meeting not long after I arrived in Orlando in 1982 was providential.  A company I owned, CRA Research Group, was looking for new business and to expand its services.  Prospective clients wanted greater access to database marketing information, and that was Harry's specialty.  

Obituary photo of Harry+Norris Handley, Orlando-Florida
Harry Handley (1939-2014)
Walt Disney Attractions would not be in our bio were it not for Harry's unique problem-solving skills.  His was a cluttered desk but an uncluttered mind.  

A former NASA engineer and research director for ABC network, Harry was a teacher, not just a demographer and statistician.  One of the more important lessons he taught us was to "qualify" quantitative data.  That is, understand the numbers by knowing who or what values those numbers represent.  

Time and again he used the illustration of focusing too much on large numbers (100,000) versus the qualifying characteristics of households, even if a smaller number (10,000) where the potential for profit was greater.   

Why do some businesses believe casting a wider net is better for prospecting?

Because they want to cover all the possibilities. However, that tends to be a misguided approach to marketing, and a costly one.  Attracting the right customers, not chasing the wrong customers, is a better way to go.  (See decision by General Motors' CEO Mary Barra to exit Russia, Europe and India in favor of more profitable markets.)        

My time with Harry pre-dated the Internet and social media.  It was a different era to be sure.  Yet finding the right demographics, household characteristics, and motivations for purchasing remain building blocks for successful marketing campaigns in a digital age.  

A problem with big data is that few know what to do with it.  Algorithms, where computers learn and repeat human behavior, can also magnify misbehavior.  And the automation of reasoning carries risk.   

Therefore, when appropriate, add to data the need for human judgment.

Such was the wisdom of Harry Handley.   


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01 May 2017

Making a Course Correction



"If you do not change direction, you may end up where you are heading."

--Lao Tzu


When should CEOs change strategy?   

In his book, "Strategic Thinking," George Morrisey suggests that "you change strategy whenever you determine that the one you are following is no longer likely to lead you in the appropriate direction."

Image result for images of corporate change

Organizations tend to change direction for one or more of the following reasons:

  • To pursue new opportunities
  • Fill performance gaps
  • Take advantage of new technology
  • New ownership or management
  • Respond to crises  

For some it's a matter of corporate A.D.D.--they can't stay in one place very long.

Regardless of why revisions are made, living in a digital world may shorten the lifespan of your business model (i.e., assumptions about how you plan to make money).

What can we learn from the evolution of strategies?

The bumpy road ahead

One example of how bad things were during the "great recession" ten years ago was the disastrous condition of the U.S. auto industry.  At the end of 2008 Ford Motor Company was just months from running out of cash. Congress threw the three major auto makers a taxpayer lifeline. General Motors, and what is now Fiat Chrysler, decided on a bailout. Ford chose to save itself. Even mortgaging its blue Ford oval.  

Image result for ford oval image

Alan Mulally arrived at Ford in 2006 from Boeing Commercial Airplanes where he was CEO. After an assessment of the situation he and others put together a strategy around unifying global operations, transforming a lackluster product lineup, and changing a culture of infighting and backstabbing.   This strategic roadmap, created in crisis during the now celebrated "Thursday" meetings, was not only designed to save the company but keep Ford in the hands of the Ford family.  

"One Ford" was the mantra under which employees carried out what has been described as one of the greatest comebacks in business history.

Why change Ford's strategy?

With the rise of electric and self-driving vehicles, Mr. Mulally's successor, Mark Fields, is doubling down on a "Two Fords" strategy recasting the company as an auto maker and transportation services provider.

The single mission and message of former CEO Mulally ("One Ford") is moving to a broader mission aimed at taking on new Silicon Valley competitors such as Tesla Motors, Alphabet's Google, and now, Apple.  Rumors of Amazon getting into self-driving automobiles are beginning to surface as well.

Tesla delivered 76,230 electric vehicles in 2016, is losing money, yet has a market cap of $53 billion, more than GM ($49 billion) and Ford ($44 billion), as investors are treating Tesla as a tech business, not a manufacturer.

All major auto companies, including Ford's crosstown rivals GM and Fiat Chrysler, are hedging their bets on what they believe is likely to be a very different transportation future, one not imagined in Detroit a decade ago.

Update: 

On May 19, 2017, Ford's Board of Directors fired CEO Mark Fields and installed Jim Hackett, head of Ford Smart Mobility, as CEO.  Hackett was previously CEO of Steelcase, and Interim Athletic Director at his Alma Mater, the University of Michigan.

Blue light specials

Although the $155 billion department store industry has often proved its critics wrong, it appears the onsite retail shopping experience may be at a breaking point. While e-commerce has been expanding for a decade through smartphones and other devices, department stores and apparel chains are not keeping up.

Full service stores have been on the decline for two decades with consumers moving to off-price retailers such as T. J. Maxx and Dollar General which plans to open 1,000 stores this year.  

Image result for images t j maxx logo

The U.S. Labor Department reported 60,000 job losses in February and March of this year in the retail sector with major retailers scheduled to close over 3,000 stores in 2017.  That number includes chains such as Macy's, J.C. Penney, K-Mart, Sears, H.H. Gregg, and Payless Shoe Stores.

Even Polo Ralph Lauren, with its affluent customers, is not immune closing its store on Fifth Avenue in New York City due to declining sales and profits at the company. 

Why the consolidation?

Over expansion would be on the list.  Newer shopping centers. A shift in where discretionary dollars are spent--from products to services. Harried households too busy to drive to a mall. However, a major disruptor of retail is online shopping making it easier for consumers to bulk purchase non-perishable goods (diapers), and in some cases, with free delivery. All from the convenience of home.

The future could be warehouse distribution centers replacing malls, at least in urban areas.

Think Amazon.

Walmart announced last month a new discount program covering 10,000 items for customers who order online and go to the store for pickup.  That promotion expands to one million items in June of this year.

Others, like Target and Office Max, are fighting back with a combination of technology, personal service, in-store pickups, and smaller stores. Costco uses groceries to distinguish itself and does well against Amazon.  

Image result for macys logo

Macy's new CEO, Jeff Gennette, says his company is a "sea of sameness in what it sells today."  His plan--cutting back on "fashion basics" to make room for higher-priced and trendier clothing.  To cover both ends of the shopping spectrum Macy's will offer more options for bargain shoppers who are going to outlets and other discounters.

It could be that Macy's real estate ends up being worth more than its retail operations.

"Hey-hey!" 

The sports business is not immune to changes in strategy.  Most often those decisions take place on the field of play by the team manager.  What about the front office?   

Image result for chicago cubs logo

After a 108-year wait for a World Series Championship the Chicago Cubs won it all in 2016 in one of the great series-ending finales of all time against the Cleveland Indians.   Talk about a "hey-hey!" moment to quote the late Cub's announcer, Jack Brickhouse.  

Did that long drought end with good pitching?  

Theo Epstein, the Cubs President of Baseball Operations, big on statistics during his time with the Boston Red Sox, decided to move from quantitative to qualitative methodologies.  Instead of an overeliance on analytics, Epstein went for a three-pronged, holistic approach:  (1) hiring for character, (2) limiting how data is used, and (3) building stronger relationships among the core players, thus avoiding isolation.

Together with the 2015 National League Manager of the Year, Joe Maddon, Esptein's primary focus on character proved a winning strategy for 2016--and hopefully beyond.

Back to basics

Here's breaking news--McDonald's is going to return to its original identity as an affordable fast-food chain and "stop chasing after people who will rarely eat there."

"Our greatest opportunities are at the core of our business," Chief Executive Steve Eastbrook said recently.  The tighter focus appears to be paying off with better-than-expected first quarter sales globally and in the U.S.

Image result for mcdonalds logo

McDonald's has lost around 500 million food orders in the U.S. in the past five years as it tried and failed to widen its customer base.  The company offered different menus adding more salads, snack wraps, and oatmeal, to no avail.  

Interestingly customers weren't leaving for fast-casual chains such as Panera.  They were going to other fast-food chains like Burger King.  

So the new strategy is "not to be different but be better," says corporate strategy vice president, Lucy Brady.  

McDonald's arrived at that "be better" conclusion by talking to its customers. Getting feedback (even from non-customers) is one way to help determine the right course correction.  Better to discover opinions first hand and put them into the mix than to cook up strategies in isolation, far from the dwindling crowds.

Gaining clarity on a business's true identity, as McDonald's seems to have done, is a big first step in closing the strategy-execution gap.


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01 April 2017

The Struggle with Strategy

"No worthwhile strategy can be planned without taking into account the organization's ability to execute it."

--From Execution by Larry Bossidy and Ram Charan


It's fairly common that when things go bad in corporate life there's a tendency to blame the marketplace, disruptive actions by competitors, timing, and even government regulations. Each of these factors can and do weigh against the best strategic plans.  Those plans are attempts to identify, hopefully in plain language, a desired future for the organization, and how to make it happen (strategy defined).  


Image result for images for strategy
(C) Strategy Archives

However, there may be something more important than rounding up the usual suspects.  

"The single greatest reason companies get into trouble is because CEOs are bad at strategy," says Cesare R. Mainardi, adjunct professor of strategy at the Kellogg School of Management and a former CEO of Booz & Company.   

Writing in The Wall Street Journal Professor Mainardi quotes two statistics from a global study about leadership capabilities:  

"81% of the time when major shareholder value is destroyed it's because of bad strategy decisions (Ron Johnson former CEO at J. C. Penney).  And only 8% of all executives are good at both strategy and execution--that is, betting on the right strategy and doing the right things to make it happen (Jeff Bezos current CEO at Amazon)."

Day-to-day matters

"If things go sideways it is most likely the strategy and execution decisions made day-in and day-out," Mainardi concludes.

The apparent self-deception facing an enterprise is that it often appears to be doing all the right things--with a focus on growth; pursuing excellence; reorganizing for change; and creating a lean structure.  Yet much of the time that list proves to be nothing more than imitative rhetoric.

"Conventional wisdom is actually a trap ... it creates a huge gap between a chosen strategy and the ability to deliver it," the study notes.  

In their best-selling book referenced above, Bossidy and Charan make the point that "execution requires a comprehensive understanding of a business, its people, and its environment."   It means top management is to be clear--but not too clear--about strategy, focusing on the objective while not defining the method of execution day-to-day.       

Roger Fisher, former director of the Harvard Negotiation Project, put it this way:  "Distant visions and hard work are both required, but unless what you do today is related to where you want to end up, you will never get there."     

The idea of mutual accountability for results may be too uncomfortable for some. If so, it explains, in part, why the "strategy-execution gap" is not broached more often in corporate and business unit discussions.   

Closing the gap

What are some ways to help close the strategy-execution gap?  

Professor Mainardi offers the following:

1.   Commit to an identity.  Stop endlessly chasing growth.  Invite it.  Define one's self by what one does--not just what one sells.  A truly differentiating identity is built on bespoke, difficult-to-build capabilities.    If a leader chooses to be true to his or her company's chosen identity day in and out, he or she can build an extraordinary company.

2.   Translate the strategic into the everyday.  Stop the endless benchmarking.  Focus on building the handful of unique, cross-functional capabilities that actually deliver on strategy. Leaders must roll up their sleeves and be close enough to the execution to become the architect and chief builder of the capabilities needed.

3.   Put culture to work.  Stop fighting a company's culture and blaming it for undermining strategy.  Start putting it to work instead.  No culture is perfect.  The key is to identify and leverage the parts that work in a company's favor.

4.   Cut costs to grow stronger.  Stop making the classic mistake of going lean everywhere. Most companies waste 20% to 40% of their budget on expense items that have nothing to do with their strategy.

5.   Shape the future.  Stop constantly reacting to market changes.  Agility is overrated.  It has unfortunately become code for throwing out strategy and chasing any opportunity one thinks might work.  The best way to own the future is to be the one to shape it.



In the May Strategist Blog:  A look at why CEOs change corporate strategies.


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