Category Archives: Strategy

Time to Start Preparing for the Next Recession

Wow! This recession isn’t over yet and CNN Money is already telling us to prepare for the next recession! Considering that boom-and-bust cycles have been happening faster and faster, it’s good advice, but it’s still a bit of a downer. I agree with Moore (in the contained video interview) that a new economic order is likely needed, but it’s not going to happen any time soon, so we have to optimize against what we have.

So how do you prepare for the next recession? The article offers three primary pieces of advice:

  • Make friends now with people you’ll need later.
    For example, if the government gives you a chance to sit on task forces, send executives, not functionaries. It doesn’t look good when the CEO only shows up to lobby officials on a potential tax or regulatory change that would benefit his or her company.
  • Listen to unconventional wisdom.
    No one wanted to listen to Jeremy Grantham when he said that real estate and asset prices had become insane. He’s still working when many fund managers aren’t.
  • Don’t go soft on evaluations.
    The best companies, like P&G, are as rigorous in evaluations in good times and bad. That’s why they never find themselves with a roster of C players when the downturn hits.

It’s all great advice, and I’d heed it because you’ll do even better than your peers during the recovery if you do.

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Six Keys to a Successful Reorganization (of your Supply Chain)

This fall, Strategy + Business, with the help of Booz & Co., got “Inside the Kraft Foods Transformation” and talked with level top leaders about their three-year turnaround and their campaign to reorganize for growth. It was a good article, but the best part was the six keys factors to a successful reorganization because not only are these themes common to Kraft, but they are common to most of the studies I’ve read regarding transformations in the leaders in the Food & Beverage and Consumer Packaged Goods industries. Since they definitely deserve to be repeated, I’m repeating them.

  • Start with the Business Strategy
    The new organizational model should primarily enable and catalyze the strategic direction of the company. An organization can only align behind a clear strategy.
  • Go Beyond Lines and Boxes in Organizational Design
    The right people and the right organizational chart is important, but supply chain is people, process, and platform. All three have to be aligned in the right workflow, under the right metrics, to fit the right goals.
  • Understand that One Size Does Not Fit All
    For example, a centralized strategy might work for the majority of your categories, but a minority might have to remain decentralized, or vice versa. Make exceptions where exceptions make sense.
  • Have Thorough Planning Lessons Pre-Launch
    Not only do major change initiatives work best when key shareholders have had a chance to articulate their concerns and grievances, but they also work best when sufficient time has been taken to identify what could go wrong and how those situations will be dealt with. It’s easy to focus on the ideal process flow, but they keys to success is having streamlined recovery plans in place when something goes wrong.
  • Leverage the Power of Leaders
    Make sure they are actively involved in all changes. Talk isn’t enough! Actions speak much louder than words.
  • Expect a Multi-Year Journey
    Major changes don’t happen overnight, especially if you are a multi-national. If you put a realistic, multi-year, timeline in place, you will get there … and do so with great success!

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All Brands are Niche Brands

I loved the title of this recent article in Strategy + Business. All Brands are Niche Brands. It’s true. It doesn’t matter what you sell — automobiles (which the article was about), computers, music players, clothing, fast food, etc. You name it, it’s niche. It doesn’t even matter if the industry has a clear “market leader”, like Microsoft in operating system software, because, when you get right down to it, even though Microsoft might still have 85% of the OS market, they have so many versions that there is no true majority leader. Furthermore, as Linux and Mac OS X gain market share, their market is shrinking.

As Stephen Dubner and Steven Levitt, authors of Freakonomics, and Chris Anderson, author of the Long Tail, have noted, with a global population approaching Seven (7) Billion, two standard deviations from the mean is fast becoming a sizable market in its own right, with a potential market size of up to 280 Million (as only 95.4% of the global population is within two standard deviations of the mean). If we subtract the 39% living in poverty, and then restrict our market size to the middle class (about 45% in non-third world economies), that still leaves a potential global market size of up to 76 Million. And if even only 1% of that market would be interested in your product, that’s still a sustainable business for a small company.

Plus, with product proliferation almost out of control in some verticals — such as cell phones, media players, and clothing — it should be easy to see that niche markets are fast becoming the norm.

So next time you’re sourcing, remember that you’re not just sourcing a commodity, you’re sourcing a niche product for a niche market and, sometimes, differentiation does help.

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Change By Design, A Book Review

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Although he was the engineer’s engineer, Brunel [who designed the Great Western Railway] was not solely interested in the technology behind his creations. While considering the design of the system, he insisted upon the flattest possible gradient because he wanted passengers to have the sense of “floating across the countryside”. He constructed bridges, viaducts, cuttings, and tunnels all in the cause of creating not just efficient transportation but the best possible experience … Brunnel was one of the earliest examples of a design thinker.

A purely technocentric view of innovation is less sustainable now than ever, and a management philosophy based only on selecting from existing strategies is likely to be overwhelmed by new developments at home or abroad. What we need are new choices — new products that balance the needs of individuals and of society as a whole; new ideas that tackle the global challenges of health, poverty, and education; new strategies that result in differences that matter and a sense of purpose that engages everyone affected by them.

Only gradually did I come to see the power of design not as a link in a chain but as the hub of a wheel. … I also noticed that the people who inspired me were not necessarily members of the design profession; engineers such as Isambard Kingdom Brunel, Thomas Edison, and Ferdinand Porsche, all of whom seemed to have a human-centered rather than technology-centered worldview.

The natural revolution from design doing to design thinking reflects the growing recognition on the part of today’s business leaders that design has become too important to be left to designers.

So begins Tim Brown’s new book Change By Design (available September 29) that tackles the myth of innovation that brilliant ideas leap fully formed from the mids of geniuses while exposing the reality that most innovations stem from rigor and discipline … the kind that comes from the application of proper design thinking. Design thinking, a process for practical, creative resolution of problems or issues, attempts to match necessity to utility, constraint to possibility, and need to demand to meet end-user need and drive business success. The ultimate challenge for a design thinker is to help people articulate the latent needs they don’t even know they have. Fortunately, the search for insight — in contrast to the search for hard data — is that it’s everywhere and it’s free. You just have to open your eyes and look at what people are doing.

For example, when IDEO was hired by Zyliss to design a new line of kitchen tools for the home, they started out by studying children and professional chefs. While neither was the intended market, both yielded valuable insights. A seven-year-old struggling with a can opener highlighted issues of physical control adults have learned to disguise and the shortcuts used by a professional chef yielded insights into cleaning requirements. The exaggerated concerns of people at the margins of the market led the team to abandon the idea of a “matched set” and create a line of products with the right handle for each tool. The end result was a product line that flew off of the shelves. [Proving one of my favourite points: just because you’ve been doing it that way for years, it doesn’t mean you’ve been doing it right!]

The Zyliss success story happened because the willing, and even enthusiastic, acceptance of competing constraints by the design team is the foundation of design thinking. The first stage of the design process is often about discovering which constraints are important and establishing a framework for evaluating them. Constraints can best be visualized in terms of three overlapping criteria for successful ideas: feasibility, viability, and desirability. A competent designer will resolve each of these three constraints, but a design thinker will bring them into harmonious balance. The popular Nintendo Wii is a good example of what happens when someone gets it right.

For those trying to wrap their minds around design thinking, the basic innovation rules that Tim outlines in chapter 3, A Mental Matrix, are a great place to start because they’ll put you in the mindset required to grasp the key tenets of design thinking.

  1. The best ideas emerge when the whole organizational ecosystem has room to experiment.
    And room to fail! The greatest successes will often emerge after you get the false starts and failures out of the way (and make an effort to understand why you failed).
  2. Those most exposed to changing externalities are the ones best placed to respond
    and the most motivated to do so.
    Furthermore, if you have someone who thrives in that sort of an environment, make sure she’s on the team!
  3. Ideas should not be favoured based on those who create them.
    The most successful individuals are often those who latch on to, and promote, good ideas.
  4. Ideas that create a buzz should be favoured.
    Nothing’s better than viral marketing!
  5. The “gardening” skills of senior leadership should be used to tend, prune, and harvest ideas.
    Not to create them.
  6. An overarching purpose should be articulated.
    You’re looking for new ideas to solve a problem that people want solved.

And you want to grasp design thinking, because it works. Probably the best example is that of “Cool Biz“, the imaginative program from the award-winning Japanese advertising agency Hakuhodo designed to help the Ministry of the Environment in Japan get people moor involved in meeting Japan’s commitment to the greenhouse gas reduction goals of the Kyoto Protocol. Within a year of the launch of this program, the slogan “Cool Biz” was recognized by a staggering 95.8% of the Japanese market. Can you imagine the boost to your corporate brand if 95.8% of your potential market recognized your corporate offerings?

For more information on design thinking, which is becoming more necessary by the day in a world where constant change is inevitable and everything is a prototype, see the Design Thinking blog, IDEO’s website, the The Harvard Business Review article on Design Thinking, the Innovation 100 Interview with Tim Brown on YouTube, the Design Thinking video (extended version) on YouTube, and the Global X Interview with Tim Brown on YouTube.

And if you’re still not convinced you should buy the book, consider the following quote which literally made my day:

Business school professors are fond of writing learned articles about the value of brainstorming. I encourage them to continue to do so (after all, some of my best friends are business school professors, and it keeps them busy and out of my way).

Service Leaders Speak: Jim Wetekamp of BravoSolution on “Sourcing Leadership for the Recovery”

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Today’s guest post is from Jim Wetekamp of Bravo Solution, a global provider of supply management services and solutions (with offices across 3 continents).

It’s been just over a year since the financial crisis that signaled the worst of the global economic recession, and as we head back to work after summer vacation, businesses around the world are looking with a glimmer of hope towards the future. As the evidence in favor of a turnaround mounts, I am increasingly approached by sourcing leaders who are looking for ways to position their businesses for sourcing leadership in the recovery.

In truth, the visionary sourcing executives recognized early on that the objective for sourcing leadership doesn’t change at all as we dip into recession and then begin to recover. It is only the resources that they are allowed that changes. Ambitious executives will have seized the opportunities presented in the last year to be a strategic value driver for their businesses, driving cost out of the supply chain and helping to improve profitability in lean times. And they’ll have done that by adhering to the priorities that matter for sourcing leaders no matter the state of the economy:

Visibility, Fundamentals, and Evolution
Figure 1: Evolving Supply Management Priorities
The most successful sourcing leaders will have continued along this path over the last year; they will have kept their teams strong and armed them with the tools they need to succeed. These leaders are the ones who will find themselves best able to ride the crest of the recovery wave. They will not waste time staffing, training, and re-booting their sourcing organizations. Sadly, few organizations have weathered the past year fully intact, so what do sourcing executives need to do to lead in the recovery?

Sourcing Leadership’s job as the economy begins to recover is to rebuild the capabilities that were lost and get back on mission. This is not the time for a slow build; the most successful teams will be those who can quickly ramp their teams up and begin firing against all their priorities immediately. If you do nothing else, you should make sure your organization has best-in-class capabilities in three main areas:

Visibility and Opportunity Planning
If you don’t currently have visibility into your spend, it’s time to get a quick snapshot while laying the groundwork for a longer-term spend management program. Long term, a spend visibility tool will help you analyze and interpret your spending; you’ll likely also need a service provider experienced in rapid spend analysis to get you quickly through the initial opportunity identification phase. BravoSolution routinely delivers detailed opportunity analysis in a matter of weeks, even where our clients have spent months prior trying to understand their spend with internal resources.

Sourcing Fundamentals and Technologies
If you’re not using e-Sourcing tools, then you’re denying your business enormous efficiency gains, and wasting the time and expertise of your team on mundane recordkeeping tasks. You can move through the opportunities you identified faster and start realizing savings and managing vendors sooner if you’re using tools designed to accelerate that process. If you don’t have the bandwidth or expertise for a particular category, don’t be afraid to ask your technology provider for support – most leading e-Sourcing technology vendors, including BravoSolution, offer templates, advice, and even fully managed or outsourced events for their e-Sourcing customers.

Evolution and Extending Reach
The biggest disservice you can do for your organization (and your career) is to shy away from your most complex, highly visible categories at this moment. Strategic categories like transportation, packaging, and services mean too much to your business to be left to languish while your team rebuilds. You need to tackle these categories now, while suppliers are still eager to negotiate, and before a recovering economy begins to drive up costs in your biggest categories. Clearly, in categories that have such far-reaching impact across the organization, you cannot afford to fly blind. The value of pulling in a knowledgeable partner at this stage cannot be underestimated. Like other leading solution providers, BravoSolution regularly works with our customers to build tailored sourcing events that help our clients gain a deep understanding of their suppliers’ cost models and priorities, and to identify awards that drive efficiencies for both buyers and suppliers, reducing costs for both parties, and driving lasting, collaborative sourcing relationships.

By preserving, or better yet enhancing, your capabilities in these areas before the recovery takes hold, you will be poised to ride the wave of recovery and create competitive advantage for your business over the long term.

Thanks, Jim.