Category Archives: Strategy

Top 10 Mistakes by Entrepreneurs … and Managers

Over on Xconomy, Steve Woit had a great post on the “top 10 mistakes by entrepreneurs” last quarter. According to the post, they are:

Undervaluing the importance of the management team.
Attempting to build the business around rocket science.
Assembling the wrong ownership group.
Over-valuing the business at critical junctures.
Failing to communicate with important constituencies.
Failing to tap knowledgeable advice.
Fear of dilution or loss of control.
Spending too much for too little.
Partnering for too little.
Failing to understand the changing roles of founders.

What really struck me is how similar this is to the top 10 mistakes made by managers, which I could argue are:

Under-valuing the importance of your senior staff.
Face it – half of the best ideas anywhere are going to come from them. Take the cotton out of your ears and listen. It’s your job as a manager to identify and implement the best ideas. This doesn’t mean that you have to come up with all the ideas yourself.
Attempting to build your business around the business opportunity of the day.
I’ve seen company after company after company fail with this short term thinking … every quarter was a new project (despite the fact the project from the last quarter never got finished) and then they’d wonder why they went bankrupt.
Assembling the wrong advisory board.
A group of ass-kissing yes-men might be good for the ego, but it’s bad for the business.
Under-valuing key parts of your offering.
Sometimes an auxiliary product or service is actually more valuable than what you think your core product is. Failing to recognize this will rob you of your best revenue opportunity.
Failing to communicate.
Your employees what to know what’s happening, and, more importantly, why. Half a message is often worse than no message – don’t make this mistake.
Failing to understand the value of a good consultant.
As I pointed out in consultants are cheap, consultants are a very valuable resource that you can use to take your operation to the next level.
Fear of experts.
Many managers think that they’ll be seen as weak, stupid, or dispensable if they turn to experts, when, in fact, the opposite is true. A good manager knows when there is a problem that requires expert input, and that she doesn’t have to worry about being replaced because managers who make the right decisions get rewarded (and promoted).
Spending too little.
Many managers cheap out just to make the short term financials look good, even when the net result is a long term loss. This is particularly true when it comes to getting employees the tools and training they need to be productive – especially in IT and Supply & Spend Management when the company doesn’t understand the productivity enhancements that the right tools and training generates.
Partnership avoidance.
You shouldn’t partner too early, but sometimes it takes a partnership to take the business to the next level. Also, the right partner at the right time can help a company address an emerging market trend quicker, and this can make a huge difference in the scale of new market penetration that a company can achieve in the short term.
Failing to understand the changing nature of the business.
Some managers don’t think they’re doing a good job unless the business runs like clockwork … but considering even Canada’s top economist admits that if you’re doing business today the same way you were doing business even five years ago, that you’re on your way out of business … clockwork management just doesn’t cut it anymore.

Now, regardless of what I say, or don’t say, you’re going to make some of these mistakes – you’re only human, and it’s hard to get a 360 view when you’re inside the box. But whatever you do, don’t forget #6! If you can’t see the problem, chances are good consultant can – and it will be money well spent!

How Are the Five Forces That Shape Strategy Going To Shape Your Supply Chain This Year?

The Feature for the January Issue of the Harvard Business Review is “The Five Competitive Forces That Shape Strategy” by Michael E. Porter where he reaffirms and updates his classic 1979 paper that revolutionized the field of strategy.

The five Porter forces that shape Industry Competition are:

Threat of New Entrants
Bargaining Power of Buyers
Rivalry Among Existing Competitors
Threat of Substitute Products or Services
Bargaining Power of Suppliers

Given that the general prediction for this year tends to be recession, what does this mean for your supply chain this year. If a recession does happen, then, regardless of the industry you’re in, we’re likely looking at the following:

few new entrants (due to lack of $$’s)
more bargaining power of buyers, as they are buying less, due to less consumer demand
increased rivalry with less business to go around
a great threat of substitute products or services as competitors try to innovate lower cost products to win a dwindling share of business
less bargaining power of suppliers overall

So what is this likely to mean for your supply chain?

the players are going to be roughly the same
there’ll still be players new to you, but not many new to the industry
with the exception of commodities based on raw materials in short supply, or that require a large amount of energy to make, you should have more bargaining power
with suppliers fighting for business, if they’re smart, they should be more open to collaboration and your performance management initiatives
this might finally be the year they are willing to work with you on innovation efforts
except for the energy marketplace and suppliers who supply raw materials in tight supply, you should hold the upper hand in negotiations

But does this mean that things are going to be better over all? According to Porter, if the forces are intense, then almost no company earns an attractive return on investment. If the forces are benign, then many companies are profitable. The industry structure sets the profitability in the medium and long run (but not necessarily the short run because a myriad of factors can affect industry profitability in the short run – including weather and the business cycle).

If you’re in an industry where forces are already intense, they are going to get a lot more intense due to lack of consumer demand. This means that even though you’re going to have a lot more bargaining power with many of your suppliers, you’re competition is going to be in the same position. Thus, even though your supply chain costs (with the noted exception of energy or raw materials in tight supply) are probably going to finally start going down a little, your revenues are going to drop too and profitability as a company may be even harder to achieve. If the forces are benign, they are going to be less so. This will increase competition, but the winners will have an opportunity to do very well both in their supply chain and in the marketplace as those with lower prices and innovative offerings will be much more attractive as consumers become even more cost, and value, conscious.

However, it’s likely that this is also the year where the short-term forces of sustainability, compliance, and sustained cost reduction come into serious play. This means that you’ll have to green-up and tech-up in your supply chain. You’ll need technology to insure compliance in product design and global trade, you’ll need technology to make sure you are complying with all of the voluntary security initiatives to prevent your products from getting trapped indefinitely in customs, and you’ll need technology to make sure you are making the decisions that squeeze the most value out of your supply chain.

Then there are the other possibilities I alluded to in my series on What Will Be The Top 10 Supply Chain Stories of 2008? (Part III).

So … innovative sourcing, procurement, and global trade vendors – start your engines!

Some Recent Pieces on Sustainability

Last November, the Supply Chain Management Review ran an article on “The Sustainable Supply Chain” that noted that being sustainable is now a source of competitive advantage and a matter of corporate survival rather than a costly inconvenience.

The article, based on a study by A.T. Kearney and the ISM that surveyed a diverse group of Fortune 100 firms, revealed that 60% of firms have adopted sustainable practices to strengthen brand names and deduced that it is now time for “wave-two” sustainability: for companies to move beyond saying the right words to truly making sustainability happen.

The article states that supply managers can foster sustainability by ensuring that suppliers incorporate sustainable innovations in operations and processes. (D’uh! But then again, this is an article that says our study reveals that achieving genuine sustainability results from making supply chains more sustainable. Double D’uh!) In particular, processes and technologies that reduce dependency on scarce and expensive resources.

It then outlines the following activities of sustainable supply management:

The Derision of a Sustainable Strategy
A strategy defines the values a company wants to emphasize, declares how it will enforce those values, and identifies consequences when suppliers or employees don’t meet the guidelines.
Retooling of the Organization
As firms increase the role of sustainability in their supply management practices, they must draft specific guidelines and procedures, create training programs, and introduce sourcing tools that equip buyers to support sustainability goals.
Supplier Relations Management
You need to have relations with your supplier.

Which is followed with some implementation guidelines:

Survey the context
Understand the risks and opportunities
Get Ready
Set Priorities
Go

Not bad, but it seems to assume that sustainability is just about the social and environmental issues, which, although important, don’t necessarily address all of the sustainable issues. Plus, like most joint efforts, it’s very high level and doesn’t have a lot of details on implementation.

Then, earlier this month, Supply & Demand Executive ran an article called “Building the Green Supply Chain” that suggests that going green doesn’t mean going into the red, which the doctor agrees with, providing the organization is smart about how it goes green. (In fact, really smart organizations will find ways to go green and save money at the same time.)

It suggests, unlike the previous article, that although the drive toward a greener supply chain appears to be gaining momentum, the companies that are actually making steps in this direction remain in the minority. According to the article, a McKinsey survey found that while 59% of CEOs believe that their companies ought to incorporate environmental, social, and governance considerations into how they manage their supply chains, only 27% said they currently do – 33% more than the A.T. Kearney and ISM study suggest. This tells us that while Fortune 100 companies may have caught on to the need to get sustainable fast, the majority of global companies, especially smaller ones haven’t. This would suggest that either they haven’t caught on, don’t think they have the resources, or don’t think they’ll see returns from doing so. Hopefully they’ll read this sustainability series and start thinking otherwise!

Strategies to Design For Supply

Even though it’s a topic the doctor mentions regularly (see “AMR’s 7 Supply Chain Best Practices”, and Procurement Lead Time Optimization, and The Benefits and Risks of Global Product Development, for example), it’s something that he rarely dedicates a post to. However, since, Supply and Demand Chain Executive recently published an article by Heather E. Domin, James Wisner, and Matthew Marks on nine strategies you an apply when you “Design for Supply Chain”, now seems like a good time to dedicate a post.

Design for Supply Chain, or, Design for Supply, is the process of optimizing the fit between supply chain capabilities, product designs, costs, and expected revenues. It is the application of supply chain management processes, techniques, and innovations that aim to simultaneously increase customer satisfaction, minimize total costs, mitigate risks, and maximize the flexibility to adapt to unexpected events.

The authors are right when they note that, “efficient product design is not just a way of squeezing out cost savings, but a competitive weapon to be leveraged for strategic advantage” (especially since good design for supply uses TRIZ). Furthermore, as the article notes, “applying a product life-cycle management mentality as early on as the conceptual design stage, a product can be developed from the ground up to be a truly supply-chain-efficient creation.

But what the doctor really liked about this article was that all of the the nine strategies outlined in the article were sound. They were:

Optimize Levels of Product Integration
Determine the optimal level of pre-assembly at upstream suppliers. Balance flexibility (the ability to configure parts in different ways, replace parts, or use parts in alternate products) with assembly time (as assembling all of the parts yourself can take time and add labor cost).
Leverage Industry Standards
Whenever possible, use industry standard parts unless the proprietary part creates a competitive advantage.
Minimize Premium Freight
Thanks to continuously rising fuel costs, increased regulatory requirements, and continuously shrinking free capacities, freight costs are no longer an insignificant part of the total cost of any buy. Sometimes, they are a majority cost – especially when you have to ship express. Be sure to design the chain with acceptable lead times and sufficient safety stock of common components or alternate components.
Design for Life Cycle
The product design should be amicable to potential component or configuration changes throughout its intended life-cycle.
Configure the Selected Supply Chain
Make sure the supply chains are designed in accordance with the company’s strategic network plans, at the category group level and not the individual product level.
Design for Demand & Supply Planning
Good designs include commonality, modular design, universal function, and final configuration postponement to allow for pooling of demand and labor.
Minimize Inventory Costs
Design your supply chain to maximize velocity and minimize lead times as much as possible to reduce the amount of stock and safety stock you have to keep on hand.
Optimize Order Management
Products should be designed to provide the maximum amount of flexibility to the customer with little or no additional internal cost.
Minimize Warranty / Service Costs
Create a reliable, high-quality product with easy to diagnose faults and customer replaceable parts that have a high warranty redemption value.

And this is a good start.

Where Pinky and the Brain Devise A Plan To Market Their Strategy

Pinky and the Brain
They’re Pinky and the Brain
Yes, Pinky and the Brain
One is a genius, the other is insane
They’re advertising guys
Their mind is on the prize
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, Brain

Before each night is done
Their plan will be unfurled
By the dawning of the sun
Take over the sourcing world

They’re Pinky and the Brain
Yes, Pinky and the Brain
Their twilight campaign
Is easy to explain
To prove their sourcing grace
They’ll overthrow the space
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, NARF!

Pinky	Gee Brain, what are we going to do tonight?
Brain	Same thing we do every night Pinky – try to take over the Sourcing World!
Pinky	How are we going to do that, Brain? Narf?
Brain	Remember last night’s lesson Pinky? Where I explained to you that we are going to market our strategy to take over the sourcing world?
Pinky	And what’s our strategy again Brain?
Brain	Come here, Pinky.
Pinky	OK, Brain.
Brain	Closer, Pinky.
Pinky	Why Brain? Narf!
Brain	Brain jumps up and conks Pinky on the head. For that!
Pinky	What’cha do that for, Brain?
Brain	Because last night’s lesson in marketing took ALL night. Even an ADD chimpanzee hyped up on caffeine would remember it. We didn’t even get started on our plan to take over the world!
Pinky	What was it about again, Brain?
Brain	About marketing our strategy to the Napoleons who also want to take over the sourcing world! They will serve as our lieutenants as I lead us to victory!
Pinky	I remember now Brain! Nog! It was about how the world shares cheese and neapolitan ice cream and that’s why we have to take over the entire sourcing world at once!
Brain	Yes, Pinky. If it makes it easier for your little pea-brain to understand, it’s about how the world shares cheese and neapolitan ice cream and that’s why we have to take over the entire sourcing world at once. But now that we’ve settled that, as part of our plan to market our strategy to take over the sourcing world, we need to create content that the Napoleons of tomorrow will want to read. We need to make sure that our first piece of content is really riveting.
Pinky	We’re not going to play in the toolbox again, are we Brain? Last time the hammer fell on my foot, it really, really hurt.
Brain	No Pinky, we’re not going to play in the toolbox again. We’re going to come up with inspirational content that will draw the Napoleons in like flies to a barn.
Pinky	How are we going to do that, Brain?
Brain	I’m working on it. Brain paces the floor for a few minutes in deep thought. He stops just as a look of evil inspiration crosses his face. Pinky, are you pondering what I’m pondering?
Pinky	I think so, Brain, but I don’t see how hiring Britney as a personal life coach is going to help us with our image problem.
Brain	No, you twit! We use the strategy of our biggest competitor, whose name I shall not utter, and find our own analyst or blogger who will write great content for us and then simply usurp that content to create our sourcing world domination web site. Since the central content will come from a trusted and credible source, our new site will be trusted and credible as soon as it launches. The Napoleons will flock to it! They’ll assume that because we too are smart enough to recognize the intelligence of the analyst or blogger, that we too must have intelligent things to say. So they’ll also read the messages we want them to read, and if we craft those messages carefully around the usurped content, a few of these Napoleons will buy in. They’ll spread the message and convince the other Napoleons. Soon we’ll have our own Napoleon army – and the sourcing world will be powerless to stop us!
Pinky	But how are we going to do that, Brain? Unlike the competitor whose name you will not utter, who has a much bigger budget than we do, I don’t think we can afford to buy off any bloggers or analysts – except for that firm downtown, but their reputation seems to be fading – and I get the impression that most of the bloggers and analysts with the reputations we’d want don’t really like us very much.
Brain	I know, Pinky. Which is why, instead of buying them off, we’re going to confuse them with humility.
Pinky	I don’t think that’s going to work, Brain. Some of them are pretty smart! Narf!
Brain	It only has to work long enough for them to take a close look at our new hypno-spend tool, Pinky.
Pinky	The what?
Brain	The hypno-spend tool. It’s our slicked up spend reporting demo tool with a brand new UI that uses pleasing colors, smooth curves, tranquil sound effects, and spinning coins to signal screen changes. When paired with our new demo specialist, whose soothing voice sounds just like Ben Stein, who has extensive training in hypnotism and suggestion, no one can resist our story that automated cleansing is the key to spend analysis.
Pinky	But I thought analytics capability was the key to spend analysis, Brain! Narf!
Brain	Smack! Brain smacks Pinky upside the head again. I told you never to say that again!
Pinky	I’m sorry, Brain.
Brain	As I was saying, five minutes into the demo with our new hypno-spend tool, and they’ll believe the moon is made of green cheese!
Pinky	Green Cheese! Yum! Can I have some, Brain?
Brain	Pinky, you fool! I was just using a metaphor!
Pinky	A metal floor? Like the one in our cage?
Brain	No – a metaphor. Where you use a set of words to represent a concept.
Pinky	Oh.
Brain	Would you like a demo, Pinky!
Pinky	Sure Brain.
Brain	Pinky, Feast your eyes on the hypno-spend tool!
Dot	Oooh! Pretty Colors!
Brain	Dot! What are you doing here?
Pinky	Dot? Dot! It’s good to see you! It’s been … it’s been …
Brain	Years! Dot, what are you doing here?
Dot	I came to say hello!
Pinky	But didn’t Mr. Plotz forbid you from ever setting foot in this building?
Dot	He did. But he also let us go.
Pinky	Go where?
Brain	She was fired, you twit!
Pinky	Set on fire? Gosh! That sounds painful.
Brain	No, no, NO, Pinky. She means she doesn’t work there anymore.
Pinky	Oh.
Dot	Yes, I’m free. Free to find new opportunities. Free to explore the sourcing world! Free to look at applications with such pretty colors!
Brain	Do you like it? It’s our new prototype hypno-spend tool.
Dot	Hypno-whattie?
Brain	Hypno-spend tool. When it’s combined with our master Ben-Stein sound-alike hypnotist, anyone who sits through a five minute demo will believe that automated cleansing is the ultimate key to spend analysis!
Dot	Okay. Whatever. I just think it’s pretty. But I think it would be even prettier with swirling pink instead of swirling purple.
Pinky	Hey, that’s a great idea, Narf!
Dot	Let me fix it for you!
Brain	No! Don’t touch that! It’s still a prototype! There’s only two copies – one on the computer and one on the portable hard-drive!
Dot	Don’t worry, I know what I’m doing!
Pinky	Ooh! That’s sooo pretty!
Dot	Just wait until you see … oops!
Brain	Oops? What did you do?
Dot	Well … you had your keys mapped a little differently than I’m used to … I kinda deleted it!
Brain	DOT!
Dot	You have a back-up, right?
Brain	Of course I have a back-up. Pinky, hand me the back-up.
Pinky	The what?
Brain	The external hard drive. The shiny metal box I asked you to keep safe.
Pinky	Oh, that. Just a sec, Brain. I’ll go get it. Pinky disappears for a few seconds. He returns with an extra shiny external hard drive. Here you go, Brain!
Brain	Pinky, why does it feel a little bit damp?
Pinky	Well, you told me to store it in the safest place I know, and the safest place I know is under my water bowl?
Brain	You what?! Don’t you know that water shorts out electronics?
Dot	Oh, don’t worry so much big Brain. I’m sure it’s okay.
Pinky	Yeah, Brain! Nog! It’s just a little water!
Brain	Let’s see it! Brain hooks up the external hard drive. He hits the power switch. Ka-Boom! Piinnkkyy!
Pinky	Yes, Brain?
Brain	It’s time to return to the marketing cage.
Pinky	Why, Brain?
Brain	To prepare for tomorrow night.
Pinky	What are we going to do tomorrow night? Narf!
Brain	The same thing we do every night, Pinky. Try to take over the sourcing world! Good night, Dot.
Dot	Good night!