Transformation Readiness, is it the strategy of necessity or opportunity?

Bruno relative changeChange is something we live with, in large part because when it happens we tend not to notice.

In the 16th century, a philosopher of diverse interests astutely observed change as a relative concept which as an observer in motion makes it difficult to observe.  Change, when observed ultimately tests our understanding of time and I suggest adds meaning to much of our actions.

Change we make happen feels different than change that merely happens independent of our actions. What we make possible now becomes different than what’s expected and predictable.

Notable Change

Ever intentionally stare at something that over time gets closer or farther away?  You know the object travels distance, yet it’s difficult to perceive or notice its movement.  We perceive and understand change similarly, once we notice a difference we know change happened but unable to sense as it happens.

Traveling relative to moving fascinated Einstein too.  December marked the 100th anniversary of Einstein’s publication of his theory of general relativity. Naming, and then expressing the idea, requires different capabilities than understanding or theorizing the concept.

Ever try to make someone else understand something you know? Did you only use language? Or did you also use pictures, gestures? Analogy,  metaphor and  story all help others understand what you know, but until you actually do what you describe your understanding won’t be sufficient.

Scientists experiment in order to test out an idea they think works. In business, customers test the worthiness, or value of what the business offers. In both Science and business, it takes more than knowledge to be willing to test the idea. That extra ingredient I lump into a category I call readiness and its inextricably linked to change.

Perceivable change

Change, often defined as the difference between one point and another.

Point A                    Point B

  •                                X

Take a look, how do you perceive change? General relativity explains that space and time both move, not exactly together, but relatively which like change makes the concept difficult to grasp, let alone measure.

Time keeping, now standardized, makes everything we do on earth measurable by contrasting it to the standard of time. Knowing the amount of waiting time helps us manage our attention by creating an expectation.  Standardizing time, allows us to plan and coordinate what we do for ourselves and with others.

For example, few people literally watch while waiting for a kettle of water to boil. The temperature of the water begins to change in the presence of heat. Reaching the boiling point proves to be a relative and meaningful change. Conversely, if the boiled water was used to brew tea or coffee,  knowing that without sustained heat, the same water will cool.

We experience waiting, not as the transitional changes in the water’s temperature, but the time difference between the thresholds. Placing a thermometer in the water allows us to observe  moment-to moment change in temperature but does little to change what we do while waiting. Similarly, the increasing number of installed sensors in the physical world  make it possible to observe the invisible moment-to-moment changes occurring around us.  Smart meters measure the amount of energy being consumed in a location, smart phones track distance traveled in greater detail than a car’s odometer.

Making change

What value does additional tracking offer?  Traveling, or consuming energy doesn’t happen because we measure them, nor does the rate in which change happens once measured.

Ever smile? This change we make in our outward expression isn’t always a conscious action and yet we may first discover by observing the reaction chain our smile produces in others.

If you want to understand change, try thinking about it with respect to time.  Actively trying to make a change happen helps us focus and notice the amount of time needed before the desired effect happens. Ever notice how long before others react to your smile, or until you feel water getting cold or getting warm?  Feeling the change in sensation doesn’t require quantification, or precision. Time too seems irrelevant, beyond our ability to recall.

When describing invention, as in the mother of necessity, what does this imply about our needs and our existing capabilities?

Possibility, are you asking how or what?

Polarity, the idea of opposites, turns thoughts and possibilities around like  a pendulum  always moving from one extreme to the other. That is until the thought runs out of energy or momentum and stops. It rests until some force displaces it.

Recently, a client asked for help explaining the difference between planning for a transition and planning a transformation. Since Transformation seems to be one of the buzz words of the moment, I began to wonder what made the two thinking processes different, and what did they really mean. My polarity thinking friend suggested that transitions plan for certainty, or near certainty and transformation plan for uncertainty.  I disagreed.

I think of a transition as the pause between takes, what happens between two clearly defined states.  It’s when we assess, evaluate or figure out our position, how close or far. Transformation, that’s the feeling we have on arrival, we made it so now what.

In other words, if the client has a clear objective as in to take a specific distant hill, then transition plans incorporate the certainty that elevations will be changing on route and insures the team’s prepared for the journey. When it knows  what changes to expect along the way, then it’s transition ready. Transformation focuses on arrival, different conditions and challenges it doesn’t know, but can imagine arrival makes possible.  After all, isn’t that why the objective was to take the hill?  Wasn’t it about the advantage that being on top offers?

Put another way, imagine what you want to do is known, like traveling to another location.  Transitions focus on the journey, how long will it take, buying tickets or planning the route. Transformation planning asks how the change in location affects your current activities.  Transitions are more whole body time shifts, where as transformation puts your head in the future while the rest of your physical body remains grounded in the present.

November’s topic for the monthly strategy discussion focused on Transformation Readiness. Before I managed to summarize the conversation and post notes,news about the sale of Mariano’s to Kroger caught my eye. and then I also spotted  an interview with CEO, Bob Mariano on the Chicago Booth website.

If you are not familiar with Chicago, then let me explain that Mariano’s was a new entry into the grocery store business. By coincident, just as they had opened a few stores one of Chicago’s main competitors –Safeway decided to close all of its Dominick’s stores. This meant Mariano’s acquired 10 of the closed stores and their debt fueled expansion took off.  That’s when Kroger came calling.

Since I had already been thinking about  transformation questions , as in how do you get transformation ready, I thought it worth sharing these responses.  Take a peek, and let me know what you think, are the example transitions or evidence of transformation readiness?

Scenario A: I think that Mariano’s namesake, CEO and founder, Bob nailed it when he said:

“At Mariano’s, we tried to push further. We continue to push.  What I mean by push is to expose the customer to different and unique things and allow them the opportunity to tell you, ‘No, I don’t like that,’ or ‘Yes, I like that.’”

Scenario B: Or maybe you prefer the spin by CEO of Shazam when asked about the increasing gap between growth in the amount of information and its utilization. ” …How do you improve data intelligence?”

“That’s definitely the case [that there is a data knowledge gap] and for years we have been talking about data warehousing, or capturing that data, but turning information into data intelligence is a new journey for many companies…”

Or, how about the Gambling industry insiders view who characterizes difference between digitizing or converting your industry to the reality post conversion this way:

Advancements in technology has brought about a rapid digitization of gambling and almost every other industry. Some have managed to exploit these developments more than others and I think that the gambling industry is at the forefront of how well technology can be applied to a domain.

As an industry we must be open to change and pro-actively look at how we can exploit such technologies to provide a better and more entertaining experience to our customers. For example, the progress in Touch ID has enabled us to allow LeoVegas iPhone app customers to log in to the casino using only their fingerprint.

Are you wondering why distinguishing between transitions and transformations matter? Or, even better, how your business can take greater advantage of the widespread availability, access and flexibility that a fully digitized world creates?

Great, now you are thinking strategically.

How Old Metrics may strand you strategically

Ever stIMG_0267op to consider how the ever present changes going on around you make your own transformation easier?

John Hagel relatively recent blog post describes the opposite.

In a world of accelerating change, one of our greatest imperatives is to “unlearn” – to challenge and ultimately abandon some of our most basic beliefs about how the world works and what is required for success.

Accenture a few years ago noticed that many different companies had shifted their approach to strategy. Perhaps, the availability of cheap, powerful computing capacity and Big Data are responsible for driving changes in strategy development as more organizations using technology find it easier to build consideration of the future into their present planning.   Hagel, a long time fan of scenario planning would applaud these efforts too.

With the rise of automated business processes, analytics too get incorporated automatically to enhance decision making and may be simultaneously compromising management capabilities to internalize all of these changes or understand the underlying dynamics traditional measures mask. Several articles provided case studies in different industries provided the basis of discussion around transformation (see the bottom of the post for specific article links).

how to lie with staticsSuccessful organizations rely on their strategy to put forward action plans, realize new ideas while averting risk. Statesmen and management alike find themselves in precarious places when they assume a trend will continue without change. Many statistical methods and decision-makers use of data remain unchanged from 1954 when Daniel Huff first published How to Lie with Statistics. His timeless book describes very simply the perils of improper use of methods that were designed to capture and explain if not contextualize the significance of singular observations, or data.   The current transformations enabled by technology have done more to alter behavior than organizations seem to recognize. That’s the path our discussion took.

The capability for insight

Prospective vs retrospective cohort analysis  and data mining techniques are far from new. Though the volume and speed of available data to digest and process with ever The increasingly sophisticated tools and the ease with which volume and speed of available can be processed may help as well as hinder their digestion. Sure the time to test alternative scenarios may be faster, but how do you choose the model?

Do you begin with the intended outcome? The scientific method and numerous models from multiple disciplines make it possible to isolate factors, determine their significance, and estimate alternative scenarios and assess how these variations produce changes in impact.

Similarly, the cross pollination of data modeling from one discipline into multiple industries and use cases continue to shift management beliefs regarding the importance of specific factors and interactions in their processes. The perennial blind spot denies many organizations and their leadership the insight necessary to transform both their internal strategic thinking process and business operating models. Last month’s discussion of McDonald’s and Coca-Cola illustrated how easily leadership misinterpreted fluctuating performance as temporal issues versus recognizing structural factors. It’s one thing to balance efficiency and effectiveness, quality and satisfaction and another to manage awareness of change and insights necessary to your continued survival.

What else thinking

“…both the digital world and the physical one are indispensable parts of life and of business. The real transformation taking place today isn’t the replacement of the one by the other, it’s the marriage of the two into combinations that create wholly new sources of value.  “

The sudden availability of online data tracking provided many organizations with the proper capability to understand user behavior differently. A whole new industry arose to focus on interpretation while creating of new measures while also introducing new thinking about effectiveness in sales, customer service, training etc.  Metrics, once created to prove out a strategy or an idea, now leave many organizations vulnerable until they build up the capacity to understand this new thinking let alone make corresponding operational changes necessary to sustain their business.

This is not the story of companies who fail to adapt such as Kodak who invented digital cameras only to retain their focus on film; but maybe it is.

http://www.cognoise.com/index.php?topic=17598.0Computerized reporting dashboards summarize specific indicators or activity associated with managing process or business relevant factors. The time and reporting cost savings that result from the automatic generation and ready access to information by managers and executives reinforce existing thinking and leave little room for understanding wider changes that may be impacting their business. It wasn’t long ago that analysts, and teams of them, spent their entire day pulling data and then calculating critical statistics detailing the effectiveness and efficiency of organizational activities to create reports for senior management. These efforts also made them accountable by insuring the data was clean, verifying whether outliers were real or indicative of a model failing to fully capture the wider dynamics. I was once one of those managers.  Today, automated reporting has eliminated many of the people capable of deeper data exploration and who chose what data, which statistics and the context necessary to understand the situation. The second problem is that data shared graphically or in tables never tell the whole story, though infographics do try.

A good analyst is taught to review the data and results, double-check whether the model or calculated results makes sense. Sure managers and executives may be quicker to detect aberrations and then raise questions but , how many of them have the time, patience or skills to test their ideas or intuitions? I imagine very few if any. Where are these available resources and how widely known are they to questioning executives?   How might the dashboard provide additional information to help frame the results executives see as they too seek to understand or make sense of the results?

Outside in thinking

Established data flow processes and automated reporting do deliver great advantages but they may also explain why outsiders find it easier than insiders to create new business models.   Where’s the out of the box thinking? And how can different data help?

Sure, it’s easy to blame regulatory requirements or compensation structures incentivized to focus on effectiveness and efficiency that leave little latitude to notice opportunity. For example, in the airline industry route fares were once set by regulations. The minimum fares were intended to cover airlines operating expenses that both insured passenger safety and access to air travel in more locations where market forces may lead airlines to cut corners. Deregulation may have given airlines additional freedom but many manage their business using the same metrics that they report to the Department of Transportation. Likewise in Healthcare, the imposition of new regulatory requirements came with new metrics that forced hospitals to focus on patient outcomes not just their costs.

When executives bottom line focus limits their thinking as an exercise in how making corrections in operation may maximize that number they overlook other contexts. Data quality issues should surface quickly in most organizations, but what if another factor created the data issue? A misplaced data point, or inconsistent treatment of the content of a data field rarely explain all aberrations in the results.   Weather, for example exemplifies a ubiquitous, exogenous variable. Observable data fluctuations may be directly or indirectly responsible by affecting other more directly connected factors, such as a snowstorms that change people’s activity plans. I’m not familiar with any automated reporting system that will automatically create a footnote to the data point associated with the arrival of a snowstorm. The reviewer is forced to remember or manually if possible add the footnote for others.

Bigger transformations to come

Bain believes there are significant implications for every organization that result from this digital and physical combination of innovations , they call Digical. It’s not easy to keep up with the corresponding behavioral shifts that result from these rapidly changing technological capabilities.

Focusing exclusively on efficiency and cost data helped management measure impact in the old era, though still necessary today they may no longer suffice. Do you know how social behaviors of your customers impact your bottom line? The technologies to support your business, such as your website or your cash register misses out on the social behaviors evident on sites like Facebook, Twitter, Yelp or even their bank. Mapping the ecosystem and then aligning the digital tracking data can now be supplemented with sensor data that may be anonymous to specific customers but can inform movement and actions relevant to your engagement.http://intronetworks.com/making-amazing-connections-siggraph-asia/

Naturally, as mentioned earlier bias plays a role in our inability to notice the significance of new data. The more we automate and configure systems to measure what we always knew mattered, the less likely we are to be able to recognize new data and its significance. What should you the analyst and you the executive do to counteract these factors?

Takeaways

Monitor the activity of smaller companies as they experiment to learn what’s most relevant.

Don’t make assumptions, exercise strategic intentions to become more open receptive and curious about anomalies and be more creativity and persistent in identifying the drivers or possible factors.

Historically, metrics were an output designed to assess the validity of your strategy –did it work and/or deliver value. Not it’s time for strategic thinking to view metrics as an input. The use of statistics enabling analysis tools partnered with business knowledge and acumen must be part of communicating to higher levels in the business.

Often we measure the wrong things because the incentives are misaligned. Am I paid based on my proven ability to produce widgets at specific levels , or to produce effective, sustainable results for the business, not just my business unit?

Computers are useless they can only give you answers. For strategy, validating the questions may be important but so too is taking the time and effort needed to determine even better questions.

ARTICLES

Alternative case examples

Bain’s study and understanding of the state of “digical” transformation:
http://www.bain.com/publications/articles/leading-a-digical-transformation.aspx#sidebar
Fast Food
http://www.qsrmagazine.com/reports/drive-thru-performance-study-2014
Wireless
http://www.rcrwireless.com/20140812/opinion/reality-check-new-metrics-for-a-changing-industry-tag10
Television
http://fortune.com/2014/10/23/adobe-nielsen-tv-ratings-system/
Gaming
http://www.gamesindustry.biz/articles/2014-03-10-social-currency-has-real-value

What strategy will help Coca Cola and McDonald’s continue to Grow?

Publié le 25/03/2010 à 23:33 par papillondereveMcDonald’s and Coca-Cola, two of America’s most iconic brands were the focus of the January 2015 discussion.  Why pick on them?

  1. The market has been digesting repeated disappointments over quarterly earnings and fueling speculations about their future.
  2. The availability of ample data and a broad set of analyses serve up a perfect opportunity to further our own understanding of the strategic challenges related to sustaining growth.

Typically, most organizations begin a strategic assessment with a simple SWOT analysis.  Instead,  we followed the Chicago Booth tradition and began with a look at available data.  We reviewed a  series of articles before discussing these two companies’ prospects for future growth. (Click here for the links and discussion preview.)

Both companies offer evidence demonstrating how their history and initial value proposition continues to dictate their forward strategic paths. Or as Michael Porter would say,

“Strategy 101 is about choices, you can’t be all things to all people.”

Once you decide whether your organization will be a cost or benefit leader, aligning your resources and messaging becomes simpler. Price doesn’t fully substitute for quality, and consumer preferences are not always consistent. An organization’s successful growth demonstrates it’s priorities and reflects its consistency to deliver on its commitments to customers and their preferences centered around price or quality.

McDonald’s and Coca-Cola sensibilities and capabilities embody the management principles of post war industrialization. The hallmarks of efficiency embodied by these two brands commanding distribution networks reflect their unwavering commitment to quality, consistency and convenience. Each however has defined value differently in the eyes of their customer which further enabled their brand’s rapid, organic growth.

McDonald’s initial automation and efficiency enabled it to deliver meals affordably, conveniently,consistently in an atmosphere that maintained a high standard of cleanliness equal or better than its competition. In 1953, these standards proved themselves effective differentiators.

Coca-Cola chose to deliver on the benefit side, historically limiting its physical assets and focusing on relationships, advertising and consistency around quality.

Operating within the boundaries of these original value proposition, both brands performance over time demonstrates how their responsiveness and sensitivity to regional differences and changing customer sensibilities allowed them to continuously add value and grow. Each brand’s commitment to experimentation and innovation proved central to fueling organic growth. Further,  their individual strengths allowed them to leverage new ideas, even when introduced by competitors.

TaB adIn 1963, Coke’s introduction of TaB followed the success of Diet Rite Cola, a first entrant in the sugarless soda category. In 1962, McDonald’s introduced the Filet-o-Fish as a meatless alternative for observant Catholics following the suggestion of an Ohio Franchisee responding to local competition

Eww Arch Deluxe ad For each, their share of successes also included colossal failures. Who can forget New Coke, or McDonald’s Arch Deluxe? Per Daily Finance.com these two were the #1 and #4 biggest product flops of all time. Both however learned from these experiences and were quick to renew the good faith of their customers and keep growing.

That is until now.

The value defined by their strengths, brand status advantages and considerable market dominance delivered significant success, but now cloud their vision and impede their path to future growth. After all, what’s really left for them to tweak? What haven’t they tried and learned?

Beyond Strength

Both companies continue to demonstrate long term value for their shareholders.  Each provide great capital returns and margins.

  • Coca-Cola has paid a rising dividend since 1963 and has a current yield of 2.88%.
  • McDonald’s has paid a dividend since 1976 and has a current yield of 3.72%.

Each holds the leadership position in their category, continue to show signs of forward thinking and planning at levels of coordination and integration that few companies achieve. Their initiatives, irrespective of success rates are also lessons and templates offering competitors a looking glass into the future.

According to data from the National Restaurant Association, fast food accounted for about 28% of the $683.4 billion in overall U.S. restaurant sales in 2014. The Palo Alto Medical Foundation reports that 25% of Americans eat at fast food restaurants every day.  . Quick Service Restaurant (QSR) magazine identified McDonald’s as the world’s biggest restaurant chain by revenue-$36B in US sales in 2014.  This equates to an estimated 18.6 percent market share of the entire fast-food industry. (Per IBISWorld market research 2014 as reported by franchise chatter.)

“McDonald’s stands for value, consistency and convenience,” says Darren Tristano at Technomic,”and it needs to stay true to this. Most diners want a Big Mac or a Quarter Pounder at a good price, served quickly. And, as company executives now acknowledge, its strategy of reeling in diners with a “Dollar Menu” then trying to tempt them with pricier dishes is not working.”

Just as McDonald’s typifies the fast food industry, Coke is the soda industry, or as Mike Weinstein, a former president of A&W Brands told Business Week,

  “Whatever Coke does, it’s seen as what the soda industry does. What happens to Coke eventually happens to everyone.”

And So?

The strengths of these two brands and value propositions sound good for McDonald’s and Coca-Cola. Their future growth however depends on just how they renew their efforts and focus and capitalize on their key strengths. The forward position challenges you to see and respond to changes  in your business environment faster. Their sheer size and market share visibility also make both more vulnerable to wider market pressures.  Especially in the U.S., where both companies current experiences and declining sales volume indicate they somehow misread the significance of changing American attitudes  around nutrition and choice.  For example,  the 3% decline  in 2013 of the entire carbonated drink market in the U.S. hurt both companies’ sales.

For Coca-Cola, the emergent energy drink category displacing their sales creates challenges for which they  have not had an effective response.Similarly, the alternative fast growing Fast Casual category represents McDonald’s biggest threat. Further growth in this category limits further expansion in the corresponding Fast Food category, and McDonald’s too has yet to effectively compete.

In addition, both new categories prove highly appealing to millennials whose behavior and preferences some analysts contend prove influential to other segments. No wonder both brands chose to leverage their considerable resources around what they know. Each reportedly are investing $1bilion in advertising in efforts to re-establish awareness among this key market segment.

Holding the value of your brand

Interbrand’s 2014 Best Global Brands
2014 RANK 2013 RANK BRAND SECTOR 2014 BRAND VALUE (USD $billion) % CHANGE IN BRAND VALUE
1 1 Apple Technology 118.863 21%
2 2 Google Technology 107.439 15%
3 3 Coca-Cola Beverages 81.563 3%
 ….   ….
24 22 Pepsi Beverages 19.119 7%
38 37 Nescafe Beverages 11.406 7%
72 69 Sprite Beverages 5.646 -3%
….   ….
9 7 McDonald’s Restaurants 42.254 1%
68 66 KFC Restaurants 6.059 -2%
76 91 Starbucks Restaurants 5.382 22%

Source: Business Wire, Oct, 9, 2014

As shown above, in 2014 Coca-Cola’s increased its estimated brand value of $81.56 billion 3% from 2013 permitting it to hold it’s #3 position a second year in a row. This is after losing the #1 spot it held in 2012 and a decade long decline of American soda sales. Their continued brand dominance reflects the impact of their recent marketing, acquisition and diversification strategies.  Business Week explains it this way:

“In 2007, Coke found that 20 percent of the sales and 50 percent of the growth in the $120 billion beverage industry came from small, independently owned brands, a third of which hadn’t existed five years before. That year, Coke launched its Venturing & Emerging Brands (VEB) division to cultivate relationships with and ultimately purchase some smaller startups.”

In Contrast, McDonalds estimated brand value of  $42.2 billion increased only 1% over 2013 reflected its slowing growth and dropped it to #9,  down from #7 position it held in both 2013 and 2012. (Note the distance between these icons and their nearest category competitors shown for comparison).

The marketplace loves a good story of failed leadership. When the mighty fall the press and public are quick to pounce and in some ways, fresh eyes and alternative experiences and optimism may prove more than beneficial. Will activist investors get their way?

Then again, in taking a close look at the fundamentals of size and respective asset valuations our disccusants were reminded of the difficulties around sustaining organic growth.

Below you’ll find the participants takeaways following our most recent discussion. Read the articles, see if you agree. After our usual wrap-up, you will also find a series of simple questions we plan to raise with a few folks with deeper knowledge and a more intimate understanding of McDonald’s.  We will post their responses when they arrive.

TAKEAWAYS

  • The one size fits all notions that produced cookie cutter efficiency and passed on volume savings to maintain quality suited the growing quick service restaurant category, when there were few comparable alternatives. Today, the US market especially its urban centers, reflects far greater diversity in the category. The growing variation along the price value continuum illustrates the market’s response to changing attitudes, palates and preferences of consumers as well as differentiating  perceptions. Use your strengths to build alternative restaurants, maybe tailoring them  to regional preferences and further diversify your portfolio holdings.
  • Separate the brand from the occasional value meal inspiration.  Sure everyone appreciates getting the best value for the lowest price, but it’s difficult if not impossible to deliver differential value messages within the same location as in the value meal combination vs. purchasing off the dollar menu. Turn your attention to differentiate your value relative to your competitors at similar price points.
  • The strengths that prove appealing to shareholders don’t indicate your understanding of individual customers.  Declining customer counts along with infrequency of return visits suggests the absence of resonating experiences necessary to meet the demands of the increasing segmentation within your broader competitive category. How can you continue to benefit from your existing strengths? Pare down your menu further to deliver the essentials of what your core customers want, assuming you really understand who that is.  Once you do, use a loyalty program to reward them and keep closer tabs on their responses as you continue to test.
  • If increasing customer price points is key to your growth equation then you also need to offer higher value for the price in order to avoid losing the core brand identity.  Obviously in rural areas where the choices are fewer, you retain a firm grip on the market and can delay changes. Unless the $1 menu, or $1 menu plus offers acceptable margins you may need to find alternatives to pass your volume discounts on to consumers.
  • Separate supply and demand functions as you manage the business going forward.  The benefits from your superb asset management capabilities on real estate, currency risk and supply chain have been impeccable and thus puzzling to watch your miss on the demand side. Are there lessons in creativity and management that could prove helpful?
  • The proliferation of segmentation in the marketplace let alone in your customer base requires a more innovative approach than mere brand building activities offer. In focusing on the customer experience you may miss aligning around your core identity. Another reason it may pay to try an alternative diversification strategy through new restaurants, concepts that don’t compromise but complement the existing franchise.
  • One of the problems of being so big and maintaining a healthy distance from your nearest competitor means you were insulated from the small ripples of changing sentiment that others were quicker to seize upon.  Your crumbs became their meal and growth ticket.  In order to get out front again, you may need to get much closer to your customers, and surprise them, delight them or even choose to get cozier with your competitors again to find a way to grow the category together.

Concluding remarks:  We know we didn’t discuss Big Data or social media or even mobile so there’s plenty of things we missed in 90 minutes. Please, share your suggestions or comments on what you find to be effective growth strategies for market leaders who seem to have hit the end of their runway.  We’d love to hear from you.

Taking Aim at Corporate Leadership–

Jamie Dimon, Hugh McCall were just a few exemplary CEOs that were discussed this morning in our discussion around Leadership.  Their ability to deliver, tough minded interactions with their boards, zero tolerance for non-performers and vision for their organization suggested that we seem to recognize good leadership when we see it.  Characteristics or the actual qualities that define leadership, however prove more difficult to understand, identify or measure for impact.

lessons-from-ducks If you invoke the simple rule of followship, then you may end up in a precarious position.  Ducklings naturally follow their mothers and the mother duck in this example shields her offspring from danger but does she really lead?

Our perceptions of leaders and the realities of effective leadership are not always in synch. Robin Hood the hero captures our attention and appears to have attracted quite a following or at least that’s the legend as it’s often told.  Reality illustrates that he was far more enabling and was probably an amazingly talented lieutenant under King John who really had the skills and experiences to inspire and train and command a team. (See Suggested articles at the bottom of this post).

Likewise today’s army does an astonishing effective job of command and control style leadership by focusing on developing people by instilling the philosophy of Be Know and Do.  The trust within a unit and the capabilities of individual members are as critical as the leaders’ vision.  The clarity of rules for succession to command are both important and immediately visible.  Every individual is responsible for every one else on your team.  Effective units require individuals to be both emotionally committed to the task as well as each other.  The army exemplifies meritocracy and demonstrates what it means to instill the construct of success from the imperative that failure is just not an option. Which means every soldier needs to help the other soldiers excel.

How exactly does the US military achieve this level of functionality and effective leadership capability?  They also use scenario planning, simulation and constantly are challenging the relationship and perception of leadership.  But does it effectively translate into business settings, or other situations where the consequences from failure are not life threatening?

One take suggests that leadership gets people to do things they wouldn’t do under their own volition.  Leadership in this frame, inspires providing mutual psychic rewards to those leading as well as those being tasked to perform. In the context of the military it’s easier to imagine how the threat and danger elements are put to effective use, but the problem is translating them into everyday work situations.

Vision obviously matters and mercurial leaders like Steve Jobs or Richard Branson who changed the rules when they entered the business are rare. For those organizations that inherit leaders, or for whom a board replaces the leaders the embedded base may prove difficult if not impossible to move or motivate.  What are the basis or selection criteria that a board uses to choose its next leader?

Alan Mulally was brought into Ford and made big bets with expectations of long-term payoffs.  Not every leadership situation fits every leader.  Situations also change over time as is illustrated by Dov Charney who may have been great at building, growing and even scaling American Apparel until his behavior no longer suited a bigger organization.

In other words, context alone isn’t the only consideration, but boards misjudge the situation or their market or their issues ore than 80% of the time.  Which explains why the failure rate of placed leaders is so high.

when does situational vs. industry competency matter?  Not clear that many people posses capabilities in both.  The ability to adapt, flexibility and even the awareness of the rate or pace of change in an industry can be difficult to assess.  This is why succession planning and preparing your team with the discipline and transparency the military uses may prove invaluable, both as a motivator as well.

Take Aways:

Leadership to be effective must be situational:

  • offensive vs. Defensive
  • Political vs. independent
  • Short term vs. Long Term
  • Intrinsic rewards vs. monetary rewards.

The Be, Kind and Do paradigm useful and instills a discipline of Respect, Flexibility, collaboration, knowledge and courage.

We tell too many war stories that may or may not be enough on point. In Business, the importance of boards hiring, managing and changing leadership process increasingly critical.  Question is how effective are they at choosing the criteria that fits the situation the company faces?

Leadership traits are also complicated and thus vary by context, industry, “charter” etc, this variety of dimensions make it difficult to codify into one description.  This is why there are so many books on the topic!

Leadership–we need to change the paradigm, understand its situational dependence and clearly evident when they plant trees!

Situation specific, leaders good in one may not transfer/translate well in another.  Parameters worth considering include:  the business life cycle, rate of change in the industry, customers, type of business (e.g. retail, government contractor etc), growth or mature or crisis?

Under different conditions, different attributes matter.  need to assess the situation accurately in order to effectively make the call of what type is needed.

Never one set of attributes that make a leader, the context really matters!

Suggested Articles

The following links to articles were merely suggested as background reading to inspire participants thinking:

US Military’s leadership development strategy

Mobile Strategy–an imperative for your future

Note to readers: The graphic to the left was found After the  October 18, 2013 discussion, inspired by articles listed at the bottom of this post.   

Does your near term performance hinge on your understanding of mobile  technology, and if so, how critical a role does it play?

Infographic-2013-Mobile-Growth-Statistics-MediumToday mobile platform adoption rates outpace the technology’s downward pricing.  The dual benefits of convenience and constant connectivity offer irresistible value and overwhelm the initial cost bumps associated with implementation.  It’s not merely the anytime anywhere connectivity with your social network that makes mobile valuable. Mobile technologies offers direct access to increasing varieties of information at the tip of your finger anytime and every where (if there’s wifi).

Questions that used to leave us uncertain, can be easily answered.  For example:  How soon until the next bus arrives?  What’s the best route to any intended destination?  What can I make for dinner? Who has the best price? What’s the name of this song playing right now?

Short message services–SMS, Geo Positioning software – GPS, Google search, untold numbers of product and service applications and internet browser capability are now built into multiple mobile devices.  They allow everyone to travel lighter and access the information needed at the right time.

For business, if you don’t have a mobile strategy yet,  best make it a priority.  At least that’s what the discussion participants concluded.  Skeptical of consumers ability to fully integrate many of these technology opportunities into their daily routine or modify their existing habits and behavior,  companies who have yet to play in this space will find it harder and harder to catch up.

The strategic opportunities continue to evolve in tandem with the spreading  uses for assistive mobile technologies.  For example, a prudent strategy  in consumer marketing might be to incorporate  the technologies to enhance the user experience—especially as no clear killer sales application that deploys these technologies exist.

·         Amazon with all its technology savvy and leadership in the online sales market leveraging its platform hasn’t found a way to fully leverage mobile capabilities to increase sales.  Mobile assistive technologies, like Google maps represent a hybrid.

·         Twitter, hot off its successful IPO has yet to grow actual sales for any business.

·         Facebook’s use of GPS allows business to learn more identifiable information about the consumers as they become proximate to their store,  but have yet to prove predictable in driving retail sales.

Advantage

What advantage then can mobile technologies really deliver?

There seems no limit to the additional utility Search Engines provide.  Mobile technologies allow roving users access to  public, private or personal sources that the engines verify and validate boost both their value and help build loyalty incentive programs.  Increasing numbers of gamification applications also exemplify how mobile technologies drive growth opportunities  by enabling repeat sales through mutual identification of merchants and existing customers.

More interesting,  mobile technologies helping to optimize each stage in the sales cycle sequence.  Applications that make use of two way transmission—driving traffic both by or to customers is just the beginning.  Efforts that allow discovery and exploit more stages in the cycle help determine when, where and how the transmission proves itself  more efficient and effective.  Should your business deploy mobile to simplify checkout? Or simplify merchandise location and availability?

In the ongoing evolution of technology, strategy that focuses on deploying tools for competitive advantage or advancement isn’t enough.  Strategy needs to consider how the new technology influences your revenue flow.

Possessing mobile technology isn’t merely a lower cost play. Strategic opportunities increase when it’s used intentionally to offer stakeholders learning opportunities.  Can you give your sales people the most up to date information on the customer’s past purchases, or your customers’ suggestions for product use, installation or enrichment?   Present technology capabilities and big data offer business opportunity to accumulate metadata and create richer customer profiles.  Mobile brings them together by putting the specific customer into the present transaction equation.

15 years ago, business wondered how, what and when E-Commerce would change their reality.  Today, forward planning organizations recognize mobile technologies as a similar force of permanent change.  Advantage will flow to those organizations who get out to test and experience for themselves the many features mobile technologies offer them directly.  These options offer unique understandings and help them translate mobile technologies’ anytime, anywhere access options into business value.

Strategy that activates customer and supplier value goes beyond capturing attention and offering incentives to drive traffic.  The strategy must consider the fuller customer experience and increase the odds of success by investing in developing future capabilities such as cross training staff and directing resources that  effect cross-promotion , understanding  both crowdsourcing and influence peddling opportunities.

Walmart’s recent experience demonstrates the shifting control customers now possess.  A computer glitch with  the Federal WIC program’s system communications prevented enforcement of  purchase limits at Walmart’s Point of Sale.  A customer tweet  flooded Walmart with these customers who exploited the system failure to their advantage and  Walmart received the short term benefits.

Summary of take aways

  1.  Confirmation that organizations must be actively trying to understand the technology, otherwise they may never get the benefits.  For now, obvious value is limited to facilitating adaptions to  marketing .  Eventually both seller and buyer will reach the same understanding but the advantage will continue to flow to those who worked hard out front and made it easier for their customers to both benefit and settle in as they who to trust and where to be.  Switching costs are always serious and so it pays to be out front.
  2.  Best to think through how you deploy these technologies carefully.  What opportunities will make things easier for you consumers, and then work to simplify the individual steps and actual transactions.  For example, Millenials view mobile as an essential service and continue to need and expect universal Wifi and battery charging wherever they go.  Are you helping them?  If not, your access to this key demographic will be limited.
  3. Balance the cost/benefit of information and investment.  Mobile is a work in progress like any technology, don’t put all your eggs in one basket.
  4. Opening up of information transmission in more places and with more transactions suggests that additional paths to capitalize on this phenomenon.  Your strategy should seek to know and learn, as in where you can produce added convenience, respond and simplify steps in your own or your customers’ process, find out more about customer behavior and your ability to learn with  them  in order to  gain strategic advantage.
  5.  Continue to seek out pockets of advantage—customer  loyalty is easy, instant access, centralize connections for your customer to one place is another.
  6. Transparency too is key. Mobile comes with real time imperatives and be sure your back up plans work.  Open Table app for example failed to deliver real time answers or reservations, which diminished its value and its opportunity to build customer loyalty.

ARTICLES:

Mobile Now—Strategy +Business June 2013

http://www.strategy-business.com/media/file/00196_Mobile_Now.pdf

The 6 Biggest Mistakes Made on Enterprise Mobile Strategy

Posted by Adam Bookman in Wired on August 5, 2013 at 10:30am

 http://insights.wired.com/profiles/blogs/6-biggest-mistakes-mobile-strategy#ixzz2glZMCXXu

 Global mobile statistics 2013 Home

http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats

And, an Optional  case Illustration.

A look At Quiri- Retail Intelligence using mobile crowd workers

http://techcrunch.com/2013/10/02/quri-a-retail-intelligence-platform-using-mobile-crowdworkers-scores-10-million-from-matrix-others/

Sports analogies for business – how effectively do their impact and influence extend beyond the game ?

George Toma Readies Superbowl 48 Giants Stadium Field.
Superbowl XLVIII, Giants Stadium NJ readied by George Toma, official groundskeeper for all 47 preceding superbowls and his crew.

On the day of  Super Bowl XLVIII, it’s impossible to ignore the power of sports to captivate the attention of the world. Few events compare historically to viewership levels and  calls for  the all-consuming air time devoted by the media to a singular recurring event. Think about it, other than religious or national holidays, only acts of pure terror or wonder attract this much attention.

Irrespective of the team match ups, the pinnacle represented by the Super Bowl offers several compelling lessons to further Business Strategy, though we will overlook the obvious promotional marketing option.

Successful business strategy defines itself as a quest for clear advantage.  Sports stories typify this quest and that’s why we wondered about the value of the analogies, given their abundance and frequent invocation.  Do they help business leverage competency, inspire confidence and deliver positive outcomes?  As usual, participants reviewed in advance a few selected articles (linked at the bottom of this post). These thought starters warmed up participants reflective abilities and helped us frame the conversation as follows:

  • A battle of objectives-Winning vs. Value Creation
  • Numbering Success
  • Beyond the action of “the game”
  • Game Changers

The topic was not intended to prove conclusive, and we offer the following post-discussion elaboration of hasty notes for those of you who missed out.  Do feel free to add your thoughts and share the responses with others.

Winning Objectives

Undeniably there is a cross-relevance between many sports philosophies and business. Competition and Sports go hand in hand. Opposition, rivalry and contest make up the elements necessary to motivate both players and observers. The experiences of playing or watching sports evoke great passion and focus, behaviors which naturally pervade our lives and make the contests universally appealing. No wonder, sport stories succeed as shorthand references connecting experiences across a series of interpersonal activities including business.

How and do sports’ stories help or hurt business strategy? The context of a game doesn’t exactly mirror the ongoing demands of business.  A specific sport’s rules, frequency of play and consistency of  playing conditions (e.g. the field, the season, the equipment, ethics etc) make sport’s winners easy to name and likewise test the merits of a particular set of plays or strategy.  Business by contrast strives to eliminate ambiguity and standardize its rules and apply them consistently.  The result is the frequent restatement of results which makes the parallels to sport that much more divergent.

The context of game doesn’t exactly mirror the ongoing demands of business.  For example, is the business of business to win, or create value?  Does strategy offer greater value when it focuses on generating general or more specific outcomes?

The delimiters present in sports—the field,the game, the season –all make possible two fundamental self-sustaining attributes:

  • Emotional fervor, and sheer adrenaline fuels high performance  in individuals, teams and fans but is impossible to sustain naturally.
  • Measurable relationships easily established between actions and rewards—both tangible and intangible .

Business strategy in contrast struggles with these issues and looks to sports for inspiration while persistently under playing the value and resists imposing similar clear and consistent delimiters.

For example, the value of  a win, though always significant accumulates in sports but often dissipates in business.  To get the points, make the down or win the game rarely engages and rewards  employees directly as  it does  players.  To deliver success, employees need more sustainable incentives.

How a business measures or tracks a win or a loss differs dramatically from sports.  It also differs within industries or within an organization based on the business unit.  Are forecasters held accountable for their targets in manners equal to sales professionals?  What about wins in customer service versus IT?

Clear outcomes generate stories that rouse emotions to a degree that no numerical analysis of performance musters. Engagement in a given task or play and the survival lesson it produces can motivate both employees and players to focus, as well as extol the importance of each effort.  The analogy of surviving a skirmish makes clear connections between the single event’s outcome and its impact on the larger mission.

War analogies and larger battles such as the Super Bowl share common language but differ drastically in participant experience. Isolating a single event and elevating its importance can be an effective motivator, but in business performance goals need to be sustained and ever-increasing.

Sports analogies dominate conversation today may be due to the increasing prominence of the business of sports and the remoteness of common war experiences in many American’s lives.  To be successful understood, metaphors need to be familiar to your audience which increases its authenticity and your credibility.  These conditions make it easy to turn to sports for help.  In a single game, the event stakes don’t carry the same consequences as being a general or platoon leader in battle.

The idea of surviving the skirmish and larger battles may be proper in sports but many business problems are often ongoing.  To call for action, any insight the analogy inspires must ring true.

Beyond the action of “the game”

Before any game, a coach and the players generally agree on a strategy.

Coaches help their players gain the knowledge they need to be effective and win. Regular practice, drilled instruction and constant review raise the level of experience and consistency of individual performance.  These factors help coaches recognize the readiness of a player and affect whether to play them in a given game and situation. Since players once they possess the ball often have wide discretion for their actions, the coach’s decisions to play them matters.  In business there’s no overt practice, and few managers and leaders prove effective as coaches, though they remain accountable. In business proven performers get more freedom than in many team sports.  For example, players may blame their poor collective performance on  decisions made by others, as reported by Darin Gannt.

‘‘That was a changeup,’’ Brian Urlacher said, via the Chicago Sun-Times. ‘‘I don’t like coming out of the game. But he’s the head coach. So I do what he says.’’

Few people close to the details willingly write or disclose these facts and their reflections in a timely manner for fear of repercussions.  There’s greater value to silence and avoids becoming the subject of wider scrutiny.  Sure, there are some wonderful tell all stories even if they tend to be extreme– great failures and great successes.  It’s no wonder that everyone confuses tactics and strategy. the failure of planned plays in both business and sport always depend on both the player capabilities and circumstances.  The difference isn’t just whose calling the shots, or is it?

Admittedly different sports offer different learning opportunities for business, but in general business could benefit from more post-mortem reflections on the game and analysis of play.

Organizations that do demand routine project reflection, write and publish  them at least internally demonstrably outperform their peers.  Still the number of organizations who have embraced this practice exemplifies the larger ambiguities that are rampant in business.  Of course sports isn’t immune to the fall out that comes to their industry from these stories but not to the extreme  and speed with which the market punishes business.

Numbering Success

Numerous performance indicators exist in both business and sports.  In sports, wins and losses are the common denominator of success for both players and teams.  Regularly, new scorecards and metrics attempt to track and match up players within an organization or rank the organization in an industry.  The quest for more data and more metrics has led to the rise of numerous successful businesses.

Numbers try to provide great performance inspirations, but fail to rouse people at the level of a great story.  Using alternative statistics to recruit and balance a team ‘s capabilities and diversity of skills plays out in both arenas.  Michael Lewis and his compelling story Moneyball heralding the quants’ efforts  in baseball to change the dynamic of the game, proved to be an ineffective strategy.  Sports management quickly learned  that an over-reliance on more statistical data missed the things that trained scouts or observers of real behavior historically captured.  Situational competence, summarized in statistical measures still requires a great deal of domain knowledge to properly interpret and produce winning combinations. .  Either may be sufficient to generate a strategy, but both are necessary to create effective strategies.

These lessons, business sadly discovers slowly and fails to fully embrace even in the wake of the colossal market disruptions caused by internet and mortgage back investing bubbles. Moneyball profiled the underdogs and arguable changed the consciousness of average America about the power of data analysis, a welcome message to Chicago quants.

Another key lesson was the use of underutilized information to plea the case for alternative strategies.

The NY Times story that second guessed the NFL coaches we read illustrates the common decision-making tension data analysis presents to both sports and business leaders.  Data’s  wide  availability made it possible for the NY Times to create an accurate predictive model and demonstrate the value of punting  in the fourth quarter, an impulse Coaches rarely heed.  Response by Ditka in the comments that follow reminds modelers that the model fails to consider what people in the game may know about the particular event that may be missing from the analysis–may being the operative phrase and tension point.

Clearly quants have their place but good decisions always include some domain knowledge.  The access to information makes it easy for competitors to rely on the same information and in fact that’s part of why the law of averages continue to pan out.  Statistics are wonderful reference points but one still needs domain knowledge to recognize what made the outlier an outlier.

Important to understand boundaries or the difference between situational competence and domain Knowledge.  Sports metaphors can help more people think differently when used effectively.

Game changers

The business of sports creates value regularly, but what about sport itself?

George Steinbrenner

George Steinbrenner purchased the Yankees at the low point of their competitiveness in 1973 for $8.7 million. According to Forbes, the teams’ worth was $1.7 billion  in 2010, at the time of his death.  Steinbrenner was the first to grasp the handle of the free-agent market and he made it work for him. In effect he made the rules they all had to live by and he dominated the game.  He made offers to players they couldn’t refuse. Mike DeGiovanna writing for the LA Times explained that  lavish spending on free agents became investments that helped fuel five world Series Championships since 1996.  His willingness to pay the premium  for exceeding the league’s salary caps allowed them to keep a winning streak.  Under his tenure, the Yankees started a television network and built a new stadium.

“The bottom line is he put great players on the field, and he delivered championships,” Cashman said. “He built something the fans can be proud of, and that’s what a great owner does.” (see )

Discussion Takeaways

In business turnarounds, surely the numbers matter but they are often not the deciding factor.

Steinbrenner’s leadership style and strategies show how it’s possible for a single individual to usher in sweeping changes in an industry.

When it comes to Big Data, it’s important to differentiate situational vs. statistical know how.  The premium value attached to Baseball statistics could easily explain why Alex Rodriquez got kicked out, because his drug enhanced performance was screwing up the stats.

Business can learn a lot from Sports.  The ready availability of numerous statistics offers a baseline and yet one still needs to overlay good judgment.  Efforts to track results may bring you closer understanding the true nature of  a problem’s structure.  Numbers  balance your  intuition and know how. They  may clarify your findings, but in the end performance is a blend of art and science.

Steinbrenner’s decision to reward players so heavily for performance may have changed the game but it also made it more lucrative for players to juice.  Be careful what lesson you take.

Sports analogies can be intimidating, to those who don’t fully understand the sport or make the connections story tellers perceive as relevant.

Increasingly Sports has taken to applying business analogies to improve its own game, its own business performance.  None the less some of the greatest quotes come from sports players, e.g  yogi Berra. “I like the moment when I break a man’s ego.

Business is a long-term effort toward an ever elusive goal, while sports  and sports management operate in a much more limited, shorter term horizon. The lessons don’t offer much assistance or inspiration for sustaining success over  longer horizons.

Sports has its Black Monday, the day in Januaray when poor performing coaches often get cut.  No singular day of reckoning in business though the swift reaction after annual earnings may produce a similar response.

ARTICLES

Journalism second guessing NFL coaches

http://gigaom.com/2013/12/06/awesome-a-new-york-times-bot-is-second-guessing-nfl-coaches-on-twitter/

be sure to check out the comments and remark by Ditka.

NASCAR second guessing

http://sports.yahoo.com/news/tony-stewart-second-guessing-decision-following-ryan-newman-201900576.html

Adopting analytics

http://www.sportsbusinessdaily.com/Journal/Issues/2013/08/12/Opinion/Sutton-Impact.aspx

Think Tank: sport and business are not a good fit 

http://www.telegraph.co.uk/finance/businessclub/management-advice/9400111/Think-Tank-sport-and-business-are-not-a-good-fit.html

Communicating your strategy

http://gbr.pepperdine.edu/2010/08/communicating-your-strategy/

Optional:
Focus on Game Changer—short video for investors in sports

http://www.sloansportsconference.com/?p=11021