by Adam Hartung | Jul 21, 2010 | Current Affairs, Food and Drink, In the Rapids, Innovation, Leadership
“I Failed Fast and Completely Re-invented My Company” is the BNET.com article title. Pixability.com of Cambridge, Mass. started out as a video conversion and editing business for families. Unfortunately, it cost more than most families could afford. Lacking revenue, the entrepreneurs thought up making highlight reals for youth athletes competing for college scholarships. Neat idea, but only 3 sales in 3 months was less than covering costs. Despite the original plan, and a desire to raise more money, it hit the founders that if they “stuck to their core” business plan they weren’t going to survive. More money or not. That’s when they realized that turning down corporate work might not be such a great idea – even though such work wasn’t in the plan. Turning to what the market wanted, editing corporate videos, the company is now growing fast and making a profit.
Same song, different verse, for Blue Buddha Boutiques of Chicago as reported in “Small Businesses Have Flexibility to Make Big Changes” at The Chicago Tribune. The company started out making chain mail jewelry sold on the internet. Not much sales. But when the entrepreneur listened to customers she heard there was more demand for jewelry supplies – so customers could make their own jewelry – than for the finished product. A quick shift in the business, aligning it to market needs, and the company shot up to a half million dollars revenue.
Far too often entrepreneurs hear “find your passion, and go with it.” “Write a business plan, stick with it, persevere, fight for success.” “Do what you’re good at.” Of course, most entrepreneurs fail. Why, because this is such lousy advice. Nobody cares about your passion, nor your plan, or your ability to persevere. Customers care about you selling them what they want. If your products or services don’t align with market needs, all the passion, business planning, fighting and perseverance isn’t worth spit.
Of course, this flies in the face of “Built to Last” author Jim Collins. To him, all winners are those who persevere. Looking backward, he can say entrepreneurs he studied were passionate and hard working. Maybe they wore white shirts, and enjoyed Juicy Fruit gum as well. The point is, that isn’t what made them successful – even if their personality traits were as he described. What’s important is that you find a market with growth, and more customers than suppliers, so you can readily sell something at a profit. Adaptability is the hallmark of great entrepreneurs. They have no product or service religion – no commitment to “excellence” – no predefined notions of how to succeed in business. Rather, they have a keen ear for the marketplace and the mental flexibility to rapidly shift into what customers want!
I beg you to be careful about listening to gurus – and especially Jim Collins. I was appalled by his column “Tuned in to four New Realities” published on Leadership Academy. Still unable to explain why companies he glorified in “Good to Great” such as Circuit City, Freddie Mac and Fannie Mae were such horrible failures – he tenaciously sticks to his guns. To him, all leaders must persevere. His new realities:
- “Define your business according to core values”. Values are great, but if they aren’t somehow intricately linked to delivering a product or service the market wants, and wants in enough demand to produce a profit, it doesn’t matter. Simple. I don’t say give up your soul. But values are not where you start. You must be flexible to align with the market. If your values won’t let you do that you need to do something else.
- “Organize by freedom of choice.” Honestly, how you organize should relate to meeting the market requirements. Whether its hierarchical or matrix or some other form – it must meet the critical market needs. Freedom is great – as long as it supports meeting the market need. You are free in America to do whatever you want, but if you don’t sell enough stuff at a high enough price you don’t eat. And for all its benefits, “freedom of choice” in the workplace is less important than positive cash flow.
- “Lead without using power.” Whether you use carrot or stick, people have to deliver what markets want. And companies have to adapt quickly to shifting wants. Sometimes it happens naturally, and leaders can just guide the process. Sometimes Lock-in to old assumptions get in the way, and then leaders have to get out a 2×4 and redirect attention to where the market wants it. It’s good to be kind and a servant-leader, but employees appreciate a good paying job with some clear guidance (at times dictatorial) to unemployment from “such a nice guy.”
- “Walls are dissolving.” I haven’t even figured out what this one means. But it’s clear that any walls which keep you from seeing the real market need is a bad thing. After that, aligning to market needs is “job #1” as Ford ads once touted quality.
Are you flexible to go where the market leads you? Or are you adamant about doing what you want to do? Are values something you use to help align to market needs, or a crutch you use to defend doing what you’ve always done? Are you able to change your management style, and organizational design, to meet market needs – or do you prefer to remain Locked-in to old management ideas and business models? Whether your company is big or small, old or young, does not matter. Lock-in will kill you when markets shift. Whether it’s structural Lock-in to an existing business, or mental Lock-in to a business plan. Adaptability to meet shifting market needs separates the winners – like Apple, Google, Facebook and Twitter – from the market losers – like Microsoft and Dell.
If you have any doubt, just ask the folks at Tasty Catering in Chicago. While others are still complaining about he recession, crying about lower sales, and food service businesses (including restaurants) are half full or closing shop — the folks at Tasty Catering are challenging the monthly revenues they set in peak years of 2007 and 2008. Instead of doing what they always did, the leaders – from the CEO to the 20-something managers talking to customers – are listening to the market and opening new businesses that meet market needs. While most employers are cutting staff, employees at Tasty Catering are working overtime – and in some businesses second shifts are being added. What was once a hot dog stand has been turned by the leaders into the winner of Best Caterer in the USA more than once – and a business that is thriving even in this “Great Recession.” Because they know how to adapt.
PS – Tasty Catering is one of the most value-responsible companies in America. Filled with employees that listen and care, and managers that want their employees to succeed. That’s because the leaders don’t see a trade-off between values and giving the market what it wants. If they keep the business moving forward, through keen connection to the marketplace, everyone wins – and values are not an issue. By being market-savvy, and flexible, Tasty Catering is considered one of the Top 10 employers in Chicago, and in its industry. And if you cater from anybody else in Chicago, or buy your delivered baskets or trays of cookies and muffins from anyone else, you simply don’t know what you’re missing!
by Adam Hartung | Dec 31, 2009 | Current Affairs, Defend & Extend, General, Leadership, Openness, Web/Tech
HAPPY NEW YEAR!
We end the first decade in 2000 with another first. In ReutersBreakingViews.com "Don't Diss the Dividend" we learn 2000-2009 is the first time in modern stock markets when U.S. investors made no money for a decade. Right. Worse performance than the 1930s Great Depression. Over the last decade, the S&P 500 had a net loss of about 1%/year. After dividends a gain of 1% – less than half the average inflation rate of 2.5%.
Things have shifted. We ended the last millenium with a shift from an industrial economy to an information economy. And the tools for success in earlier times no longer work. Scale economies and entry barriers are elusive, and unable to produce "sustainable competitive advantage." Over the last decade shifts in business have bankrupted GM, Circuit City and Tribune Corporation – while gutting other major companies like Sears. Simultaneously these changes brought huge growth and success to Google, Apple, Hewlett Packard, Virgin and small companies like Louis Glunz Beer, Foulds Pasta and Tasty Catering.
Even the erudite McKinsey Quarterly is now trumpeting the new requirements for business success in "Competing through Organizational Agility." Using academic research from the London Business School, author Donald Sull points out that market turbulence increased 2 to 4 times between the 1970s and 1990s – and is continuing to increase. More market change is happening, and market changes are happening faster. Thus, creating strategies and organizations that are able to adjust to shifting market requirements creates higher revenue and improved operational efficiency. Globally agility is creating better returns than any other business approach.
A McKinsey Quarterly on-line video "Navigating the New Normal: A Conversation with 4 Chief Strategy Officers," discusses changes in business requirements for 2010 and beyond. All 4 of these big company strategists agree that success now requires far shorter planning cycles, abandoning efforts to predict markets that change too quickly, and recognizing that historically indisputable assumptions are rapidly becoming obsolete. What used to work at creating competitive advantage no longer works. Monolothic strategies developed every few years, with organizations focused on "execution," are simply uncompetitive in a rapidly shifting world.
And "the old boys club" of white men in top business leadership roles is quickly going to change dramatically. In the Economist article "We Did It" we learn that in 2010 the American workforce will shift to more than 50% women. If current leaders continue following old approaches – and generating anemic returns – they will rapidly be replaced by leaders willing to do what has to be done to succeed in today's marketplace. Like Indra Nooyi of PepsiCo, women will take on more top positions as investors and employees demand changes to improve performance. Leaders will have to be flexible and adaptive or they, and their organizations, will not survive.
Additionally, the information technology products which unleashed this new era will change, and become unavoidable. In Forbes "Using the Cloud for Business" one of the creators of modern ERP (enterprise resource planning) systems (like SAP and Oracle) Jan Baan discusses how cloud computing changes business. ERP systems were all about data, and the applications were stovepiped – like the industrial enterprises they were designed for. Unfortunately, they were expensive to buy and very expensive to install and even more expensive to maintain. Simultaneously they had all the flexibility of cement. ERP systems, which proliferate in large companies today, were control products intended to keep the organization from doing anything beyond its historical Success Formula.
But cloud computing is infinitely flexible. Compare Facebook to Lotus Notes and you start understanding the difference between cloud computing and large systems. Anyone can connect, share links, share files and even applications on Facebook at almost no cost. Lotus Notes is an expensive enterprise application that costs a lot to buy, to operate, to maintain and has significantly less flexibility. Notes is about control. Facebook is about productivity.
Cloud computing is 1/10th the cost of monolithic owned/internal IT systems. Cloud computing offers small and mid-sized companies all the computing opportunity of big companies – and big advantages to new competitors if CIOs at big companies hold onto their "investments" in IT systems too long. Businesses that use cloud architectures can rearrange their supply chain immediately – and daily. Flexibility, and adaptability, grows exponentially. And EVERYONE can use it. Where mainframes were the tool for software engineers (and untouchable by everyone else), the PC made it possible for individuals to have their own applications. Cloud computing democratizes computing so everyone with a smartphone has access and use. With practically no training.
As we leave the worst business environment in modern times, we enter a new normal. Those who try to defend & extend old business practices will continue to suffer declining returns, poor performance and failure – like the last decade. But those who embrace "the new normal" can grow and prosper. It takes a willingness to let scenarios about the future drive your behavior, a keen focus on competitors to understand market needs, a willingness to disrupt old Lock-ins and implement White Space so you can constantly test opportunities for defining new, flexible and higher returning Success Formulas.
Here's to 2010 and the new normal! Happy New Year!
by Adam Hartung | Dec 22, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Innovation, Leadership, Web/Tech
In "The Year in Innovation" BusinessWeek has offered its review of innovation in 2009. And the report is grim. Most companies cut innovation spending – including R&D. Even the pharmaceutical industry, historically tied to long-term investment cycles, cut 69,000 jobs in 2009, up 60% from 2008. Meanwhile, P&G's dust cloth Swiffer was pronounced a major innovation – indicating both how few innovations made it to market in 2009 – and the degree to which BusinessWeek must depend upon P&G for advertising dollars given this selection (I mean really – BusinessWeek ignores Google Wave and Android entirely in the article but feature a Swiffer dust cloth!)
According to BusinessWeek, the big advances in innovation in 2009 apparently were "open innovation" and "trickle up innovation." The first is asking vendors and others outside the company to contribute to innovation. Adoption of open innovation has spurred one thing – less spending on innovation as companies cut budgets, using "open innovation initiatives" as an explanation for how they intend to maintain themselves while spending less. Open innovation has not spurred improved innovation implementation, just justified spending less with no real plans to achieve growth. With open innovation, of course, failures no longer belong to the company because the "open environment" didn't produce anything – hence innovation simply wasn't possible!
Trickle up innovation is asking people in poor countries, like India, how they do things. Then seeing if you can steal an idea or two. There's nothing wrong with turning over every rock when trying to innovate, but using analysis of third world countries, where costs happen to be very low and new innovations few, to drive your innovation program smacks of looking for ways to put a fig leaf on a naked innovation program. Expectations are low, so explanations are more prevalent than results. C.K. Prahalad wrote an entire book on this approach – which is popular with big company leaders who have abandoned innovation and think it clever to steal ideas from the poor. But it's not how Apple became #2 in smart phonesor created iTunes or how Facebook has taken over social networking.
source: Silicon Alley Insider (with Google picking up 2 new carriers in late 2009, this chart will be very different by summer 2010)
None of the trends identified by BusinessWeek reflect behavior of the real innovation winners. Rather, they reflect the big companies who are mired in Defend & Extend management, and making excuses for their terrible performance since 2007. Not once does the article talk about Google, Apple, Cisco – or leading small company innovators like Tasty Catering in Chicago. There are companies winning at innovation, but they are certainly not following the trends (which have produced marginal results – at best) identified in this article.
Because planning processes look at last year when setting goals for next year, lots of companies now plan even lower innovation spending for 2010. And that's how an economy goes into a tailspin. Everyone from bankers to manufacturers to retailers are saying 2009 was weak, and they don't see much improvement for 2010. That can become a self-fulfilling prophecy. 24/7 Wall Street reported in "Immelt Speaks at West Point: Future Leadership Path" that the CEO of GE, Jeff Immelt, is doing less innovation spending and relying more on government/business partnership. And of course GE is realing from over-reliance on financial services and under-investment in new products during his leadership. While Immelt is patching up holes at GE, the company is sinking without new products manning the oars.
Companies don't just need to spend on R&D. Studies of R&D have shown that the bulk of spending is Defend & Extend. Trying to get more out of the technologies embedded in the Success Formula. P&G and GE can spend easily enough. But when it's on short-term "quick hits" they get declining marginal returns and weaker competitiveness.
Companies in 2010 must adopt new approaches. They have to quit planning from the past, and plan for the future. More scenario development and understanding how to change competitive position. And they have to quit being so conforming and promote Disruption. Disruptions are needed to open White Space so new Success Formulas can be developed. In the 2000/01 recession Apple looked to the future, Disrupted its total dedication to the Macintosh and unleashed White Space allowing the company to become a leader in digital music as well as the front runner in smart phones within a decade.
Your business can be a leader; and soon. If you start thinking differently about what you must do, quit putting all your energy into Defend & Extend behavior and invest in White Space, innovation will flourish – and with it your revenues and profits.
by Adam Hartung | Jul 15, 2009 | Disruptions, In the Rapids, Leadership, Openness
I've had the good fortune recently to meet some companies that are doing an extremely good job of practicing The Phoenix Principle. Although no company story can be told well within the shortness of a blog, some of these stories are so powerful I want share some of the good things I'm seeing. Especially now, when it seems bad news is dominating. That's not true everywhere – and it's worth profiling a few winners (and hoping they'll excuse the brevity of these descriptions.)
Recently I met with Tasty Catering in suburban Chicago. Tasty is by far not the largest caterer in the U.S. (or even Chicago), nor the smallest. Nor is it the oldest, nor youngest. You could easily miss it as "just another company." One of those nearly faceless businesses crowded into the business parks around America. But this company is by no means normal, and as a result
- It's been named "Caterer of the Year" by top food magazines
- It's been The Best Company to Work For in Chicago 3 times
- It's been honored by Winning Workplaces and The Wall Street Journal as a top American business.
- There were a lot of awards, these are just the ones that come to top of mind.
When Tasty Catering created its vision – it's BHAG (in Jim Collins venacular) – nowhere does it say "caterer". Their ambition is to be the best. At whatever the company does. The 50-ish founder told me that his employees were insistent about this, because they did not think Tasty would just be a caterer. There are too many possibilities, according to the internal teams. The people at Tasty want to go wherever the market leads them. Their ambition is to GROW.
Everyone in Tasty is challenged to scan the horizons for new business opportunities. . And create business plans. The CEO encourages his people to work with college professors and get school credit – but if the plans are good Tasty funds them. And the business ideas don't have to be in catering, or even food. Whatever has the opportunity for growth. So Tasty now has a finance company, a "green" gift business, a supplier to large-scale retailers of packaged food, and a trucking company. Again, those are just the ones I remember. And at least one of these was created by employees who are first-generation immigrants with little formal education – employees another company might deride as "kitchen workers" – but with a massive desire to grow the business. At Tasty, everyone is considered capable of seeing a market opportunity that can create profitable revenue, and everyone is encouraged to bring those market-based ideas to the table.
Tasty obsesses about competition. Everyone in the company has internet access. And manager after manager told me stories about using the web to track competitors. Press releases, articles, anything that's on the web – they keep track of what competitors are doing. When they see competitors do something, they want to know why – and if it works. Tasty uses competitors as much as test beds for ideas – what works and doesn't – while simultaneously tracking their activities in traditional areas. They track customer reactions to competitive ideas, and use that to bring out their own ideas. As a result, Tasty finds new customers, finds new products to sell and finds new markets to develop.
The CEO told me that when he started he had a bunch of hot
dog/hamburger joints. But it was an intern who told him he'd be
better off to sell those assets and change into catering. This was an
incredible distruption, to change from a fast food operator to a
caterer, but with the growth of franchise fast food staring him in the face he made the
switch. Now the CEO relishes the Disruptions his staff bring. Wouldn't trucks make great rolling billboards – if painted for that purpose? Time to change the trucks. Wouldn't having a menu that's all healthy, and disposable products that are entirely eco-friendly, snare some accounts? Why not try it? If the kitchen isn't busy 24×7, couldn't we make packaged food for sale as retailer brands? If we need financing for a new business line, can't we fund that from internal cash flow? Why not start an internal finance company? If restaurant and store operators want prepared food, why not start pursuing RFPs and see if we can win some retail business (even though it means we'd have to double our equipment overnight)? Disruptions are so common at Tasty they don't even think aboout them as disruptions – they are the norm.
And as the last paragraph indicated, White Space is everywhere. When an employee has an idea they can turn it into a business plan. The people inside Tasty even help work on it. Then the plan is vetted and reviewed. If it looks good, Tasty will set up a separate company to implement the plan, and make the employee the CEO. Now this person has the permission to go make it happen, and the money to do it. There are goals, and report-backs. And discussions about how to make the business grow. And every project is visible for everyone in the company to see. No "skunk works." Everyone knows what's happening, and looking to see what works. Everyone wants to learn and migrate toward a growing future so the business will succeed and they can succeed with it.
2009 started off with a sledge hammer for catering. The recession caused companies to cancel events, big and small, and quit catering in food. It would have been easy for Tasty to falter – because revenues went down for the very first time. But instead, everyone met and put their heads into finding ways to get back on the growth track. Resources were cut in the tradtiional business. Belt tightening went around the board. But resources were expended in new marketing – viral on-line campaigns for example – to find the customers who still have needs. People put more energy into differentiation programs – like the non-plastic clear wrap and non-plastic disposable utensils – to make the business more appealing to those who still have events. And new business opportunities – like the private label manufacturing – took on new urgency and more resources. As a result, while many caterers have failed and others are in dire straits Tasty has returned to growth – and not just in catering.
Meanwhile, the employees at Tasty are some of the most gratified I've seen. Here in this recession, they still are highly motivated and love their work. Even though they could do other jobs, they stay. They don't expect the CEO to find them work, or promise them a job, or guarantee their income. But they do understand that if they keep growing, working at Tasty is great. They tie their success to the success of the business – which they tie to identifying market opportunities and fulfilling them better than competitors. They work at Tasty because they are connected to the market – and it is empowering. It's not paternalism that keeps them satisfied (far from it, peer reviews assure paternalism is not allowed), it is seeing market results from the innovations they develop and implement.
If you have an event of any kind, go to the Tasty Catering web site and/or give them a call. If you have a need for someone to supply you with muffins, cookies, baked goods or other foodstuffs private label – again, to the web site and/or give them a call. This is one great company. Given a little time, they just might give Sysco Foods (the country's largest supplier of food to restaurants) or another mega-company a run for their money. This company is out to WIN – and all eyes are focused on the market, everyone pays attention to competition, Disruptions are the norm and new White Space is created every few months (regardless of the economy.)
