Wednesday, October 28, 2009

Strategic Planning Analogy #287: List Vs. Recipes

Let’s assume for a moment that you ordered a new cookbook over the internet. When the package arrived, you eagerly opened it up, expecting to get some great cooking ideas.

Instead, you were horrified to find that the cookbook was nothing but a long list of food ingredients. They were listed alphabetically, with no reference to amounts or what to do with them. It just said things like:

Balsamic Vinegar
Brussels Sprouts

“This cookbook is worthless,” you declare. “What was the author thinking?!” To find out, you read the book’s preface. Here, the author says:

“In this book, I have listed my favorite ingredients. All of my great meals have been made from ingredients on this list. My hope is that you will be inspired by this list and use items from it to create your own great meals.”

Yes, it is true that great meals are made using food ingredients. However, if all you have is a list of the ingredients, it does not mean that you will necessarily create a great meal. The secret to a great meal is the recipe—the instructions on how to convert the ingredients into meals.

Recipes give you additional information, such as:

1) Purpose – The type of meal being made.
2) Priority – How much of each ingredient is used.
3) Sequence – What order are the ingredients combined
4) Process – How the ingredients are combined (and cooked)

This all seems so sensible when considering writing a cookbook. Fill the book with recipes, not ingredient lists. However, when writing a strategic plan, I have seen people fall into the trap of just producing lists.

For example, a section on external environmental factors might just be a list of 20 or so things going on in the environment. Sections on internal strengths and weaknesses might just be long lists of topics—half under a strengths column and half under a weakness column. Consumer insights could just be a list of demographic “fun facts” or a list of various consumer segments, or a list of summary tables from some consumer research.

At the end of the day, if that’s what you’re doing, then you have not created a strategic cookbook. All you have are worthless lists, providing no guidance in how to make a proper meal to strategically nourish the organization.

The principle here is about context. Context is the structure which provides meaning and insight to random lists. Recipes provide the context for ingredients. One of the most important values that a strategist adds to an organization is the ability to convert lists into strategic meaning via context. In fact, at one company where I worked, I was sometimes referred to as the VP of Context.

The three main weaknesses in providing a list without context are the following:

1) The Illusion of Equality
In a list, everything looks about equal in importance. They are all written in the same size of type and take up about the same amount of space on the page.

In reality, however, we all know that not every possible environmental factor is of equal weight in developing our strategy. Some are more important than others. In food recipes, we use bowlfuls of some ingredients and spoonfuls of others. If you get these measurements confused, the meal is ruined.

The same is true in strategy. As strategists, we need to provide the context telling people what is truly the most important and most meaningful. Strategic success depends upon focus. Without context, one does not know what to focus on.

2) The Appearance of Isolation
By putting each item on a separate line, it appears that each is a separate item. It looks like each can be addressed one-at-a-time.

In reality, however, factors are connected. If you change something in one area, it will impact other areas as well. For example, a decision to lower production costs can impact quality, brand image, value perception, and so on. It can also cause a rise in other costs (like returns, defects, and repairs), causing no real net savings.

If you ignore the interconnectivity, you will fall victim to unintended consequences, which we have discussed in prior blogs.

3) The Overcapacity of Agenda
The human mind can only comprehend a limited number of ideas at the same time. And unless you have the rare mental capacity of a gambling card counter, the number of concepts you can hold at the same time is very small. There is a reason why seminaries teach young pastors to try to keep their sermon points to approximately three per sermon. Any more than three and the audience starts becoming mentally lost.

If you give someone a list of 20 internal strengths and 20 internal weaknesses, you have given them something they cannot comprehend all at once. The list is too large. The inter-relationships will be lost. The “big picture” will be lost. The ability to find a grand strategy grinds to a halt.

If this is the case, then how should a strategist convert lists into recipes? There are three steps (see how I’m keeping this down to three problems and three solution steps?):

1. Collapse/Nest into Systems
Although the human body is made up of many hundreds (if not thousands) of parts, you can collapse the list into a smaller number of integrated systems, like the digestive system, circulatory system, or respiratory system.

You can do the same with strategic planning lists. Look at how all the parts inter-relate to discover the various (relatively) closed systems. Then nest all of the sub-points under the relevant system.

For example, I recently was reading a book about consumer shopping. The book listed 14 motivators to get people to buy something. That list was too long to comprehend all at once. The list was also confusing, because the definitions of each motivator tended to overlap with the definitions of others (proof that there is no isolation and that systems were in play). After examining the list, I saw two main systems at play in motivating purchases—Joy from the Shopping Process and Joy from Product Ownership. I then collapsed (i.e., “nested”) all of the key elements of that list of 14 under these two systems. Now that’s a lot easier to comprehend.

Systems can be found in strategic inputs (like consumer behavior) as well as potential strategic outcomes. We usually refer to potential outcome systems as Strategy Scenarios.

Collapsing is not the same as simplifying. Simplifying provides less information. Collapsing provides more information, because it provides the context of the system to which the item belongs.

2. Explain How the System Works
Stories are more memorable than lists. They are also more powerful and persuasive as a communication tool. That is why my blogs start with a story. Once you collapse the lists, you need to build a story around the systems to show how they work. For example, Scenario Planning is the process of building stories around various potential strategic outcomes.

If you cannot explain the systems in a story, then you probably do not understand them. So it is also a good test of your own understanding of what’s going on.

3. Relate Everything Back to the Strategic Question at Hand
The ultimate goal of a strategic planning process is not a book of lists, but a vision and path to a better future. Therefore, everything needs to be seen in light of how it helps achieve that goal. Show how the information impacts your ability to succeed. This will help you prioritize the information by relevancy to the task. If it doesn’t relate, cut it out.

Strategists add value by bringing context to the wealth of data that is out there. Rather than just giving management long lists of data, give them the strategic insights which only come from placing that data into context. This is done by collapsing data into systems, explaining the systems, and showing the relevancy to your strategic issues.

There is the story of a man who built a great library, but only put one book in it. The one book was an unabridged dictionary. Why just the one book? His response: “Every other book just uses the words already included in the dictionary. Since all the words for all the other works are already in the dictionary, it would be redundant to have any other book in the library.”

This man misses the point. Just having the words is not enough. The value is in how the words are combined into a compelling story. Similarly, your value is in how you combine ideas into a compelling strategic story.

Tuesday, October 27, 2009

Strategic Planning Analogy #286: Who’s Strategy is it?

Let’s imagine for a moment that a friend of yours asked to borrow your conservative-looking car for a few days. Being the nice person you are, you let the friend borrow the car.

After those few days are up, your friend returns the car. To your shock and horror, you notice that your friend had made changes to the automobile. The exterior had been repainted to a color you do not like. Flame-like decals were put on the sides of the car. The interior was redesigned in an awful checkerboard pattern. The carpeting was replaced with some awful shag that looked like something out of a 1960s Hippie “Love Van.”

Naturally, you would be furious with your friend for trashing up the look of your car. You’d probably say something like, “What is the matter with you? I let you drive my car for a few days and you totally destroy its appearance. Have you lost your mind? This was MY car! You had NO RIGHT to change it like that!”

You friend answers as follows: “I knew I’d only be using the car for a short time, but during that time I wanted to be able to make a statement. I wanted to car express my personality.”

At this point, you’re probably ready to scream, “Well now you can express yourself on a check to pay for all the damage you did to my car!”

It’s hard to believe that someone would be that disrespectful of your car. After all, it is your car. It belongs to you.

Yet something similar seems to occur often in the business world. A newly hired CEO, CMO or strategist will come on the scene. As the new person in the company, they want to quickly make their mark on the firm. They want to make a statement and express themselves. As a result, they start to make all sorts of changes to the brand.

The consumer then screams back, “What are you doing to MY brand? You are destroying it! You had no right to make those changes! Make it the way it was before!”

Remember the debacle of “New Coke?” There was a consumer revolt because the consumers felt that “their” brand had been violated. New Coke had to be eliminated and the classic form needed to return.

The Coca-Cola brand was like the car in the story. Consumers felt they owned the brand. The executives, who tend to stick around in their job for a only short time, had “borrowed” the brand and returned it as an ugly “New Coke.”

The principle here is that consumers of a brand tend to stick around longer than the managers of that brand. So, in essence, the brand belongs to the consumer and the managers are only borrowing it for a short time. Therefore, our brand strategies should take more of a “borrower” approach.

A typical CEO holds that position for about 3-4 years. A CMO typically holds its position for only about a year. A Chief Strategist probably falls somewhere in-between. This is a very short period compared to the expected life of the brand or company being managed.

The only one sticking around for the long haul tends to be the consumer. In many ways, they are the ones who own the brand. After all, branding success depends on creating the proper image/position in the mind of the customer. The customer owns their mind. They don’t like people playing mind games to mess it up (even more than they hate having people mess up their car).

Look at what Pepsi did in 2009 by redesigning all of its brand logos. Between the cost of the redesigns and the cost of the transferring all of the visuals to the new look, Pepsi probably spent well into the hundreds of millions of dollars world-wide.

What were the results? First, the redesign of the Tropicana orange juice carton was received so poorly by the consumers that Pepsi had to return to the former design. The consumer response was “How dare you change MY juice carton. You made it ugly; change it back!”

Changing Gatorade to “G” caused a lot of initial confusion for the customer. Is this the same old Gatorade I’m used to or did you mess it up like Coca-Cola did with New Coke? As for the other Pepsi logos, I doubt one will ever be able to find a positive return on the huge investment. The new management over-stepped and wasted a lot of money.

Remember, we are only borrowing the brand/product/company for a short time. We need to act more like borrowers. As a borrower, we should manage by a few rules.

Rule #1: Do Not Ignore the Legacy You Are Inheriting
Typically, the brand/product/company was around for a long time before you got there. You are not starting with a clean whiteboard. That whiteboard is already filled with years of impressions and experiences between the brand and the customer. Some of those impressions/experiences are etched in pretty deep. You cannot just erase this history as if it never occurred.

Before embarking on any strategic or cosmetic change, first make sure you understand all of that historical heritage. That legacy tends to box you in on your strategic options. Depending on the history, certain strategies will be compatible. Others will not.

Coca-Cola’s legacy was around authenticity. Coke was “the real thing.” Coke was “it.” The historically-based impression was that the Coke formula was the enduring essence of refreshment throughout the generations and that everything else is a poor imitation.

This legacy boxed in the strategic options. Throwing away the old formula and replacing it with a new one was not compatible with this legacy. If old Coke was “real” then new Coke had to be “fake.” If old Coke was “it,” then new Coke was “not it.”

Based on the history one has inherited, you only have permission to go in certain strategic directions. If you stray too far from history, consumers will tell you that you had no permission to do so and will try to force you to return the brand back. We talked more about permission in a recent blog.

In this Web 2.0 world, the customer has more power to fight back than ever before. So do not ignore the history you are inheriting. Pay heed to impressions already in place. Go only where history allows you to go.

Rule #2: Remember Where the Battle is Taking Place (the Consumer’s Mind)
To win with the consumer, you have to win at the point where decisions are being made—in the mind of the consumer. You do not own the mind of the consumer. You can visit it, but trust me, the consumer is very protective of what goes on there.

As I said earlier, if you think someone is going to be mad because you messed up their car, just watch what happens if you try to mess up their mind.

Therefore, treat the consumer’s mind with respect. Respect the historical impressions which already are already embedded in the brain. If you stray too far, your message/strategy will not be believed.

Remember, you are only a visitor, borrowing a bit of their mental attention.

Rule #3: You Are A Caretaker of the Brand For the Next Generation
Just as the brand/product/company was around well before you got there, hopefully it will be thriving well after you leave. You are a caretaker of the brand for only a brief time. If you are a poor caretaker, you will destroy the brand’s long-term viability.

If you only think short-term, you can find many ways to get a quick bump in profits. Some of these tactics, however, can destroy the long-term prospects.

Think of the luxury fashion industry. The heritage is wrapped up (in part) in exclusivity. In the near term, one can get a boost in luxury goods sales/profits by taking the brand to the masses. However, once the masses embrace the brand, the exclusivity heritage can be destroyed. In the long-term, this will lead to defection from the brand by luxury customers. Once the luxury customers no longer embrace/endorse the brand, the masses will no longer see the value, so they will eventually reject it as well. The net result is that the short-term boost lead to long-term brand destruction.

Remember, the key determinant of stock price is anticipated future cash flow. If your actions appear to be destroying long-term prospects, the stock price will be depressed, even if you get a near-term bump. Keep a long-term perspective in your strategy. When you hand off the brand to the next manager, give them a strong brand.

We are managers for only a brief period in the life of what we are managing. We are inheriting the legacy of those who came before us and we are leaving a legacy to those who come after us. The best strategies understand this larger perspective. They take advantage of the opportunities provided by the old legacy and create enduring strength which transcends our tenure. After all, the brand really belongs to the customer. We are only caretakers.

When I was a Boy Scout, we were taught about treating nature with respect. We were told that we were nature’s caretaker on behalf of future generations. When it came to camping, the rule was to “leave the campgrounds in a better condition than you found it.” I’d say this concept applies equally well to strategic management.

Tuesday, October 20, 2009

Strategic Planning Analogy #285: Anti-Gravity Tree

You’ve all heard of Sir Isaac Newton. He’s famous for his discovery of the law of gravity by watching fruit fall from a tree. Well what about his jealous brother Figaro “Fig” Newton?

Wanting to make a name for himself, Figaro claimed to have discovered the anti-gravity tree. Fruit never falls off this tree. Therefore, Figaro declared that the tree defied gravity.

Why is it we never heard about this anti-gravity tree discovery? Well, one day, Figaro Newton was up in the anti-gravity tree doing his daily chore of applying glue to the fruit. (He claimed that the glue was for medicinal purposes and had nothing to do with keeping the fruit from falling.)

On that particular day, Figaro had climbed higher in the tree than normal. He had crawled out onto a thin branch. The branch broke under Figaro’s weight, and Figaro fell to the ground and died. Once people saw that branches and people could fall out of that tree, its status as an anti-gravity tree went away.

Gravity is a basic law of physics. The law applies everywhere on earth. The law cannot be repealed; exceptions cannot be made. Therefore, one cannot have an anti-gravity tree. As much as you try to fight it, gravity will make things fall out of that tree.

There are also some basic laws of business. In a similar fashion, these business laws cannot be repealed and exceptions cannot be made. If you try to defy these business laws, you will end up out on your own thin branch and eventually fall to your doom.

The principle here is that consolidation is a law of business. Consolidation cannot be repealed and exceptions cannot be made. All industries eventually consolidate into just a small handful of players, with typically one or two dominant players. Any strategy which depends on an assumption that an industry will not consolidate is based on a false assumption.

I was reminded of this by an article in the Economist magazine recently. The article was talking about the rise of cloud computing. Cloud computing is when do not keep your software or data on your computer. Instead, you access it from a third party via the internet.

In the article, there were references to moves by government regulators to try to keep cloud computing from consolidating. The idea is that the governments do not want another situation like what occurred in PC-based software, where nearly everything consolidated into Microsoft’s hands. Therefore, the governments will work to keep consolidation from happening in cloud-based software.

In its interpretation of the Economist article, the Corporate Executive Board went even further, by saying, “There will probably not be a single dominant provider of cloud services.”

It sounds here like people are trying to repeal the law of consolidation. Well, I don’t buy it. All industries eventually consolidate. Cloud computing will as well.

Yes, governments can slow the down the process a little bit. But that is like trying to glue fruit to a tree. It is only temporary. Governments can force openness of choice, but if everyone decides to choose the dominant player, the industry will still end up consolidating.

Just because governments can force Microsoft to make it easier for customers to avoid its Internet Explorer does not mean that the industry will suddenly be full of dozens of internet web browser companies, with none being dominant. The same is true for cloud computing.

There are many factors which tend to make consolidation inevitable, including:

1) Economies of Scale (which favor the larger firms)

2) Risk Avoidance (people like to purchase from the ‘winners”)

3) Price Wars (which favor the larger companies with the deeper pockets)

4) Mergers and Acquisitions (which put more power in fewer hands)

5) The General Acceptance Of Dominant Standards (which makes anyone not using the dominant standard vulnerable to obsolescence—as a provider or as a user)

6) The Law of Positioning (which says that only one firm can own a position in the mind of the consumer. Whoever owns that position in the mind will automatically own the dominant market share.)

Therefore, I predict that cloud computing will not be an exception to the law of consolidation. This industry will not be an anti-gravity tree. It will consolidate.

Why is this such an important point to make? The reason is that one’s assumptions on how an industry will evolve impacts the type of strategy one may follow.

For example, if you believe that an industry will not consolidate, you may create a strategy based on having a modest market share in a wide open playing field. However, if you believe that consolidation will occur, the strategy might focus on a cut-throat war to achieve commanding leadership.

I remember reading an article decades ago, back in the early years of PC manufacturing. The writer of the article gathered up the strategic objectives of these PC manufacturers. The majority of the manufacturers were targeting a long-term market share somewhere in the range of about 15%.

There was a problem with this predominant strategy. First, there were around a dozen firms each trying to achieve this level of market share. Add them all up and you get a lot more than 100% of the market. So the math doesn’t work.

Second, this strategy ignores the law of consolidation. Under consolidation, one usually ends up with a couple of firms having far more than 15% share and some niche players with far under 15%. Almost nobody long term operates in the 15% range.

According to the Q1 2009 data (source: Gartner), PC market shares in the US are as follows:

HP 27.7%
Dell 26.2%
Acer 13.6%
Apple 7.4%
Toshiba 6.6%
Everyone Else 18.6%

As one can see, the law of consolidation has occurred, and most of those PC firms in the article had the wrong initial strategy. It is also interesting to note that most of the firms in that original article are no longer in the PC business. Do you think there may be a connection between no longer being in business and having the wrong strategy (based on the wrong initial assumption)? I do.

Strategies are based on assumptions. Any strategy relying on breaking one of the fundamental laws of business as part of its assumptions will almost assuredly fail. Consolidation is one such fundamental law of business. If your strategy depends on suspending the laws of consolidation, you may want to consider rethinking that strategy.

Why is it that when a space ship in a Star Wars movie gets destroyed, it always starts to drift downward? Out in space there is no gravity, so an incapacitated ship has no reason to fall down. The law of gravity is so ingrained in our minds that we even have trouble ignoring it in our imaginations of outer space. We should have the law of consolidation equally ingrained into our minds.

Monday, October 19, 2009

Strategic Planning Analogy #284: Wheels on the Plow

Once upon a time, there was a successful, experienced farmer named Joe. Joe would hook his trusty horse up to his old plow and create a precision garden.

Then, one day his neighbor Bill bought one of those new-fangled motorized tractors. Bill was a less experienced farmer who had poorer soil to work with. However, that motorized tractor made Bill’s farm far more productive than Joe’s farm.

Joe didn’t like his neighbor doing so much better than himself. After all, Joe was the more experienced farmer. So Joe examined the situation. He noticed that Bill’s tractor had wheels. Therefore, Joe decided to put wheels on his horse-drawn plow.

The wheels made Joe’s horse-drawn plow a little more efficient, but still far less efficient than Bill’s motorized tractor. “What’s the problem?” Joe thought. “I’ve got wheels just like the tractor. I’ve got more experience. Why is Bill doing better than me?”

A motorized tractor is far more efficient than a horse-drawn plow. No matter what you do to modify that horse-drawn plow, it will never catch up to the power of the tractor. Imitating part of the tractor, by putting wheels on the plow was not good enough. Even Joe’s added experience wasn’t enough to overcome the power of the motorized tractor.

To be as efficient as Bill, Joe would need to completely abandon the horse-drawn plow and get a motorized tractor.

The tractor was a disruptive technology. It made the old technology obsolete.

Disruptive technologies and processes occur in business rather frequently. When it happens, we can either react like Joe or react like Bill. Bill embraced the disruptive technology. Joe tried to modify the obsolete technology with a small part of the new (the wheels). Bill’s approach was more successful.

In general, embracing new technology is more successful than a half-hearted approach.

The principle here is that sometimes you have to abandon what you know and embrace the new in order to thrive. A half-hearted approach (putting wheels on the plow) won’t do.

We can see that in the history of the retail/restaurant sector.

I was recently eating at a Big Boy’s restaurant. While sitting there, I started thinking back to my childhood, when Big Boy was one of the largest and most successful restaurants in the US. It had a strong appeal with children and made good burgers.

Then along came McDonalds. McDonalds brought a disruptive technology to the restaurant industry. It eliminated waitresses and busboys. It eliminated washing dishes. It made the food preparation far more efficient. As a result, McDonalds could offer items similar to what was on the Big Boy menu far more efficiently than the Big Boy way (and charge a lot less for them).

At first, one might think that Big Boy had the advantage. It was more experienced in the restaurant business than McDonald’s founder Ray Kroc. It had a nationwide market penetration. It invented the Big Boy hamburger (the Big Mac was just an imitation). It already had the devotion of children.

Yet today, Big Boy is barely limping along as a tiny company in a few locations, whereas McDonalds is everywhere, doing quite well.

Sure, Big Boy made some improvements along the way. They did their equivalent of “putting a wheel on the plow.” But it never embraced the transformational invention of the fast food industry. Had it quickly embraced the disruptive new industry, Big Boy could have been what McDonalds became. But it did not, and saw a declining future.

Similarly, Sears could have been what Home Depot became. Sears had all the early advantages, including the power of the Craftsman name. Yet Sears did not embrace the disruptive technology of the large Home Improvement Center. It just put a few wheels on the old way that Sears had always done things.

Even when Sears tried to build free-standing specialty stores to compete with Home Depot, it modeled them more after the old hardware store format (which Home Depot was putting out of business) than it did the new disruptive business model. The free-standing Sears Hardware Store near my home currently has a going out of business sign on its door.

By contrast, let’s look at the history of Wal-Mart. In the 1940s, Sam Walton started out as Walton’s Variety Stores. At the time, this was the most efficient way to sell basic goods in the rural south. However, in the late 1950s, Sam Walton noticed that the new discount store format was superior to the old variety store business model in terms of providing value to the customer. So Sam Walton abandoned the variety stores and fully embraced the new discount store format, opening his first Wal-Mart store in 1962.

Eventually, Sam noticed that warehouse clubs might be a disruption to the discount store model, so he fully embraced the technology and in 1983 began to build the Sam’s Club chain. Later, he noticed that the hypermarket/supercenter model could be the disruptive technology to make discount stores obsolete, so he fully embraced the supercenter concept, opening the first unit in 1988.

Today, Wal-Mart sees the internet as a disruptive technology that could significant overtake the old business model, so they are starting to fully embrace on-line retailing. According to a Reuters article dated October 17th, CEO Raul Vazquez told Reuters its aim is to be the biggest and most valued online retail site. According to Vazquez:

"In a few months, whenever someone thinks about buying diapers—in the same way they think about going to a Wal-Mart in the physical world—they will think about going to Eventually, we'll be the biggest in sales and the biggest in mind-share and all of those other things that we've established in the offline world."
Given their track record, I would guess that Wal-Mart will be a winner here as well.

Wal-Mart wins because it was not afraid to abandon its successes of the past and embrace the new disruptive technologies. Big Boy and Sears are losing because they hung onto the past and made only minor, half-hearted improvements.

So what does this mean for the rest of us?

1) Be on the lookout for Disruptive Technologies
Wal-Mart kept spotting the disruptive technologies early because they were always on the outlook for any potential threat to their value proposition, no matter where it came from. If you are not actively looking broadly, you may miss it, because the disruption often comes from outside your industry and not from your traditional competitors.

2) Be careful in how you define yourself
Big Boy and Sears defined themselves by what they were and what they did. Big Boy saw itself as a traditional restaurant. Sears saw itself as America’s Department Store. By contrast, Wal-Mart defined itself by the benefits it provided to customers—namely lowest prices.

When Wal-Mart saw anything that could potentially offer better prices to its customers, it quickly pounced on it. They knew that if they lost their pricing edge with the customer, the game was over, so they saw any pricing advantage anywhere else as an immediate threat.

However, Big Boy and Sears did not feel as immediately threatened by McDonalds and Home Depot, because these newcomers came from different industry definitions. Since they did things differently, McDonald’s and Home Depot were not seen as direct competitors. The newcomers were seen as playing in a different industry—not their own—so not an immediate threat. Hence, their technologies were not fully embraced.

3. Be willing to abandon what used to make you successful
Wal-Mart was willing to abandon its prior means of success in order to fully embrace its next means of success. They would shut down a Wal-Mart discount store and build a Wal-Mart Supercenter across the street. Such abandonment of the past is difficult to do, but often necessary. If you are not willing to completely abandon the past, you cannot completely embrace the future.

4. Don’t Just Put Wheels on the Old Plow
Improvements to obsolete technology don’t change the fact that the technology is obsolete. A halfhearted inclusion of bits and pieces of the future glued onto the past won’t succeed against others who fully embrace the future. Rather than putting wheels on the plow, buy the motorized tractor.

When disruptive change occurs, you can either embrace it or resist it. Embracing it is usually the best approach, even if it means abandoning what made you successful in the past.

Prior experience is not much of an advantage if the experience is in obsolete processes. Don’t let your obsolete experience blind you to the need to gain new experiences.

Thursday, October 15, 2009

Strategic Planning Analogy #283: Run for The Exit

Let’s assume you are inside a large, unfamiliar office building that is on fire. If you do not get out of the building soon, you will die in the fire. Unfortunately, since you are unfamiliar with the building, you do not know the way out. What should you do?

Let’s say that you have three choices. First, you can try to find your way out with a friendly person who is equally unfamiliar with knowing a way out. Second, you can try to find your way out with a scenic tour guide who wants to give you a grand and exciting tour of the entire building before letting you out. Third, you can go with a guide who knows the most efficient path out of the building and is experienced in leading people out of the building.

My guess is that most of you would pick the third choice.

Many times, life can feel like being trapped in a burning building. There are pressures and stresses from every direction. All you want to do is quickly escape and get to a point of safety. Therefore, you look for the option that provides the easiest and fastest path to safety. In the story, that means finding someone who can quickly show you the way out.

Even the process of making a purchase can sometimes feel overwhelming, like being in a burning building. There are so many choices, so many risks, so many different kinds of deals. You can feel like you are surrounded by smoke, unable to determine what is the best course of action.

If you want to make a sale, it can be useful to think of yourself as the experienced guide in a burning building, the one who gets the customer to the exit door (with purchased product in hand) as quickly and easily as possible.

Today’s blog is based on some principles discovered in research by the Corporate Executive Board. As part of their recent research, the Corporate Executive Board looked at the selling process from the point of view of both the customer (most effective way to buy) and the sales force (the most effective way to sell).

After seeing the results, it occurred to me that the selling process is rather similar to the burning building story. In particular, the Corporate Executive Board came to two conclusions that are similar to the story.

1) It’s the Product, Not the Process
According to the Corporate Executive Board, “Customer effort is the most relevant indicator of loyalty in a customer service interaction.” In other words, customers are most loyal in their purchases to companies that minimize the effort customers must exert to get the product.

When comparing customers of High Customer Effort buying processes to Low Customer Effort buying process, the Low Customer Effort process customers were:

1) Far more likely to make a repeat purchase (94% vs. 4%)
2) Far more likely to increase their spending (88% vs. 4%)
3) Far less likely to spread bad word of mouth (1% vs. 81%)

The point here is that customers tend to make purchases not because the love the process of buying, but because they love the process of consuming. It’s the product they want, not the task of getting it.

Like in the story, what they really want is to get to the exit door as quickly and effortlessly as possible. The selling process is more like a burning building than a place where they want to hang out. The harder you make it to buy, the harder it will be to make a sale.

I am reminded of research I once heard about conducted by a disposable razor manufacturer. They found that when a customer bought a multi-pack of disposable razors, the number of days that the customer used the last razor in the pack tended to equal the number of days of use for all of the other razors in the multi-pack combined.

Was that last razor a lot more durable than the others in the pack? Of course not. The fact was that customers hated making the effort to go out and buy another multi-pack so much that they would put up with sub-standard performance of that last blade rather then make the next purchase.

The razor company concluded that if they could make the razor purchase completely effortless (like automatically shipping razors to the house on a routine schedule) they would sell a lot more razors.

As sellers, we may obsess about the selling process and look for ways to make it enjoyable. However, from the customer’s point of view, that process is like being trapped in a burning building—something to be avoided, or at least minimized. The customer in the burning building is not looking for a tour guide to turn the process into a leisurely, enjoyable vacation. They just want to get out.

As the Corporate Executive Board concludes, “Reduce customer effort—don’t focus on delight—in customer service interactions.” In other words, it’s the product, not the process, that the customer wants.

2) Be a Leader, Not a Friend
The Corporate Executive Board not only discovered that the “delightful transaction” approach is sub-optimal. They also found out that “relationship building” is a sub-optimal selling approach. Relationship builders tend to focus on reducing tension and creating a friendlier selling interaction. However, when you are in a burning building, you don’t want to make friends and reduce tension. Instead, you want someone who can help lead you out of that fire.

Therefore, it is not surprising that the Corporate Executive Board found the relationship building approach to be sub-optimal. Customers are not looking for friends, they are looking for product.

The better approach, according to the Corporate Executive Board, is the challenger approach. The challenger does three things:

a) Educates the customer about what best suits their need
b) Tailors the solution to the particular customer
c) Takes control of the process to make sure your goals are met.

You know, that sounds a lot like my leadership guide, the one who knows how to get you from the fire to the exit door quickly because they take charge in getting you what you need.

The leader takes the initiative, so that you don’t have to exert as much effort (reinforcing principle #1). They are also no-nonsense, realizing their job is not to eliminate the tension from being in the fire, but to eliminate the time in the fire.

If you want a strategy to increase sales, consider these two principles from the Corporate Executive Board. First, focus on minimizing customer effort rather than maximizing customer delight. It’s the product, not the process that should get the focus. Second, be a leader rather than a friend. Show the way to the best path for that customer.

If you want to have a delightful time with a friend, do it on your own time, not when trying to sell your product.

Wednesday, October 14, 2009

Strategic Planning Analogy #282: Wonderful Weeds

As much as I hate being on committees, there’s one committee I think I’d like to be on. That would be the committee that determines which plants are good plants and which plants are weeds.

Why would I want to be on that committee? Because I hate having to pull up weeds. If I were on the weed naming committee, I’d see to it that nothing would be called a weed. That way, there wouldn’t be any weeds to pull (since nothing would be classified a weed anymore).

Take the dandelion, for example. Why is that considered a weed? I think it is a pretty flower. I’ve eaten dandelion leaves in tasty salads. A friend of mine made dandelion wine. Why is such a nice and useful plant considered a weed?

And how about switchgrass? It’s called a weed, yet many think it holds great promise as a source of biofuel.

I think I’d like to be the Will Rogers of plant life. Will Rogers said he never met a man he didn’t like. I’d like to be the guy who says he never met a plant he didn’t like. That way, I’d have an excuse not to have to pull any so-called weeds, since they would all be my friends.

At some point in the past, plants were placed into one of two categories: good plants and bad plants (which we call weeds). It seems a bit arbitrary to me why some are called weeds and others are not.

The same thing happens in the business world. Certain practices, costs or outputs were long ago automatically labeled as bad, while others were automatically labeled as good. Who made up those labels and why should I automatically agree with them?

So-called “bad” plants, like dandelions and switchgrass, have some beneficial qualities. Similarly, some business practices or outputs considered bad may also have some benefits if we look at them differently.

If you want some breakthrough innovations, you may need to reconsider the things you label as “weeds” in your business. Just take off the “weed” label and look at them as potential opportunities. It could lead to some remarkable new business ventures.

The principle here is that old labels can be wrong. Labeling something a business weed can bias you against it and cause you to want to automatically pull it out of your business. If you take off the label, you may find that it could be valuable source of new profits.

We’ve talked about labeling in prior blogs. For example, back in October of 2008, we talked about lost business potential by how one labels the rest of the value chain. For example, if we label someone as just a customer, we only expect them to consume. By doing so, we can miss out on the opportunities to also use that person to help us develop products, market products, critique products and provide all osrt of other inputs.

We also touched on this subject in a blog in February of 2008. In that blog, we saw how the so-called useless byproducts of business can become new sources of income. We saw how Australian breweries turned their waste byproduct into popular Vegemite. We saw how McDonalds turned real estate (normally a nasty weed of a cost to be minimized) into cell tower income. We saw how Wendy’s took useless overcooked meat scraps and turned it into chili. We saw how HEB turned a costly overhead expertise into a consulting business. And we saw how Tyson is turning their (formerly useless) fatty byproducts into a bio-energy profit center.

I was reminded of the latter idea in a recent issue of Fortune magazine, which talked about a company named Darling. This company specializes in collecting the so-called useless fat byproducts from restaurants and slaughterhouses. Darling then takes these “weeds” from the restaurants and renders it into saleable products. In 2008, Darling had sales of $807 million and profits of $55 million. Darling was ranked #13 on Fortune’s 2009 Fastest Growing Companies List. Not a bad way to earn money off of someone else’s weeds.

In addition to byproducts, another area of business often looked at like weeds is the cost of labor—a nasty expense to be pulled out of the organization whenever possible. However, as we discussed in a blog last March, labor costs can also be seen as an investment. As long as one is getting a great return on that investment, one should actually add labor to the business.

In general, any cost-cutting is a form of weed pulling. The idea is that costs are bad, and the more you pull them out, the better your “business garden” will be. Yes, cost cutting is often a good and necessary thing. But not all costs are weeds. They may just be underutilized assets that can be redeployed for greater profit. For example, the write-offs from shutting down weak businesses and underutilized assets can be huge. If you can discover a new use for these assets, you are far better off.

Some costs have delayed benefits. For example, one can cut out maintenance costs for awhile and look great. But eventually, things will start breaking down, because the equipment was no longer well maintained. That cost of maintenance starts looking pretty small compared to the cost of repairing broken machinery.

Similarly, Chrysler saved money for awhile by cutting back on product development. Now, Chrysler is hurting, because there are no new products in the pipeline.

In yet another prior blog, we talked about how profits can be temporarily improved if you cut out advertising expenses. However, without advertising today, future sales can eventually stagnate and decline. As a result, if you cut the advertising expense today, you may seriously damage future profits. So even if the cost looks like a pull-able weed now, consider the long-term ramifications before pulling it. You may regret pulling it later.

We tend to view the world through labels. If you label something as a worthless weed, you will no longer look for any worth in it. However, many so-called worthless weeds can be new sources of revenue if we just think about them differently. Therefore, before starting to pull the weeds out of your business, reconsider them as untapped resources. Look for ways to tap into them for innovative new sources of profits.

It takes a lot of effort and pain to pull weeds. It can also take a lot of effort and expense to get rid of business “weeds.” It is so much better if you can avoid the pain of pulling by finding the profits hidden in the weeds.

Monday, October 12, 2009

Strategic Planning Analogy #281: The Magic Hammer

Bob was giving Joe a tour of his office building. In the center of the main entryway was a fancy display case. Inside the display case was a hammer.

Bob was very proud of this hammer. He made sure that seeing the hammer up close was the first part of the tour.

“This is the finest hammer ever created,” beamed Bob. “All the research says that if you want to succeed in my industry, you need a great hammer. Since I want to succeed, I bought myself the greatest hammer in the world.”

Joe was a little perplexed. He asked Bob, “If you keep this hammer locked up in a display case, how can it help improve your business?”

Bob replied, “The research said that having better hammers leads to better success. If I went and used this hammer out in the field, the hammer would get worn out. Its condition would deteriorate from what it is now. It would become a lesser hammer. Why would I want to make this a lesser hammer if the research says that better hammers are the ones which lead to success?”

At this point, Joe could see that further discussion about the hammer would be useless, so he asked Bob to show him the rest of the office building.

Bob sighed and said, “There really isn’t much left to show you. I declared bankruptcy last week and sold off all of the office equipment in an auction.”

A hammer is a tool, not some sort of magical charm. For a tool to be useful, it needs to be used properly. Just having the tool on display won’t do much good. It doesn’t provide magical success merely from its presence.

Although Bob owned the hammer that could potentially bring success, his company failed, because he did not properly use the hammer.

In the business world, there are hundreds of management tools available. There are also lots of books and consultants out their proclaiming that their particular management tool is just what you need to be successful. Lots of these books are purchased and lots of these consultants are hired. Yet many companies continue to fail.

Apparently, Bob is not the only one having trouble getting the promised success out of tools. Perhaps, like Bob, we are not using the tools properly.

The principle here is my universal law of management tools. It goes as follows: For every management tool available, you can examine the marketplace and find companies falling into each of these four categories:

1) Firms using the tool who are successful.
2) Firms using the tool who are not successful.
3) Firms not using the tool who are successful.
4) Firms not using the tool who are not successful.

For example, I can find firms using centralization that are both successful and unsuccessful. Similarly, I can also find firms using the opposite approach (i.e., decentralization) that are both successful and unsuccessful.

In other words, any given management tool is not a magical charm that makes every company who touches it successful. If used properly, it may be able to help you, but even that is no guarantee. The correlation between any tool and success is typically very weak.

Therefore, when developing strategies, do not make obtaining a particular management tool the centerpiece of the strategy. Your ultimate goal is the quality of what you put in the bank account (profits), not what you put in the toolbox (tools). Good tools are nice, but your strategic approach should give a higher priority to the following three areas:

1) Place
Which of the two petroleum industry scenarios do you think will be most successful:

1) Using mediocre tools to drill into a huge reserve of oil; or
2) Using the highest quality tools to drill into an area devoid of any oil.

Naturally, if you want to be a successful oil producer, you need to apply your tools to places where the oil exists. Good tools help, but if you are located in the wrong place, those tools will not prevent your failure.

Strategy guru Michael Porter says that one of the most important steps in strategy is your choice of place—where you have decided to set up your business model. Not all places are created equal. Some are naturally better suited for success than others.

Some industries have high average profits, while others tend to be perpetually bad for everyone nearly all the time. Some sectors within industries tend to do a better job of absorbing the profitability of their ecosystem than others. Some business propositions (positions) tend to be more compelling than others.

Choosing a poor position in a poor sector of a poor industry will almost guarantee failure, no matter how good your management tools are. Jack Welch was known for using a lot of management tools at GE. However, a great deal of his success was due to identifying places in the GE portfolio where they had little chance for success (typically where they had no chance of being a leader) and divesting of those businesses (and reinvesting in better places). GE has continually morphed its portfolio over time so that it is in the right places (where success is easier to obtain).

As Willie Sutton put it, he robbed banks because that’s where the money was. Therefore, we need to be like Willie Sutton and first figure out where the money is. Then we need to direct our strategy so that it is pointed at that pool of money. Only after making this major decision should we worry about the tools.

2) People
If you give an axe to a skilled lumberjack, you will get a better result than if you give that same axe to an axe murderer. The tool is only as good as the person using it. Poor operators lead to poor results.

In developing your strategy, how much attention is focused on strategies for finding, obtaining, training and keeping the best people? Is it a higher priority than strategies for getting in place the latest management tool?

Online retailer Zappos put nearly all of its energy from day one into optimizing the people side of the business. It let them grow from nothing to being acquired by Amazon for a little under a billion dollars after only a few years in business.

If you truly believe that people are the key to your success, then that should show up as a priority in your strategy formation.

3) Practice
Great companies tend to be perceived as best at delivering a desirable benefit. Becoming the best is typically not an accident. It comes from a continual focus on that point of superiority.

Practice makes perfect. So to keep your edge, keep working the area that makes you great. Get even better, so that others are never able to catch up. Wal-Mart wins by being best at price. It innovates new ways to help it lower prices even more, so that others cannot catch up.

Focusing on the goal of getting better at what you are best at is more important than focusing on the latest management fad. Fads come and go. True staying power comes from staying true to your point of differentiation.

The correlation between any management tool and success is weak. You can find both successes and failures with virtually all the management tools. Therefore, don’t focus too much strategic energy on getting the latest management tool. Instead, focus on matters more critical to success, such as place (where you choose to position yourself), people (getting, keeping), and practice (getting better at what you are best at).

Beware of magicians trying to sell you their magic hammer.

Tuesday, October 6, 2009

Strategic Planning Analogy #280: Mother May I

When I was a child, one of the games we played was called “Mother May I.” In this game, one person (called “Mother”) stood facing away from a line of children. The one playing the role of Mother then chose a child (at random, or in order), and announced a direction. These followed a pattern, like, "Bobby, you may take “x” giant/regular/baby steps forward/backward." The child then responded with "Mother may I?"

At this point, Mother then said "Yes" or "No", depending on her whim, and the child complied. If the child forgot to ask "Mother may I?" he/she went back to the starting line. The first one to touch Mother won the game.

The two most important things to remember when playing Mother May I are:

1) You cannot move unless you have permission.
2) If you forget to ask for permission, you have to start all over again.

These two points are also important to remember when developing a strategy:

1) Your strategy probably will not succeed in a space unless you have permission to be there.
2) If you do not ask for permission, the marketplace will punish you and you have to start again.

The principle here has to do with the concept of permission. A strategy only works if there is cooperation between your company and its key constituents—the consumers, strategic partners and employees. If your key constituents do not think you have a right to be operating in that space (or in that manner), you will not get the needed cooperation. Therefore, a necessary element to success is gaining permission from your key constituents.

1) Permission from Consumers
Over the last 10 years, Seth Godin has written a considerable amount on what he calls permission marketing. His idea is that un-asked-for one-way advertising (from producer to consumer) is very wasteful. Instead, marketers should first get permission to speak before spouting their marketing message. The idea is to create a relationship, or dialogue, with the consumer first, in order to create credibility. Then, when you give your marketing message, it will be better received, because the customer gave you permission and asked for the message.

This is all very fine and good, but I want to take this to a deeper level. Getting permission to speak is only half the battle. You also need permission to change the mental model inside the customer’s mind.

Consumers have a mental model about how things work and how various brands perform. For example, let’s assume someone wants to buy a new vehicle. Their mental model of choices may go something like this:

“If I want a reliable car, I should get a Toyota; if I want a luxury car, I should get a Lexus; if I want great value, I should get a Hyundai; if I want a truck, I should get a Ford.”

Brands are quickly labeled and slotted into a particular mindset. This mindset is the lens through which they see the world. If you, the producer, make a marketing proposition which is contrary to that mindset, the customer may not give the permission for that proposition to enter their mind.

Ford has been trying to convince people recently that it is not only the place to go for trucks, but also for automobiles. Ford now makes fine automobiles, on par in quality to Toyota and Honda. Unfortunately, the old mental model is so strong that Ford is having difficulty getting credibility as a viable automobile choice. People are not giving Ford permission to enter that mental space in their mind. That space is already filled by Toyota and Honda.

Therefore, before Ford can convince you to purchase one of their cars, they must first convince you that they have a right (i.e., permission) to be considered in your mind as a viable automobile seller.

Similarly, Wal-Mart recently tried to be taken seriously as a source for fashion apparel. It set up a quality fashion design studio in New York. It took out ads in Vogue magazine. It had a fashion show during New York’s fashion week. All that effort failed, however. Wal-Mart was still not taken seriously as a place for fashion. The project was a bust and most of the initiative got shut down.

The problem was not quality. The problem was permission. The consumer would not give Wal-Mart permission to be in that space. It took decades of careful image crafting to get Target to the place where it was seen as a credible source for fashion. Wal-Mart tried to get there in one year. Consumers would not permit it. The mental mindset for Wal-Mart is “Lowest Price.” This is incompatible with fashion ads in Vogue. The mind would not let the message in.

2. Permission from Partners
This same principle applies to your relationship with your strategic partners. Cisco and HP have been strategic partners for a long time. The relationship has been successful for both of them. However, in the past year these two firms have been invading each other’s territory. Cisco has made devices which cut out HP and HP has made devices which have cut out Cisco.

Neither one asked the other for permission to do this. They just did it.

The companies claim that these are rational growth moves and that their partners should understand that and rationally still work together in other areas as they partnered in the past. Unfortunately, we are not 100% rational. Companies, just like people, have an emotional element as well. These emotions get upset when a partner invades their space without permission. They retaliate with products that invade the other person’s space.

I suspect that in a few years all of that great strategic partnering between HP and Cisco will be a memory.

3. Permission from Employees
I know a company where they used to value their employees highly. The employees were considered to be the most important asset and were treated as partners. Then there was a change in command. The new administration started treating employees as a horrible cost to be minimized. They did not ask the employees for permission to make this change. The employees resented this change.

As a result, many of the good employees left the company. The ones who stayed were less devoted to the company. Rather than volunteering to work hard 70 hours per week, they started working only 40-50 hours per week. If they were going to be treated as”just an employee”, the employees would start treating their work as “just a job”. Enthusiasm and morale declined. Productivity was ruined.

Be careful about taking employees for granted. If you act without their permission, they can make your life miserable.

Just like the game “Mother May I”, if you want to move ahead, you need to ask for and receive permission. Otherwise, you will meet resistance. With customers, one needs to get permission to change mental mindsets. With partners and employees, one needs permission to change the status quo.

Getting permission takes time. It looks like a way to slow down a strategy. However, without permission the strategy goes nowhere. That’s even slower. So factor getting permission into your strategic timetable.

Monday, October 5, 2009

Strategic Planning Analogy #279: Trends Change, Not People

When I was a teen, my observations were that young people drank Coke and older people drank coffee. Now, decades later, it seems that it is the younger crowd that is patronizing the coffee shops and drinking the coffee in large quantities. If anyone is drinking a Coke, it tends to be an older person.

The same with hair color. When I was a teen, I observed that if there was a woman with bright blonde hair, she tended to be a relatively young adult. Older women had more subdued colors. Now, decades later, it seems that the bright blond colors are on the older women and the younger women use more subtle highlighting.

It’s as if all of the rules I learned as a teen no longer apply.

The problem with the rules I came up with as a teen was that I was linking a trend to an age. In other words, I believed that when people reached a certain age, they should act a certain way.

Instead, I should have linked a trend based on date of birth. In other words, people born at a certain time have a particular characteristic they will carry on throughout adulthood. The next generation is not bound by the old trend and so they start their own, which they carry on throughout their adulthood.

It isn’t so much that people’s beverage preferences change completely as they get older. It’s that the “cool” drink in the formative years changes from generation to generation. Depending on that was “cool” to drink at that formative age, that became the beverage of choice you carried with you as you aged.

A couple of generations ago, that cool drink was Coke. Now, it’s some fancy form of coffee (or maybe an energy drink). I suppose in another generation or two, young people will find something else “cool” and it will be the old folks who drink the fancy coffees (who are those same people who picked up the coffee habit when they were young and when coffee was cool).

This concept has been particularly true with beer brands over the ages. A particular beer brand is cool when drinkers are starting out, and they tend to stick with that brand through the rest of their life. The next generation chooses another “cool” beer brand and sticks with it. And so on.

So what does this imply for strategy? Strategies try to find the ideal place for your firm in the future. To find that ideal place in the future, it is important to first have an accurate view of the future.

As you try to imagine that future world, you can fall into the trap I did as a teen and incorrectly assume that younger generations will revert back to the behavior of the prior generation when they get older. I had thought that young people would always prefer Coke and old people would always prefer coffee, no matter when you were born. That was an incorrect assumption.

A better way to predict the future is to look at how each generation forms its habits in those formative years, and use that as a guide for how each generation will adapt to the future.

The principle here is that trends change faster than people change. The next revolution in behavior tends to start with the generation still forming its life-long habits. Those who already have long-ingrained habits change far more slowly. As each new generation arrives, there is the opportunity to create a new trend, even if the older folks hesitate to participate.

This principle should lead to the following concepts.

1. Don’t look to the older people of today to predict how the older people of tomorrow will be
Back in the 1980s, I remember reading predictions about shopping behavior. At that time, the older people were shopping Sears, while the younger adults preferred shopping discount stores and specialty stores. Some prognosticators at that time were predicting that when the younger customers became old, they would switch store preferences to Sears, since that seems to be what older people do.

Well, here we are at the point when those younger shoppers from the 1980s are older. And guess what…they did not automatically start switching over to shopping Sears. Sears’ customer count continues to drop.

Those prognosticators in the 1980s made the mistake I did as a teen and associated behavior with an age rather than with when you were born. Sears is losing customers because the ones who were in their formative years when Sears was cool are dying. The next generation stayed with the same basic habits they formed back in the 1980s. They didn’t say they needed to switch to Sears when they got old because “that’s what old people are supposed to do.” Instead, they said, “Sears is the store for my parents, not me.”

Buick has been trying for years to get young people to embrace their brand. Unfortunately, Buick tends to be associated with a much older generation and it is hard to dislodge that image.

For young people, Buick is not the cool brand of their generation. And when today’s young generation gets old, I doubt they will suddenly switch to driving Buicks. They won’t think that “Old people drive Buicks, so now that I am old, I should drive a Buick.” No, unless something dramatic happens, Buick’s fate appears tied to an earlier generation and its best years will die as that older generation dies.

The same is true for newspapers. For awhile, many newspaper folks were not afraid of the internet because they thought that as the young adults got older, they would become more like their parents and switch from the internet to the newspaper. You don’t hear those comments much anymore, as people realize the new generation is never switching to paper for their news as their parents have habitually done.

This is not to say that older people never change their behavior. They do. However, those changes are not because they say “I’ve gotten old now, so I have to start acting like my parents did.” Instead, the changes tend to occur because:

a) Their relative discretionary time versus discretionary money changes over their lifetime (we act differently when we are time rich and cash poor versus when we are time poor and cash rich).

b) Their physical abilities change (older people have poorer vision, weaker stomachs, and are less mobile—perhaps no longer able to drive themselves).

c) Even though they may not be trend-setters, older people will switch to the new if it is found to be vastly superior (for example, the elderly eventually saw the benefit of the internet for their lives). In this case, they are not changing to be more like their parents, but to be more like their children.

2. Don’t look to the younger people of today to predict how the younger people of tomorrow will be
Each generation has its own defining moments. Those who grew up in the depression of the 1930s had a different outlook from those who grew up in the prosperous 1950s versus those who grew up in the turbulent 1960s, versus those who grew up in the materialistic 1980s, versus those who are growing up in the current age of terrorism.

Times change; technology advances. A person who has been tapping on a computer keyboard since the age of three sees technology a lot differently from one who first typed on a computer in their 20s. The “cool” behavior of one generation becomes “the weird stuff my parent’s did” to the next generation.

“Cool” communication has morphed from email to IM to texting to tweeting. We’ve moved the core cool internet page from portals to search engines to social network sites. The cool thing of tomorrow may not even be invented yet. So don’t assume today’s definition of cool will last.

It’s difficult to stay relevant and cool for each new generation. MTV has had to reinvent itself many times over in order to have its brand still be relevant to each young generation (and it appears to be losing the battle). Perhaps a better approach is to emulate Pepsi, who adds new brands to its portfolio in order to be relevant to each new generation, from Pepsi to Mountain Dew to Gatorade to SoBe.

Therefore, when envisioning the future, assume some behavior patterns which do not yet even exist. Better yet, try to create that next cool thing.

Behavior patterns tend to follow generations. Therefore, it is often a mistake to use one generation’s patterns in order to predict a different generation’s patterns.

All of this change is good, because it provides a competitive advantage to those who know how to exploit it. If things never changed, we’d all still be shopping Sears.