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.

1 comment:

  1. Gerald,
    I read this article twice and still want to read it one more time.
    Your article reminds me of project risks. Some managers view them as threats whereas others view them as opportunities. In fact, I did a short study on how profitable businesses prospered from turning risks into opportunities.
    Negative thinking turns plants into weeds. Positive thinking turns weeds into a wheel of running success.