Tuesday, August 28, 2012

Strategic Planning Analogy #466: You’ve Got Personality

Over the past year or so, I’ve been splitting my time between looking for clients for my strategy consulting business and looking for a full-time strategy job.  This has given me the opportunity to talk to a lot of executives at a number of companies.

In the vast majority of cases, I eventually received a rejection.  Now, one might at first think that these rejections would make me feel more negative towards these companies.  After all, they rejected me.

However, just the opposite is true.  After meeting with the people at these companies, I like the companies a lot more.  I feel that I’ll be more likely to patronize them than before and I even feel a bit more loyal to them—even though they rejected me.

Before I met with these companies, they were just faceless, impersonal businesses—just words and numbers.  There wasn’t much of any reason to feel any personal connection with them.  But after I met and talked with people in the business, that all changed.  I got to see the people behind the company.  I got to hear the passion in the voices of the leaders.  I got to see people enthusiastically working at the company to do something great.  I got to see the awards in the lobby display cases, hear the chatter in the lunch room.

In other words, the company was no longer a faceless, impersonal entity.  Now it was a real living breathing entity with a personality.  I could feel the drive and the passion.  I could see there were people who cared.  Now I could relate to the business on a deeper, more personal level.  The emotional bonds became stronger, because now because there was a deeper connection.

Most businesses would be tickled to death if they could create these deeper, more loyal ties with their customers.   In my case, these great feelings continued in spite of being rejected.  Wouldn’t it be great if customers had such strong feelings towards your business that it could even overcome an occasional consumer disappointment?

In most businesses, it would not be practical to fly all of one’s customers to headquarters to talk to senior leadership about the business, like I was doing for interviews and business pitches.  But anything a company can do to move from being a faceless, impersonal entity to being a personality that customers can relate to is a move in the right direction.

The principle here is that the personality of the brand or company matters.  If done properly, it can help deepen the bonds between company and customers.  If done improperly, it can create an image that will turn people away from the company.  Therefore, as part of a strategic plan, one should consider the proper personality for the business and tactics for bringing it alive to the potential consumers.  The personality needs to be managed, just like any other asset.

Example: Best Buy
I first realized the importance of this fact when I was working at Best Buy.  I was shown some research Best Buy had done before my time there.  I believe the research was from the early to mid 1990s. 

The research was asking customers their opinions of the various consumer electronics retailers in the US.  At the time, there was a dozen or so regional retailers in this space who wanted to become national leaders.  It included retailers such as Circuit City, Silo, Highland, Fretter’s, Best Buy, and many others.  Today, all of them have long since disappeared—except for Best Buy.

Did Best Buy survive when others failed because consumers saw it as a far superior consumer electronics retailer?  This research at that time would say no.  In fact, consumers saw all of these retailers as pretty much the same.  On all of the rational variables of retailing (price, selection, etc.), all of the brands were rated fairly equally.  There wasn’t much of any reason to prefer one retail brand over the other.

As I say in my book “The Most Important Question,” one of the most important tasks of strategy is to discover and strengthen reasons for customers to naturally prefer your company or brand more than the alternatives.  In this case, the consumer electronics retailers were failing on this most important point.  There was no reason to prefer a particular store because they were seen as indistinguishable from each other.

That is, except for one little difference.  At that time, Best Buy had a person who would dress up in a costume which looked like a giant price tag.  This walking price tag would interact with customers in Best Buy’s advertising. 

According to the survey, people liked this giant walking price tag.  Why?  Because it helped give Best Buy a personality.  They liked the way it interacted with the customers.  It seemed to enjoy the same fun, entertaining things they did.  It had a personality as being like one of them.

In a sea of faceless competition, the personality which came from the giant Best Buy Tag gave customers deeper, more positive feelings towards Best Buy than towards any of the competitors.  It gave a reason to like Best Buy more, to prefer it.

Now I’m not claiming that all of Best Buy’s success was due to that giant price tag.  Success comes from doing a lot of things correctly.  But I do believe that the uniqueness of having a personality gave Best Buy an edge at a critical time when industry consolidation was about to occur.  It bought time in order for Best Buy to improve a lot of other variables, so that Best Buy could be the superior brand which survived the consolidation.  Without that personality edge, I am not sure Best Buy would have survived the transition.

Lately, however, Best Buy’s future seems to be under threat.  There are many reasons for that, and it will take many changes to return strength to the Best Buy brand.  But I am willing to bet that if you asked consumers to describe the personality of Best Buy today, you would get a lot of negative attributes.

Based on the chatter I read on the internet, Best Buy appears to have lost control over managing that personality.  It is being redefined by disgruntled customers in a negative way.  That is not a good thing.  Now Best Buy has to fight an additional war.  Not only does it need to fix the problem of becoming irrelevant in a changing marketplace, it needs to overcome a bad personality.  It would have been easier to transition to relevancy if it had the advantage of a likeable personality on its side.  Then people would be more forgiving during the transition, just as I liked companies even though they rejected me.

So how can we manage the personality for our benefit?

1.      First, think about personality strategically.  Decide which personality is most in sync with your strategic point of preference.  Figure out how to instill that personality into everything you do.

2.      Consider a more public profile for the leadership, so that they can bring their face and personality to an otherwise faceless firm.  Richard Branson is a great example of this.  His strong personality is very public and has helped give a strong personality to all of the Virgin divisions.

3.      In lieu of real employees, one can use symbolic representations to make the personality come to life.  This can be things as crazy as a giant price tag, or the Geico Gekko. 

4.      Actively manage your interactions with customers.  Some lowly sales clerk on the front lines may be the only human interaction a customer has with your firm.  If that clerk has a bad personality, it can reflect negatively on the entire brand, since it is the only human reference point.  Work to instill the proper personality into all employees based on the way you hire, the way you train, the way you reward.  Zappos provides a good example of this.  They were so intent on having a staff with the right personality that they only hire people with the personality which fits their culture and mission.  It  a huge part of the interview process.  To make sure employees are there for the mission and not just the money, after someone has been employed for a week they offer them $2000 if they want to leave.  That weeds out the people who only work for the money.
5.      Actively manage your interactions with society.  Society expects businesses to be good citizens.  They want you to give back.  This is particularly true with the younger adult generations.  If you are not seen as a good corporate citizen, it will damage your personality and you will lose business.

6.      React quickly to threats to your personality.   Monitor what people are saying about you.  As soon as your personality is being threatened, act to rectify the situation.  Don’t let little issues grow into big negatives.  Be fast and aggressive in protecting that reputation.  Cisco is a company which takes this very seriously and has developed tools to help others do the same.

Personalities help companies build stronger bonds with their customers.  These company/brand personalities need to be managed like any other strategic asset.  Incorporate personality development/management/protection into your strategic planning.

Ask the marketplace this question:  If my company were a person, what type of personality would it have?  You might be shocked at what you hear.




Thursday, August 23, 2012

Yet Another Gift for You

I just finished putting together another book on strategy.  It is based on a sampling of my favorite blogs from the late 2010 to mid 2012 time frame.  I reworked some of the material--adding parts, taking away parts, and updating parts.  I also added some new commentary to show how all of the chapters fit together into the larger picture.

The new book is called "The Most Important Question."  You can download a free pdf version at the following link:


I'm sorry it isn't full of all the features found in an e-book, but at least the price is right.

Wednesday, August 15, 2012

Strategic Planning Analogy #465: Put Another Log on the Fire

One time while camping I began cooking dinner on a campfire.  The fire was nice and hot, so I thought cooking would be easy.  I filled a pot with some soup and put it on the fire.

The fire was so hot that it burned a hole in the bottom of the pan.  Not only did I lose my dinner as the soup fell through the hole, I also lost my fire which was doused by the soup.

The purpose of a campfire is to provide light and heat for your camp.  This needs to be managed.  If the campfire gets too large and too hot, it is no longer useful for cooking and you cannot get near it to warm yourself.  It also can become very dangerous and quickly get out of control, perhaps burning down your campsite and the surrounding forest.

Conversely, if the fire is ignored and allowed to go out, then it takes forever to restart the fire and get it back to a reasonable size.  In the mean time, it is cold and dark.  And if you run out of matches, you may never get the fire restarted.
In my story, I mismanaged both extremes—I got the fire too hot to cook, which caused the fire to go out when the soup fell through the hole.  And the wet logs didn’t want to re-light.

In the business world, you can think of the logs as being like investments in the business and the fire as being like the financial output of the business.  If you don’t manage these inputs and outputs properly, you can end up in a mess, just like I did with my campfire.

The principle here is that future growth should be managed in relationship to the current situation.  In other words, you are more likely to have a strong future if it is leveraged off the current strengths.  We can see how to do that by looking at the lessons of the campfire.

Lesson #1: All Fires Left Without New Fuel Eventually Die
There is only so much fire potential in a log.  Eventually, it will be completely consumed by the current fire and no longer produce additional fire.  Therefore, if you do not want the fire to go out, you have to keep adding new logs to the fire.

The same is true in business.  Like each particular log, each particular business strategic initiative eventually fails.   Times change; customers change; competition changes; technology changes; the environment changes.  New, superior solutions for the evolving customer needs make your old strategic initiative obsolete.  It no longer provides any financial output (the flame goes out).

As a result, you cannot just sit back and enjoy the success of today.  Even a perfect campfire right now will eventually go out if you do not add logs to it.  Similarly, perfect financial output today does not guarantee that it will go on forever.  You have to keep investing in the business (adding more logs).  Otherwise the business will die.
That investment can take two forms.  First, you need to invest in maintenance and upkeep.  As a lifelong retailer, I know what happens if you do not reinvest in the look of your store.  Eventually, it becomes so ugly and worn out that customers refuse to come back.  The fire goes out.  

Second, you need to invest in modifications to your business in order to keep it relevant to the changing marketplace.  

Remember, if you tie the success of your business to a single initiative, your business will die when the original logs of investment in that initiative are spent.  If you want your business to last beyond that, you need to keep investing in the business.

Lesson #2: Big Logs Require a Big Fire to Ignite
Big logs do not automatically combust into flame.  If you want to get a big log lit, you have to stick it in a place where a big fire already exists.  It then uses the current flames from the older fire to start the process of creating its own flames.

The same is true in business.  It is a lot easier to get a new initiative off the ground and running successfully if it can leverage off the power already inherent in the base business.  That power can come from strong customer relationships, a great distribution network, economies of scale from the base business, and so on.  The new business can “borrow” these strengths just as a fresh log “borrows” the flames of the old fire to get going.

This implies two things.  First, the best time to invest in the future is when you are still strong in the present.  If you wait until the flames go out before adding the new logs, the new logs won’t ignite.  You have to add the new logs while the old flame is still strong if you want them to quickly take off.

Although this is common sense with fires, this idea is often ignored in the business world.  In retail, I saw executives wait until people no longer wanted to shop a store before remodeling it.  By then it was too late (the fire had gone out).  Since customers no longer patronized the store, they did not see the improvements   They had already moved on to someone else’s store.  It was a wasted investment which didn’t catch on.  No, the best time for that remodel would have been while the customers were still in the store and had a positive feeling towards that store.  Then they would have seen the improvements and then felt even more positive about that store.  

For a more dramatic example, think of Kodak.  It stayed with the analog film “logs” way too long—all the way until their flame was nearly extinguished—before adding on the digital “logs.”  It was too late.  There was not enough power in the weakened core to ignite the new business. It never caught fire.  Instead, the digital fire belonged to the competition. 

Had Kodak made the transition to digital when they were at the peak of analog power and still had a strong brand and consumer franchise (i.e., when their fire was still strong), those digital logs would have had a better chance of catching on.  

The reason for waiting too long to invest in the future is usually a fear of cannibalizing the current core business.  But do we worry about cannibalizing the old logs of a fire when putting a new log on top of them?  No.  We understand that those old logs are going to die anyway and that they are most useful to perpetuating the flame if you put a log on them while they are still strong.  And besides, the goal is not to optimize a single log, but to optimize the entire campfire.  So we toss the new log on without a second thought. 

We should have a similar attitude in business.  Assume cannibalization is going to occur anyway (either by us or by someone else).  So if it is going to die anyway, it may as well be us to gets the future business.  And we are more likely to get it if we put the log of the future on now, when the flame of the current business is still strong enough to ignite it.  Leverage your strengths while they are still strong.

The second implication is this:  just tossing a log near the current fire won’t do anything.  It will just lie there unlit, even if the other fire is still blazing strongly, because the new log does not touch the current flame.  This is what happens when we invest in a future that does not leverage the current strengths.  It there is no fit with the core, it cannot leverage the flame from the core.  It is like trying to start a completely new fire next to the old one. 

And we all know how hard it is to start a new fire.  You cannot start with big logs.  You have to start with small sticks and easily ignitable tinder.  Then you can gradually increase the size of the sticks over time (if the small fire does not go out—which is common).  Eventually, you might be able to get that new fire to support a big log.

Wouldn’t it just be easier to leverage the fire you already have?  So as you invest in the future, find a future that can leverage what you already have built.  It makes the chance of it taking off quickly more likely.   Don’t be lured to invest in the hot new thing just because it is a hot new thing.  If it has nothing to do with your core, you bring no advantage.  You are starting a new fire from scratch.  You will most likely lose out to others who bring an advantage to the business.

Lesson #3: Managing Multiple Fires Can Be Difficult
This leads to the next point.  It is easier to manage one fire than two.  With two fires, one can become distracted and lose control of the situation.  This can lead to one of the fires either going out or burning up the camp.

That is why the principle of focus is so important in business.  Focus eliminates the distractions and allows you to excel at the point of focus.  It is better to have one great fire which goes on forever through careful, focused management than a handful of unrelated flames that are weak and always going out.

Lesson #4: Don’t Use Up Your Logs Too Quickly
If you toss too many logs on a fire too quickly, two negative consequences can occur.  First, you can lose control of the fire.  It becomes too hot to use and may engulf your entire campsite in flames.  Second, it uses up your logs too quickly, so you cannot keep the fire going a long time.
In business, there are also negative consequences to investing too much, too fast.  You can lose flexibility because all the resources are committed up front.  And if you invest faster than your company can manage it, you lose control of the business.  Instead, invest wisely for the optimum long-term results.

Managing a business is like managing a fire.  To keep the fire burning successfully for a long time, you need to:

a) Put new logs of investment on the fire while the old flame is still strong.
b) Make sure the new logs can leverage off the strengths of the old flame by having strategic fit.
c) Make sure you don’t put too many logs of investment on too quickly (faster than you can manage).

Fires are fun to watch, but if all you do is watch, then the fire will go out. 

Monday, August 13, 2012

A Gift for You

As we are approaching my 500th blog entry, I decided to help those of you who want to search around in all those blogs for insight on a particular subject.  I created an Excel spreadsheet with a very brief summary of each blog entry. You can then search on this spread sheet to find the proper blog entry.  The spreadsheet is located at: https://www.box.com/s/9cae3c97fa35be582310.

Hopefully, this will be of help to you.  Otherwise, you can look for particular blog entries by using the topics link in the right-hand column of this blog.

Wednesday, August 8, 2012

Strategic Planning Analogy #464: The Blue Screen of Death

This past week has been very frustrating for me.  My computer was getting slower and slower.  Eventually, it kept coming to a complete stop.  The screen would go completely blank (the blue screen of death) and the disk drive wouldn’t stop whirring away. 

I had to keep manually stopping the operation without going through a normal shutdown (Windows doesn’t like that).

Usually, I could get a fair amount of work done in the first hour after re-booting, so I used that time to go online to find out how to fix the problem.  What I learned was that my computer was filled with thousands upon thousands of little glitches which had developed over time.  It was nothing major; just so many little problems that the computer wouldn’t work anymore.

So I downloaded a program to clean up the bulk of the mess.  Then I slowly fixed all the remaining errors one by one.  Now my computer works fine again.

A similar type of frustration can occur in strategic planning.  You may have a great strategic vision and a great plan to bring it to life.  However, once the plan is put into motion, it seems like nothing is happening.  Although it may have appeared like progress was being made at the start, that progress slows down over time.  Everything related to implementation slows until it seems like all progress has stopped.  You have the strategic equivalent of the blue screen of death—a strategy which no longer functions.

Many articles have been written about strategic implementation (including many of my own blogs).  Most of these articles deal with major issues, such as:

a) Resistance to change;

b) Dealing with those who try to sabotage the strategy because it hurts their power base;

c) Political struggles.

These are major roadblocks by people proactively resisting the strategy.  This is important stuff.  But it may not be the most important roadblock.

As we saw with my computer, the slowdown was not caused by a few major attempts by others to proactively destroy my machine.   No, it was thousands of little glitches which innocently crept in while I was doing millions of little tasks which had no malicious intent. 

In the same way, most strategic initiatives grind to a halt not because of a major malicious act, but because thousands of little barriers creep in while thousands of employees just try to innocently do their jobs.  No one barrier is enough to halt the strategy, but the accumulation of thousands of these acts eventually clogs the system and prevents implementation.

Think of it like this.  I could destroy my computer by attacking it with a hammer.  I could also destroy my computer by innocently eating cookies while I worked.  Only a few cookie crumbs would innocently fall into the keyboard from each cookie eaten.  However, after eating thousands of cookies, there could be so many crumbs in the keyboard that it no longer works. 
This latter problem is common in strategy.  While we are working to prevent someone from taking a hammer to the strategy, we fail to see all the little crumbs building up.  Right under our noses, the factors causing the strategy to fail are building up.  And although this attack is more innocent, the result is still the same.

The principle here is that strategic implementation does not need malicious resistance to slow it down.  It just needs to allow tiny barriers to accumulate.  Therefore, have a plan to prevent this accumulation.

If you want to keep a computer running smoothly, two actions are recommended.  First, install a program that tries to block errors from getting into your system.  Second, check and clean up your system on a regular basis, before the errors get to the point where they seriously impact performance. 

Let’s see how to apply this to strategy implementation.

1) Identifying How The Errors Creep In
Two types of errors can creep into a company to prevent implementation.  I call them the errors of dilution and thickening.

Dilution occurs when the strong imperatives of strategy are weakened by compromise.  It comes about like this: Winning strategies typically emphasize owning a position of leadership in a particular area.  It is the place where your business can claim to be the best.  This could be one of a number of things, like best price, highest quality, most service, most authentic, most prestigious, most entertaining, best tasting, and so on.  It is this point of superiority which provides your reason for existing—your path to winning.

To attain and retain that point of superiority requires a diligent focus on improving that point of superiority.  Trade-offs must be made to reduce effort in other areas in order to put required resources in the desired area.

Unfortunately, in the small everyday decisions of business, these trade-offs can sometimes be ignored.  Small decisions may be made which move the company away from this focus.  It may be a decision to vary slightly from the focus to pocket a small amount of business near-term, to meet this month’s quota, or the desire to broaden one’s appeal a little bit.  These look like small compromises—just small, temporary departures from the long-term focus to perhaps make a small immediate gain.  But do enough of these small compromises and you end up with one big departure from the desired path.

The result is that these compromises dilute one’s effectiveness at the desired point of superiority.  You become less superior where you need to be most superior.  You confuse the customer as to what you stand for.  Or those actions may actually destroy your position.  Toyota’s point of superiority had been reliability, but it got diluted by a series of actions to broaden the range, increase geographic distribution and lower costs.   The accumulation of these acts severely hurt Toyota’s reliability image in 2011.   Like with my computer, this accumulation of dilution slowed things down for Toyota.  They needed to stop and “re-boot” their strategy.

Besides dilution, one can slow down the strategy through thickening.  This is the process of adding so much additional activity to the agenda that the strategy part of the agenda loses emphasis and priority.  It’s one thing for a company to focus on three major goals.  It is quite another to simultaneously focus on 35 major goals. 

Once everything becomes important, then effectively nothing becomes important.  There is no priority to the strategic path.  A little effort in 35 different directions means no great effort in any direction.  No single extra task breaks down the process, but over time the accumulation will.  Pouring in all these extra tasks is like pouring molasses into the river.  After awhile, so much molasses will be in the river that it doesn’t flow any more (it’s gotten too thick).  Progress stops...like my computer.

2) Having a Plan to Clean Out the Errors
So how do we clean out the errors of dilution (through compromise) and thickening (through added tasks)?

Dilution needs to be attacked two ways.  First, strategic implications need to be brought down from the ivory towers to where everyday decisions are made.  Before making every, and I mean every decision all over the company, first ask yourself which answer moves you closer to your point of superiority.  Realize that every decision can compromise your position and make sure you understand the ramifications of such a compromise on your ability to hold your position of strength.  This needs to become a natural activity done all the time, modeled by top management.

Second, one needs to constantly monitor where one stands with the customer regarding their point of superiority.  Is the perception increasing or decreasing.  If the position is decreasing, then one needs to quickly root out the diluting activities and eliminate them.  

Regarding thickening, one needs to constantly monitor the size of the list of priorities and the number of tasks expected.  Keep the list small.  The idea should be something like for each new priority added, an old one needs to be eliminated.  If you have a lot of things you want to do, do them sequentially rather than simultaneously.  In other words, after priorities are accomplished, take them off the list and replace them with new ones. 

And finally, step back every once in awhile to reassess how many errors have crept into your system.  Just as the experts tell you to run a clean-up program on your computer once a week or once a month, companies should do a formalized clean-up effort on a regular basis—perhaps twice a year.  This is a formalized time to look for ways to cut out excess tasks and diluting compromise practices.

Strategic efforts often fail not from large malicious acts, but from an accumulation of small innocent acts that eventually slow down progress to a halt.  These acts tend to slow down progress by either diluting one’s focus (through compromise) or overburdening you with too many other tasks competing for your attention (called thickening).  To stop this from happening, one needs to put in place programs to attack dilution and thickening on a continual basis, like how an antivirus program works on a computer.  Then one needs to periodically focus on cleaning up any dilution or thickening which crept in anyway (like running a computer clean-up program).

Remember, it’s easier to fix all these problems when the threat is still low.  If you wait too long, you end up like I was with my computer—a machine that crashed all the time and could do nothing.