Strategic Planning Analogy #548: Strategy with Claws

THE STORY
I have two cats. One cat has none of its claws. The other cat has all of its claws. If you want to pick up and move the cat with no claws, it is relatively easy. You just pick her up.

If you want to pick up the cat with all of its claws, it is much more difficult. Immediately those claws come out and grab onto the spot where he is lying. This makes it almost impossible to pry him away from that surface. First you pry one paw away. Then, when you start on the second paw, the claws on the first paw reattach themselves. It becomes a major struggle.

THE ANALOGY
Think of your product as being like those cats. The surface they are on is your customer. The one trying to take the cat away is your competition.

The easiest one of your products for your competitor to take away from your customer is the one with no claws. They can just pick up that product, toss it away, and substitute their own product.

However, for the product with claws, it is much more difficult for the competition to displace you. Those claws dig into the customer. They hold on tight. Normal competitive efforts are not enough to dislodge those claws. You get to keep that customer. So, the moral of the story is that we want to have products with claws.

Although cats are naturally born with claws, business offerings are not. You need to create strategies that put claws on your product. Unless you proactively design claws into your business model, you will be far more vulnerable to competitive attacks and far more likely to fail.

THE PRINCIPLE
The principle here is that your product must not only satisfy your customer, but do so in a way that makes it hard for competition replace you.

Customer Satisfaction Not Enough

Customer satisfaction is a good thing, but usually not good enough to ensure customer retention. The competition also wants to satisfy your customer. In fact, your customers probably have many options, all of which are reasonably good at satisfying their needs. So, just satisfying your customer’s needs is not good enough to ensure that you will keep them as a customer. Others can do the same. All they may have to do is just trim their price a little and, like picking up a cat with no claws, toss you aside.

I suppose you could get into a price war to get the customer back, but that leads to an endless cycle which leaves nobody with any profits. Yes, the customer will be highly satisfied with the ridiculously low prices. But you will go bankrupt trying to serve them at that price. So satisfaction alone is not the answer.

Designing Claws

A better approach is to design claws into your product. Claws would be anything that makes it harder for the customer to switch to a competitor’s offering. An example of “No Claws” would be a relatively generic product indistinguishable from the competition (similar features, similar performance, similar delivery, etc.). These would be things where—if you took off the name—you wouldn’t be able to tell which brand it is. It’s hard to hold onto customers in that environment.

But here are some ideas which can even put claws into relatively generic offerings:

1. Add Service: Products alone are more interchangeable than products plus service, because services can be more customized and personal. They can change a commodity into something special—unlike the competition. And if there is a service component, then there is often a people component. And it’s a lot easier to say good bye to a faceless product than to a service person who has become your friend. In an earlier blog, I talked about how even something like selling gravel can get claws if you add the right type of service.

2. Add a Network Effect: It’s hard to switch away from businesses like Linkedin or Facebook, because you are not just leaving that business—you are leaving all the connections that business brings you. Someone else might have a superior customer interface or more features, but if they don’t have the connections to the network, then there is little reason to switch to them. It’s like a talent agent who has all the right connections within the entertainment industry. Why would you ever leave that to go with someone with fewer connections, even if they are a better negotiator or take a smaller fee? So work on the value of your connections. Make it so that when they leave you, they are also leaving a lot of others who are valuable to them.

3. Strategic Pricing: Rather than getting into a self-defeating price war, use pricing to create claws at a higher margin. For example, volume discounts increase the downside of switching, because you lose the accumulated benefits of adding to your volume. It’s like the old punch card where if you buy 10, the 11^th is free. You only get the big benefit if you stick around long enough to buy 10. By connecting increasing value to increasing volume, you add claws to your offering.

4. Bundling: A similar strategy is bundling. Let’s say you sell photocopiers and you bundle the supplies into the sale of the equipment. By bundling, you can sell the photocopier very cheaply, because you know you will make it up on the rest of the bundle. And any competitor who wants to get you to switch on the supplies would have a hard time, because of a contractual bundling of supplies and equipment. You would almost have to get the company to switch equipment in order to get them to switch supplies, a tougher proposition. And if you can make your supplies non-standard, it is even harder to make a switch. Another benefit of bundling is that it is harder to make direct price comparisons on the individual parts, making it harder for someone to quote a lower price on any of the parts. The best situation is if you choose to bundle a mix of items where very few companies carry all the items in the bundle. That makes it harder for them to match your bundle, since they don’t control all the pieces.

5. Integrated Systems: Henry Schein is a distributor of a wide variety of supplies to dentists. They also sell a propriety computer system for operating dentist offices. About 40% of dentists in the U.S. use this operating system to run their business. It’s hard to get these dentists to completely abandon Henry Schein, because then they would no longer be able to run their business. In a similar manner, some office supply companies and travel agencies integrate their computerized ordering system right into the customer’s operating system. That makes it really hard to get people to switch, because now you have to dismantle operating systems. Who wants to do that? (that’s a big claw)

6. Deepen the Offering: It’s one thing to replace a vendor who does just one little thing for you. It’s another thing if that vendor is integral to your success because they do so much for your business. Consider Sysco, the foodservice supply company. They’ve deepened their offering to the point that they do almost everything except cook the food and wash the dishes. Besides food, Sysco offers things like: 

1. Kitchen Supplies
2. Dining Room Supplies
3. Cleaning Supplies
4. Business Management Tools
5. Technology Solutions
6. Dishes/Silverware/Glasses 

Switching away from that many things at once is extremely risky, so you are far more hesitant to change vendors.

7. Auto Upgrading: One is most vulnerable to losing business when a customer finds themselves out-of-date with aging, inefficient equipment. A new vendor comes in with the latest shiny-new product with all the latest features and technologies and your customer’s jaw drops. They feel they’ve got to switch the get the latest wonder. You can stop this switching by having an automatic updating program. You automatically keep upgrading the customer to the latest thing. That way, they are never far enough behind that a competitor can lure them away by merely showing them a shiny new product.  

This is just a small sampling of ways to put claws in your offerings. Brainstorm on adding claws when dreaming up your strategy and business model. It will pay great dividends later.

SUMMARY
Customer satisfaction strategies take you only so far in a world where all the competition are also trying to satisfy the customer. To keep your customers, you need to add claws to your offering—features that increase the downside risk for switching and/or increase the upside potential for staying. There are a wide variety ways to add claws to your strategy. Choose some.

FINAL THOUGHTS
Don’t automatically assume that claws will naturally occur for your product. If you want them, you have to design them into your business model from the start.

Strategic Planning Analogy #544: Competitor or Co-Conspirator

THE STORY
For decades—in fact for most of the 20^th Century—baseball was America’s sport. It captivated the minds of the people and was their sporting passion. Nothing else came close.

There was all sorts of competition in baseball, with the players battling it out over the summer to see which team would come out on top and win the World Series Championship. The fans were captivated by every nuance in every game.

But gradually, over the latter part of the century, American Football started winning over the hearts of the sports enthusiasts. Today, football has become America’s sport. Sports enthusiasts are captivated by every nuance in every football game. Outside of New York City and Boston, most sports fans really only get a bit interested in baseball in the post-season. Television viewership of baseball during the season is miniscule compared to the ratings for football.

It makes you wonder…where did the real competitive battle in baseball take place? Was it on the field between baseball teams or was it in the hearts and minds of the sports fan at home? They may still be winning baseball games, but they lost the battle in the mind.

THE ANALOGY
An important aspect of business strategy is competitive strategy. The idea is to develop a plan to win share versus the competition. Why? Winners tend to reap the majority of the financial rewards, so the goal is to find a way to beat the competition and win. The result is a strategy with a focus on the competition.

The problem is that the competition are not the ones purchasing products. The consumer is. The consumer is the one who ultimately determines your success, not the competition.

If you are not careful, you could end up in the situation like baseball. You could become so focused with beating the competition (the other baseball teams), that you fail to see that the consumer (the sports fan) is abandoning baseball and consuming football. You may win the baseball game, but lose the fan, which is the greater loss.

In business, Kodak was so focused on beating Fuji that it failed to act sufficiently on the customer abandoning both and moving to digital imaging. Target and Walmart were so busy battling each other that they let Amazon grab a huge chunk of the market. Pepsi and Coke spent years fighting each other while the market for cola in the US was shrinking and the customer was abandoning colas for coffee, tea and healthier alternatives.

Competitive strategies may be nice, but consumer strategies are better.

THE PRINCIPLE
The principle here is that the real competition are not the companies that tend to look and act a lot like you. Instead, the real competitor is the one who can render your entire product category obsolete (or at least a lot less relevant). In baseball, the real competition was not other teams that wore similar baseball uniforms and played a similar game of baseball. No, the real competitor wore something a lot different (football uniforms) and played something a lot different (football).

In fact, I will contend that those who look like you really aren’t your competition, but are more like a co-conspirator. You actually work together to keep your category relevant. The noise you both make in the marketplace usually doesn’t change market share all that much. But is does draw attention to the category. So, in a sense, you are both working together on the same side—the side that wants customers to still be in love with your category.

Mature Market Stability

The more mature the market, the more this principle is true. Just look at the mature product categories found in the supermarket. Executives at the companies in these mature categories (like cereal and canned goods) go crazy with celebration when they can move their market share a small fraction of 1%.

Why are they so excited about so little? It is because mature markets tend to be very stable. Brand images are set, habits are ingrained, and preferences between brands in the category are etched in stone. There is little that can be done to move the needle, so any movement, even small ones, are celebrated.

We’re even starting to see this now in traditional computers. The market rankings are becoming stable and changes in share from quarter to quarter are hardly noticeable. The only sizable movement is from consumers moving their purchasing to other devices, like smartphones. So who is the real competition for computers? It’s the devices that don’t look like computers. That’s where the real gains and losses occur.

In fact, the vast majority of business categories are fairly mature. Rapid competitive movement is rare in most sectors. Unless someone comes up with a major technological breakthrough, share doesn’t move much. And even then, the gain is usually temporary as the others find a way to catch up.

The only meaningful movement is between categories. It’s a battle between teams wearing entirely different uniforms and playing different games.

The Response

With this in mind, how should companies respond?

First, they need to define themselves by what consumer needs they are satisfying rather than what product they sell. As mentioned earlier, the consumer is the one who decides the winner, not the competition. The customer is purchasing solutions to problems. If an entirely different product better solves their problem, then they will abandon their old category for an entirely new one. So if you want to win, see the world like the consumer and take off those product category blinders.

For example, Bausch & Lomb defined itself as being in the vision solution business rather than the lens manufacturing business. Bausch & Lomb saw its competition not as other lens makers but as anyone who was improving vision. As a result, when newer, non-lens businesses started offering better vision (like Lasik surgery), Bausch & Lomb was there, establishing a leading position.

If you define yourself by your product, your firm will die when your product category is replaced by something new. If you define yourself by consumer solutions, you will always have relevancy.

Second, don’t just focus on the same old competitors who are similar to you. Keep one eye on the periphery. Look for what the leading edge people are doing…what is coming next. Look for the new thing that will make you the obsolete thing. Look for the exciting thing wearing a different uniform. Look for the new rules that turn the tables.

SUMMARY
Rarely is the real action taking place between competitors approaching the market in a similar way. Instead, the big action is between dis-similar solutions to the same problem. In fact, your traditional competition is more like a co-conspirator, working with you to create interest in your product category. Therefore, focus more of your effort on aligning with the consumer rather than beating up the similar competition. After all, the consumer is doing the spending, not the competition. And they aren’t limited to spending it just in your category.

FINAL THOUGHTS
I suppose that someday American Football will be replaced in popularity by something else. The wheel of change never stops.

Strategic Planning Analogy #526: Big Stick

THE STORY
One time, while vacationing in northern Minnesota, I stopped to see the big tourist attraction in Eveleth—the world’s largest free-standing hockey stick. The stick is 110 feet long and weighs over 5 tons. Next to the hockey stick is a 700 pound hockey puck.

My thought is that, sure, that’s a big hockey stick. But I’ve seen bigger ones in the business world. I’ve seen business graphs with hockey sticks that span millions of dollars!

THE ANALOGY

When a line graph shows a history of slight decline followed by an incredibly fast upward rise, people call that a “hockey stick.” It got that name because the graph has a shape similar to a hockey stick (see chart).

In the business world, I’ve seen lots of hockey stick graphs. The story behind the graph is always the same: Yes, our historical performance has been poor, but you just wait. The magic is about to happen! Soon, everything will suddenly become wonderful and money will come pouring out of the sky!

Just look at the social media world. There are companies who have never made a profit and are actually increasing their burn rate through cash as losses ever widen. Yet they are going public at astronomically high valuations. Why? Because, supposedly, the magic is about to happen when profits will skyrocket. They’ve sold people on the idea that the company is about to experience a “hockey stick” performance.

Given the high valuations placed on these companies, I suspect that their hockey sticks make the one I saw in Eveleth look very small indeed, by comparison.

THE PRINCIPLE
The principle here is that just because you can fill a spreadsheet full of projections and make all sorts of fancy charts about the future does not mean that your scenario will come true. Adding extra decimal points to a wildly optimistic guess does not make the guess any more accurate.

Studies have shown that people are more likely to believe a wild guess is more accurate if the last digit in the number is either a 3 or a 7. But changing a wild estimate from $32,665 million to $32,667 million only gives the illusion of more accuracy. It’s still just a wild guess.

So don’t automatically believe a projection just because it is presented in a way that appears objective and well thought out. People can dress up inaccuracy to look like respectability.

One should be especially skeptical when presented with a hockey stick future. After all, if it is going to be so easy to rapidly improve performance in the future, why is today’s performance going in the other direction?

Where Does the Magic Come From?

There’s an old saying that the definition of insanity is doing the same thing over and over again and expecting a different result. That’s insane because the only way to get a different result is to do things differently.

Hockey sticks assume a wildly different result in the future. So a fair question to ask is what has made things so different to cause a different result. If a truly wonderful and believable change is presented that reinvents the rules dramatically in your favor, then maybe the hockey stick makes sense. Otherwise, the change is nothing more than hoped-for magic. And I’m not going to bet the future on some mysterious magic.

In the social media space, the magic is often referred to as “monetization.” In other words, they say “We currently have no idea how we’re going to make a profit, but once we amass a huge bunch of people, we will ‘magically’ come up with a way to monetize them. Trust us. We’ll find it later.”

I’m not sure I trust the magician.

And even if there appears to be a credible scenario for why a specific type of change will reinvent the rules in my favor, there is still reason to be skeptical. As I mentioned in an earlier blog, I once asked a group of executives what they would do if competition suddenly found a way to take a lot of share from them. They replied that they would get aggressive and do whatever it takes to get the share back. In other words, they would fight to reverse the effect of the change.

Remember, you are not the only one trying to write the rules of the future. So is the competition. Competiton WILL retaliate and try everything they can to pull the line of your hockey stick down. Even if the only thing they can do is copy your change, it gives them a chance to take away about half of the benefit of your hockey stick as they share the benefits of change with you.

What are Their Motivations?

Another thing to look at is the motivation behind the one showing you the hockey stick. How do they personally benefit from having you accept a hockey stick scenario? Is it just a lie so as to advance their career? Is it just a distraction to make you forget about how badly they’ve managed the business in the recent past?

Hockey sticks are hard enough to believe in the hands of those with noble intent. They are almost impossible to believe in the hands of those whose motivations cannot be trusted.

What is their Supporting Data?

All the numbers and math behind the hockey stick can be accurately calculated. But that doesn’t mean that they are accurate conclusions. All the inputs to that math are based on assumptions. If the assumptions are lousy, than it doesn’t matter how accurately you do the math. The answers will still be wrong.

Therefore, instead of arguing the math, you should focus the discussion on the assumptions behind the math. Are the assumptions:

• Believable?
• Doable?
• Able to Withstand a Competitive Response?
• Capable of Creating a True Advantage?
• On an Identifiable Path to Profits? 

Or is it just a bunch of magic?

SUMMARY
Many presentations of the future include a hockey stick—a rapid and large improvement to the business after years of weak performance. Since hockey sticks rarely occur in real life, seeing one on a chart should set off warning bells in your head. Work extra-hard to determine if the scenario should be believed. Look for believable and achievable change in the environment to your advantage. Make sure the presenter has the right motivations. And double check the assumptions.

FINAL THOUGHTS
Hockey is just a game and hockey sticks are a tool to advance that game. Be wary of business people who use hockey sticks to advance their game of deception in order to wrongfully advance their selfish cause.

Strategic Planning Analogy #506: Perspective

THE STORY

Let’s assume that a government transportation committee examined whether to add more lanes to an urban highway. 

The conclusion of their study went something like this:

Yes, we concede that during a brief period of the day (rush hour), the highway becomes highly congested and traffic stops moving. However, outside of rush hour, the highway is operating well below capacity and flows very smoothly. Since the highway is well below capacity for approximately 85% of the day, we see no reason to add any lanes. After all, 85% efficiency for a highway is quite acceptable.

The response from a consumer group advocating extra lanes went something like this:

The reason why the highway flows well outside of rush hour is because that is not the time when the highway is most used and most needed. According to our research, 85% of the cars using the highway use it during the congested rush hour period when cars greatly outnumber the current highway capacity. Since the highway is well above capacity when 85% of the drivers are on it, we see a clear justification for adding more lanes to the highway. After all, 85% inefficiency for a highway is quite unacceptable.

So is the current highway 85% efficient or 85% inefficient?

THE ANALOGY

Strategy creation involves making decisions. Facts are a key input for making those decisions. In fact, I had a boss once who on a daily basis would say that he would not make any decisions unless they were “fact-based.”

But how reliable is the “fact-based” approach? In the story above, two groups used facts to reach a conclusion. The transportation committee used facts to “prove” that the highway was 85% efficient. The consumer group used facts to “prove” that the highway was 85% inefficient. These facts lead each group to come to a different conclusion about adding lanes to the highway.

Was one group’s facts right and the other group’s wrong?  No, both groups had equally true facts:

a)     85% of the TIME OF DAY the highway had excess capacity.

b)     85% of the TIME OF DRIVERS using the highway was during times of inadequate capacity.

So what is the right “fact-based” decision? Obviously, we need more than just these facts to reach an acceptable decision. And when it comes to strategy we need more than just facts as well.

THE PRINCIPLE

The principle here has to do with perspective. Facts alone do not automatically lead to the proper conclusion. It is only when we place those facts within the context of the proper perspective that we see what is the right thing to do. Therefore as much care and effort should be given to developing the proper perspective as is given to acquiring the right facts.

Perspective depends on two items: Where one is looking from and what one is looking at. In strategic analysis there are usually multiple places to look from and multiple items to look at. If you miss out on examining some of these options, you may come to the wrong conclusion.

Perspective #1: Where One Is Looking From

From the eyes of the transportation officials looking at the highway from afar, what they saw was smooth operations nearly all day long. From the eyes of the drivers on the highway, nearly all of them saw congestion nearly every moment they were on the highway. Their different perspectives cause them to see the situation very differently.

A similar situation can occur in developing your strategy. From the eyes of the executives inside your organization, you may see a particular strategic option as ideal for your bottom line. But how does that option look from the perspective of other eyes?

Perhaps your decision places added burdens on your suppliers, causing them to no longer want to supply you or only supply you if they get added compensation for those added burdens. That added compensation might wipe out a lot of the original advantages you saw from the internal executive eyes. A similar situation could also occur with your distributors.

Or perhaps your decision triggers an adverse reaction from your customers when they see it. This problem could not be seen with the internal executive eyes, but was quickly apparent to the customers’ eyes.  The unperceived adverse consumer reaction could make that original strategic option no longer as viable as first seen.

Or perhaps when your competition sees the strategy, they perceive it as a bigger threat than you thought and they react far more aggressively than anticipated. This aggressive reaction wipes out your perceived benefit.

Or maybe when those ideas from headquarters get down to the factory floor, they cannot be operationalized as smoothly as one thought. Something gets lost in the implementation on the factory floor which hurts the strategy’s effectiveness.

Therefore, before making a decision, step away from the pile of facts and look at the situation through other sets of eyes. How will the decision be seen by all the other relevant parties (suppliers, distributors, customers, competition, front line employees, the government, etc.)? How will their perspective affect their behavior, and how will that behavior impact your strategy?

You may find a need to modify your strategy in order to get all of the players see the situation in a manner which moves them all in a favorable direction for your business.

In addition, consider how you communicate your decisions, so that you can help influence how others see it. How the decision is communicatted may be just as important as the decision itself when it comes to implementation.

Perspective #2: What One Is Looking At

In the story, everyone was looking at the same issue: what is the proper number of lanes to have on the highway.  It assumes that the only way to address congestion is by looking at lane-count for the highway. Is this a fair assumption?

Perhaps there are other solutions one could look at, like:

a)     Increasing use of public transportation;

b)     Convincing more people to use alternate routes;

c)     Getting businesses to stagger the hours employees work;

d)     Reallocation of traffic direction for the current lanes depending upon time of day (e.g., more inbound lanes in the morning and more outbound lanes in the evening).

e)     Financial incentives for carpooling.

f)      Building a separate road nearby.

How do you know you are making the right decision if you have not fully explored all potential options? All those facts you’ve gathered may only be applicable to examining one particular option. If you look at the problem in a different way, you may find that you need a different set of facts altogether.

Remember, business success usually depends on offering a superior solution to your customers’ problems. There may be many distinctively different ways to solve that problem. Unless you examine many alternatives, you may not offer the right solution.

Perfecting the obsolete is not a path to success. After all, even a mediocre smart phone is far superior to the best Morse code telegraph solution, no matter how much time you spend trying to perfect it.

So don’t frame your strategic discussion too narrowly. Before deciding on the best way to do something, first make sure it is something worth doing. First frame the discussion around finding the best solution rather than just finding ways to improve the status quo.

SUMMARY

Facts are useful, but facts alone are incomplete. Facts are only useful if seen from the proper perspectives. Therefore, before deciding a course of action, improve your perspective by:

a)     Looking at the problem through all the eyes of the various people who have an influence on the successfulness of the strategy (suppliers, distributors, customers, competition, front line employees, the government, etc.).

b)     Looking at multiple ways to solve the problem. Creative, superior solutions may look nothing like the status quo.

FINAL THOUGHTS

Great strategic solutions may take you into uncharted territory—doing things in a way they have never been done before. There won’t be a big pile of facts to help you in uncharted territory. And if you wait to act until you can get a big pile of facts, someone else will have already captured that strategic space. Perspective helps fill in the holes when facts are hard to come by.

Strategic Planning Analogy #463: Where Secrets Aren’t Hidden

THE STORY
Back when I was in High School, I had a friend who wanted to date a girl.  Unfortunately, she did not want to date him.  She said that the only way she would meet with him would be if he came over to her house to have her teach a lesson from her religious organization.  Since that was the only way he was going to meet her, he said yes to those conditions.

Later, my friend had some misgivings about the conditions, so he talked me into joining the religious class with him at her house.  She gave us some religious books to look at and told us to read a particular page.  After we read the page, she asked us a question about the material.  I immediately gave her an answer.  She was impressed by what I said so she asked me how I came to that conclusion.

My reply was that it was not my conclusion.  There was a big footnote at the bottom of the page which had the answer she was looking for in it.  So all I did was read the footnote verbatim.    

After that, she didn’t ask me any questions any more.

THE ANALOGY
Life is full of questions.  Business is no exception.  If you want a build a solid business strategy, you need to first answer a lot of questions regarding the environment, internal competencies, competition, consumers, assumptions, and so on. 

Sometimes, it can be difficult to find the answers to these questions.  However, at other times, the answers may be right in front of us, like that footnote in that religious book.  All we need to do is know where to look (like in the footnotes section) and there it is, staring us in the face.

One of the hardest bits of information to find can be the future strategic intent of key outside stakeholders and competitors.  It is usually in their best interest to keep that information a secret from you.  After all, if you knew their strategic intent, you could use that information against them.  They prefer the element of surprise to work in their favor, so they hide their strategic intent.

This blog will show where some of that supposedly hidden intent is actually out in plain sight, like that footnote.

THE PRINCIPLE
The principle here is that even though competitors may not want to tell you their strategic intent, they are often obligated to tell others of that intent.  For example, they may need to tell their intents to a lender or the SEC or a zoning commission.  All you need to do is look at what they tell the others and the intent can be as obvious as that footnote in the story.  We will talk about several of these places.  

1) Jobs

If a company is planning to move in a new direction, that often requires an infrastructure or skill-set not currently in the company.  It may also require a restructuring of the business (which also may apply if a company is abandoning an area).

As it turns out, these types of changes often lead to new job titles and new hires.  So if you follow what types of people are being hired and how job titles are changing, you can find out what type of work and what type of organization is being developed.  And that will tell you the direction of the strategy.

I’ve read job descriptions where the whole new strategic intent is pretty much laid out in full.  Or the job description may say that the company is planning to enter the “such-and-such” business and is looking for people with expertise in that area.  Or a press release about job promotions may explain the strategic basis behind the reorganization.   Facts they want to hide from you are broadcast to perfect strangers through job boards, press releases and other job-related material.     

So where can you find this data?  Job listing aggregation sites like indeed.com are very valuable.  Search on a company and/or a job title and you can find all the relevant job listings.  The Signal feature of Linked In (look under the header for News) and various Twitter search options can help you track early hiring searches sent out via messages like Twitter.  Just search on the word “hiring” and all sorts of interesting things show up.

And of course, you can look at a particular company’s web site.  Two places of note are useful—the career page and the press release page (to read about promotions and reorganizations).

2) 10 Ks

Public companies are obligated by governmental regulatory agencies to report on key aspects of their business.   These documents need to be filed and can typically be accessed by the public.  The key information might not be at the top in the headlines, but if you look at the interior pages and footnotes, a lot of secrets are disclosed.  In the US, the key documents filed with the SEC (like 10Ks) can be found at www.sec.gov/edgar/searchedgar/companysearch.html.

For example, no company wants to later be cited for not sufficiently explaining all the risks to their business in the business risks portion of the document.  Therefore, they tend to go overboard and overstate risks.  These overstatements can allude to business risks of future strategic intents not otherwise discussed.  A great example of using a company’s filing to discover strategic intent can be found here, where the example of Microsoft is used.

3) In-House Documents

Some companies go to great lengths to keep secrets out of documents going out to the world.  However, they can often be less diligent in documents meant for internal employees.  And guess what?  A lot of company web sites have links to internal newsletters and other such documents.  And anyone can look at them.

By the way, sometimes it is difficult to discover the internal conventions for how company emails are assigned.  However, you can often find out what these conventions are in these in-house documents.

4) Employee Rants

Employees often say more than they should, especially if they are angry.  And some of them put these thoughts on the internet.  There are lots of places where this can be found.  If you can join a particular company employee group on Linked In, you can catch some of this gossip.  Or the Yahoo company message boards in the finance section often have insider comments from employees.  Just type in the company symbol and look for its message board.  Or go to Google and type in a company name followed by the word “sucks.”  Most major firms have at least one site devoted to rantings which can usually be found this way.  Or you can search on company comments on Twitter. 

I know of one high-ranking officer in a company who lost his job because he said too much on the Yahoo message board.

The Jigsaw Puzzle

Many times, press releases, interviews and some of the other sources mentioned above will give some hints about strategy, but not provide a complete picture.  They are like a single piece of a jigsaw puzzle—interesting but not enough to understand what the whole picture is about.  However, if you collect enough of this information from a variety of sources, you can end up with handfuls of jigsaw puzzle pieces.  They may not be all the pieces to the puzzle, but enough to know what the complete picture would look like.

So consolidate your individual pieces and look at them together.

SUMMARY
Just because a company wants to keeps secrets doesn’t mean that the information cannot be found.  If you know where to look, a lot of those “secrets” are hidden in plain sight.   So look for them.

FINAL THOUGHTS
For the truly lazy, there are companies that will do the looking for you.  You really have no excuse.

Strategic Planning Analogy #462: American War-Idol

THE STORY
Imagine what would happen if military warfare shifted from the field of battle to a TV reality talent contest, like “American Idol.”  Victory would no longer depend on direct combat with the enemy.  No, the victor would be determined by how many in the TV audience vote for a particular army.

Instead of direct combat against each other, each army would perform a military exercise separately.  They would show off their talents at warfare skills. Then the TV audience would vote on which army appeared more skillful. Like on those singing talent TV shows, the singers rarely go head to head in combat.  They just sing their songs and hope the audience prefers their performance over the others.

If this were the case, then the whole idea of warfare would have to change.  Instead of focusing on the best way to physically defeat the enemy, the goal would shift to focusing on the TV audience.  Gaining votes from the viewers becomes the name of the game rather than the old measurements of territory won or lives lost.

I suppose this would cut down on the bloodshed, but it would require a radical rethinking on how to do the act of war.

THE ANALOGY
A lot of the terminology in strategic planning is borrowed from the military.  There are strategic campaigns, strategic attacks, competitive enemy assessments, and so on.  In fact, a lot of the beginnings of business strategy borrowed heavily from military thought.  Military books like “The Art of War” are often placed on the recommended lists for business leaders.

But I think we need to ask ourselves an important question.  Is the modern game of business more like the traditional military, or more like those singing talent shows on TV?  This is an important question, because the way you approach winning under these two scenarios is quite different. 

As we saw in the story, traditional warfare is about direct confrontation with a foe.  The focus is on overpowering the enemy with superior force.  On the TV talent contests, the confrontation is much more indirect.  Yes you still have to overcome a foe, but the decision is made by the audience.  In this case the focus is on wooing the audience.  The enemy is overcome by superior popularity with a third party.

In the modern world of business, the losers go bankrupt while the winners create cash flow.  And where does that cash come from?  It is not like the old traditional warfare or pirate warfare where you would conquer the enemy on the field of battle and then take their wealth as “the spoils of battle.” 

No, it is far more indirect in the business world.  You get the cash flow primarily from people buying your goods and services—your CUSTOMERS, not your enemy.  Yes, you have to convince customers to spend their money with you rather than your competition.  But that is an indirect assault on the competition.  This means that the real battlefield is not where the competition is, but where the customer’s mind is at.

Hence, victory in business today appears more like the American Idol TV show than old war battles.  You focus on trying to get the “votes” of the audience (customers vote mostly with their money in business) rather than directly vanquishing the foe. 

In fact, this trend appears to be getting even greater.  First, thanks to the social media, the customer is becoming even more powerful in determining the winners and the losers.  Second, governments are still legislating and prosecuting to protect companies from direct “anti-competitive” moves on other companies. 

So, direct confrontation is getting legislated away while the voice of the third party consumer is becoming more influential.

Therefore, if you want to get ahead in business, it may make more sense to put away those books on war and start watching more talent contests on TV.

THE PRINCIPLE
The principle here is that your strategic thinking may need to deemphasize the competitive warfare principles and embrace more of a talent show mindset.  In other words, you may need to fixate less on the competition and more on the consumer.

Too much of a fixation on beating the competition can have two major drawbacks.

1.  Too Much Focus on Improving the Status Quo Rather than Seeking Superior Consumer Solutions.

Consider the epic battle in the last century between Kodak and Fuji in the analog film business.  Each was focused on trying to beat the other.  First, a lot of effort was put into trying to have a superior film product over the other.  For a short period of time Fuji would be ahead of Kodak in quality and then Kodak would make a leap to superiority and so on.

Second, serious effort was spent trying to get superior product distribution over the other.  Finally, there was the battle over value/price.

And we all know what happened.  Customers abandoned the category and moved to digital imaging, making Fuji and Kodak both losers in imaging.  All that effort to have superiority over the rival in quality, distribution and value ended up being meaningless.  It didn’t matter who won the direct battle between Fuji and Kodak for superiority in analog film.  If the consumers stop voting for the category, the victory is very hollow.

I had a friend who worked in the US beer industry decades ago.  He would talk about the intense fixation in top management at Anheuser Busch and Miller at that time to try to destroy each other.  Each spent a fortune to try to get an edge on the other in the US market.  All the while, imports and micro-breweries were stealing the hearts of the customers.  AB and Miller were so weakened by the shift that they each had to seek shelter by selling out to larger international firms.

The point here is that the intense competitor fixation is usually placed on competitors doing pretty much the same thing in the same way in the same industry.   It is based on the current status quo and the goal is to be the best at doing what the status quo does.

The problem is that consumers shift, causing the status quo to become severely weakened or obsolete.  While you are staring at your status quo enemy, you miss the competitor of the future who is now only a blip on the horizon.  You miss thinking outside the box to find advantages that have nothing to do with superiority within the status quo competitive system.  Worse yet, you miss out on time that could have been focused on understanding the mind of the customer better (where the real voting takes place).   

Rather than building superior solutions for the consumer, you end up building superior obsolete products. Just because you beat up your enemy doesn’t mean the customer wants you.  A better version of a no longer desired solution still loses the war for votes.

2.  Missing Out on Peaceful Coexistence Options

Another important point is that you can win the hearts of the customer without having to completely destroy the competition.  Many of the losers on the American Idol TV show still went on to have successful singing careers.  Winning on the show did not mean everyone who did not win had to fail.   They could peacefully co-exist in the entertainment marketplace by appealing to different audiences.

This is very true in the business world.  If your strategic position is significantly different from another firm, you can both win by appealing to different segments.  For example, one technology firm can win in the consumer space (like Apple) where another find success in the business space (like Microsoft).   Or one brand can focus on the high-end luxury business while another focuses on the masses.

The idea is that rather than focusing on outdoing a competitor at the same thing, one can often be more profitable leaving the competitor alone and going in a different strategic direction.  In a head to head competitive battle, your advantages tend to be very temporary, because the enemy fights back to gain its own advantage.  In addition, price wars against each other wipe out the profits from any temporary advantages.

By contrast, if you ignore the enemy and go a different way, your efforts can be placed behind more dramatic and more lasting points of differentiation—because the whole strategy is based on being different rather than trying to be better at the same thing.  And with a stronger differentiation, there is less need to resort to price wars.

Strategy is about choosing the right tradeoffs—doing less of one thing so that you can do more of another.  If you choose different tradeoffs than the competition, then you sort of cease to really even be in competition any more.  So long as there is a large enough audience voting for your version of the tradeoffs, you can almost ignore that other company and just focus on being better at your point of differentiation.

If Apple had continued to try to beat Microsoft in traditional computing, it would have died a long time ago.  However, by repositioning itself in an entirely new business model, Apple could win while not having to really worry about Microsoft anymore, because they were no longer in direct competition.  Instead it had the luxury of just focusing on getting better at its point of differentiation (and make a lot of money doing so).

 

SUMMARY
Excessive focus on beating the competition can hurt your chances of success because it takes focus away from areas which can create consumers to spend more money with you.  In particular, it focuses one too much on the status quo, rather than on the superior business models of the future (which typically come from someone who is not a current competitor).  Second, money and effort is wasted on trying to outdo the competitor at the same thing rather than creating more lasting and more profitable superiority through differentiation in positioning.  Remember, the money comes from the customer, not the enemy, so focus on where the money is.

FINAL THOUGHTS
Even the military is starting to adopt more a TV talent show approach to warfare.  The turning point for the US in the war in Afghanistan came when less focus was placed on out-muscling the enemy and more focus was placed on pleasing the citizens living there.  By building roads and schools and other initiatives, the citizens started liking the US more.  As a result they gave less shelter to the enemy of the US, allowing the US to gain more victories.  If even the military is moving in this direction, shouldn’t you?

Strategic Planning Analogy #408: Poisoning the Well

THE STORY
There are lots of stories written and movies made about feuding families in rural areas. A common tactic used to attack the enemy in these stories family was “poisoning the well.” What would happen was that one family would sneak onto the other family’s property. They would then do something to the well water or reservoir of their enemy with the intent of either drying up the source of the water or making it unfit to drink. This was called poisoning the well.

This was a particularly nasty tactic, because if a farmer or rancher doesn’t have access to good water, their livelihoods are ruined. Not only is there nothing for the family to drink, but nothing to feed the cattle or water the crops. The family who was attacked in this way had few options. Often they just had to give up and move somewhere else.

What makes this tactic even scarier today is the fact that it is not that difficult for a terrorist to “poison the well” of major cities. Using modern chemistry, it wouldn’t take much for a terrorist to cause the major sources of water for huge cities to become unfit to drink. Suddenly, that old tactic takes on new significance.

THE ANALOGY
A similar situation occurs in the business world. However, instead of the well or reservoir being filled with water, it is filled with cash. Just as water is needed to keep the cattle healthy and the crops growing, cash is needed to keep the company healthy and growing. Cutting off the flow of water can ruin a farm or ranch. Similarly, cutting off the cash flow to a business can ruin it.

And just as the families in these movies and books had enemies, so do businesses. And if a company makes a strategic error, they can create a situation in which competitive forces “poison the well” of cash for a business. This can be so ruinous to a firm that the company can no longer exist.

Therefore, a key component of strategy needs to be protecting the well of cash so that it does not get poisoned.

THE PRINCIPLE
Today’s principle has to do with where the emphasis should be placed when looking at the strategic aspects of a potential acquisition. I believe that, in general, too much focus is placed on potential synergies from the acquisition (ways to boost cash) and not enough time is spent looking for the potential of the acquisition to poison the well of cash (ways to destroy cash).

As we will soon see, acquisitions can trigger competitive events which may cause a poisoning of the well. Since the purchase price in an acquisition is typically linked to the value of future cash flows, any poisoning of the well seriously diminishes the value of that acquisition (because there will be far less cash after the poisoning). It can cause you to grossly overpay for the acquisition if you do not take this into account during due diligence.

Ways in Which Acquisitions Can Poison the Well
There are many ways in which an acquisition can poison the well. For example, let’s assume you want to acquire one of your suppliers. That supplier may also be supplying your competitors (your enemies). The enemies will not want to do anything to help you, so if you buy that supplier, they may take their business with that supplier elsewhere. In other words, your ownership of that supplier can trigger competitors to take away their business and reduce the supplier’s cash flow. You have poisoned the well.

Let’s say you want to acquire your distributor. Suddenly, many of your enemies who also use that same distributor may no longer want to use them because they do not want to help a distributor owned by their enemy. Again, the cash goes down due to ownership change. You’ve poisoned your well.

Let’s say that you want to acquire a direct competitor. It may be that a lot of the customers using that competitor were doing so specifically because they did not want to give their business to you. Once you buy that competitor, it becomes a part of you. Therefore, the customers who were trying to avoid you will take their business away from the company you want to acquire. The well is poisoned.

I spoke about this concept in more detail in a prior blogs (here and here). You may want to go back and review them.

Synergies Aren’t As Great As One Thinks
Given the high potential for ruinous poisoning, you’d think that more attention would be given to it. Instead, my experience has been that the bulk of the strategic focus in acquisitions is around synergies.

Synergies are good and they should be looked for, but if we focus too long in this area, we may delude ourselves into seeing more synergies than really exist. Lots of studies have looked into why most acquisitions fail. One of the key conclusions which keeps coming up is that acquisitions rarely achieve as many synergies as one thinks prior to the deal. Apparently, much of that time focusing on synergies was focusing on illusions which will not occur. They deceive us into seeing more value than there really is.

Worse yet, all that time spent on the optimism over synergies may keep us from spending enough time on the pessimism of potential well poisoning. Too much optimism combined with not enough pessimism leads to grossly overvalued estimations of cash flow. The result is that companies pay too much for an acquisition and destroy company value.

The Google – Motorola Mobility Deal
The principle of poisoning the well can be seen in the potential acquisition of Motorola Mobility by Google. Does Google have enemies? Yes, indeed. There’s a reason why Microsoft filed a complaint with the European Commission back in April 2011, alleging that Google was engaged in illegal anti-competitive activity. There is a reason why several companies which don’t usually work well together (Apple, Microsoft, Research in Motion and Sony) combined to outbid Google for Nortel’s intellectual property back in July. They don’t like the power of Google and they want to keep Google from getting stronger.

Then comes the announcement that Google wants to acquire Motorola Mobility. As it turns out, not only does this action give Google’s enemies a chance to poison the well, it also gives Google’s “friends” an opportunity to poison the well.

For example, Microsoft is expected to use this event to tell people in the industry that they cannot trust Google and should put more of their priorities into the Microsoft/Nokia system. This can poison two wells. First, it can take sales that would have once gone to Motorola Mobility and shift them to Nokia. Second, it can make a higher percentage of phones carry the Microsoft software instead of Google’s Android system. The Microsoft system will shift more mobile advertising revenue to Microsoft (through Bing and other sources) which could really hurt Google’s cash flow.

Worse yet, this just might be enough of a boost to Microsoft to give them critical mass in the mobile marketplace, something they can build on and grow. Perhaps if Google had not announced this deal, Microsoft would have eventually given up on the mobile software due to insufficient demand. A similar situation could occur with Research in Motion, who might have eventually gone away, but now may have a chance to revive itself through the poisoning of Google’s well.

Even Google’s device partners (“friends”) in the mobile space (Samsung, LG and HTC) may now become less enamored with their partnership with Google. They may begin to think that Motorola Mobility will get preferential treatment over their own devices. As a result, they might hedge their bets by getting closer to Microsoft, shifting share away from Google’s Android.

If less of the really cool devices (from Samsung, LG, and HTC) carry Android, and if Motorola Mobility puts Android on inferior devices, then consumers may revolt and switch away from Android. Again, more poisoning of the well.

And if Android starts losing significant market share from all these poisonings, it may have less influence in getting priority for cool apps from the development community. This could start a downward spiral, as even more customers see a reason to switch to others who have cooler apps sooner.

The point here is that this type of deal can cause all sorts of negative poisoning of the well. I hope Google fully considered these ramifications when contemplating the deal.

SUMMARY
Acquisitions do more than create positive synergies. They can also trigger negative impacts on cash flow (poison the well). Since the true amount of synergies in a deal tend to be less than expected, and the poisoning of the well can be larger than expected, strategic emphasis during acquisition may need to shift from synergy to poisonings.

FINAL THOUGHTS
In the old stories, it was the enemy who poisoned the well. In business, we tend to poison our own well through poor strategic decisions. Shame on us! This is a preventable problem, because it is under our control. Make sure you consider the potential for poisoning the well whenever you contemplate a move which upsets the status quo.

Strategic Planning Analogy #322: Problems of Scale

THE STORY
The rising prosperity in China is impacting Chinese eating habits. For example, between 1982 and 2002, daily per capita consumption of grain in China dropped 21%, from 509.7 grams to 401.7 grams. At the same time, meat consumption grew 132% and vegetable cooking oil consumption grew 153 % (Source: Chinese National Bureau of Statistics).

If you consider that fact that it takes about 7 or 8 grams of grain to produce one gram of meat, the grain requirements for China are growing rapidly, even though direct grain eating is going down. According to an article in the June 24, 2008 issue of the China Daily, if the Chinese started to eat meat at the same level as in the US, the world would need to produce an additional 277 million tons of grain to grow the meat. That would require finding an additional 68 million acres of quality farm land that is not currently being farmed (about one-sixth of the farmland in the USA).

Add to that the fact that if every Chinese adult drank just one additional can of beer in a year, China would need approximately 150 million more pounds of grain. This starts adding up in a hurry.

THE ANALOGY
It doesn’t sound like much when you say that it takes about 7 kg of grain to make 1 kg or meat, or that it takes about 0.08 kg of grain to make a can of beer. However, when you multiply that against a population in the billions, small changes in meat and beer assumption can really change grain consumption.

This is what happens when you apply scale to these equations. Suddenly, little movements in behavior create large swings in demands all up and down the supply chain. The bigger the scale, the larger the swings.

Strategy is usually concerned with finding ways to change behavior—to your benefit. The equations associated with current behavior may appear innocent enough, and you might apply them to your strategy. However, if there is enough scale to your behavior change, the current equations may no longer be applicable.

For example, changes in the diet of China are affecting global food availability and global food prices. The old cost of goods assumptions are no longer applicable, since the new consumption has altered prices of all sorts of cost components throughout the entire food production pipeline. Add to this the uncertainty of biofuel consumption and the formulas may need to change again.

Your strategic actions impact the environment in which the strategy will operate, rippling out changes in many directions. You need to take that into account when assessing your strategy viability, especially if it starts to scale large.

THE PRINCIPLE
The principle here is that strategies do not operate in a vacuum. If your strategy is to create large-scale changes in demand, then all the current assumptions about how the marketplace works need to be thrown away, because your changes will impact how the marketplace works.

Here are six factors to consider when contemplating large-scale strategies.

1. Is there Capacity to Satisfy Demand?
Years ago, I talked to someone at McDonalds. They were testing a new meal item—McShrimp Cocktails. The item tested very well. Based on the current economics, it looked like it could be priced to make a profit. Then they looked at what happens when you scale this up to the entire McDonald’s chain.

As it turns out, it would have taken more than 100% of the world’s capacity of shrimp to meet annual the demand projections. So McDonald’s couldn’t meet demand, even if they wanted to. Even scaling back demand, the change to the shrimp market would have been so huge that the old cost estimates would have been invalid. Scarcities would raise the price of shrimp, making it too expensive for the McDonald’s menu. A great test of McShrimp Cocktail was made invalid once consideration was given to scaling it up.

In the early days of Starbucks, Starbucks promoted itself as being a place to get superior coffee, because it was small and could afford to be choosy about the quality of beans it purchased. Now that Starbucks is huge, it has to buy so many beans that it cannot afford to be as choosy as it once was. There are not enough “superior” beans to meet the Starbucks demand. As a result, a promotional approach was no longer valid.

There are retailers who specialize is selling manufacturer overruns and other distressed or excess goods at a deep discount. Over time, some of those retail chains have gotten so large that there is not enough excess in the marketplace to fill their stores. They have to supplement their supply by purchasing goods the normal way, just like they retailers whom they are trying to under-price. Suddenly, the strategy doesn’t work like it used to.

2. Can the Supply Chain Handle the Shift?
I was talking to someone years ago at the Mars candy company. I complained that they had changed the recipe of their Mars Bar candy bar from hazelnuts to almonds. I told him I liked the old taste better.

His response was that the original Mars bar created a large scale change in hazelnut consumption. The hazelnut supply chain was not built to handle that kind of demand. As a result, Mars found that there was not a stable, predictable way to procure the hazelnuts they needed and that the pricing was not stable. By contrast, the almond ecosystem could easily absorb the demand of the Mars bar in a predictable way, so Mars shifted from hazelnuts to almonds.

A similar situation happened with General Mills and their introduction of a buckwheat based cereal. The demand for the cereal was strong. Unfortunately, the supply chain for buckwheat was not able to satisfy the sharp rise in demand created by this cereal. The supply chain was so bad that General Mills decided to stop making the popular cereal. So much for that great buckwheat cereal strategy—foiled because the supply chain ramifications weren’t adequately considered.

This is why, when McDonalds is expanding into new territories, they start years in advance to first change the local supply chain for products like beef and potatoes. They want to make sure the supply chain can handle their large scale before putting that scale into the marketplace. A similar process occurred for the Chipotle restaurant chain. They had to delay their rapid growth strategy until they could convince farmers to rapidly expand the capacity for avocados. Otherwise, there would not have been a stable supply chain for the restaurants.

3. How will your Scale Impact Pricing?
Supply and demand impact prices. If scale radically increases demand, and supply does not keep up, prices for your raw materials will skyrocket. This will make any strategy based on the old supply and demand relationships obsolete (and perhaps make your strategy no longer valid).

To get around this, your strategy may need to consider locking in long-term supply contracts at fixed prices…or maybe consider backwards integration into owning your sources of supply in order to guarantee adequate supply at a reasonable price.

Suppliers need to worry about this as well. In the US food business, the manufacturers saw their primary customer as the supermarket. When the wholesale clubs like Costco and Sam’s Club first started, their demand was tiny when compared to the supermarkets. It was seen as incremental business. Therefore, the temptation was to set prices to the clubs based more on incremental costs rather than full costs (which were disproportionately born by the supermarkets). Of course, once the clubs achieved huge scale, that pricing plan was no longer valid.

4. How Does Scale Impact Image?
Many goods are sold on the basis of image or prestige, such as luxury goods and fashion brands. Much of the appeal is based upon their scarcity—only available to the rich and famous. Once the item is widely available to the masses, the elite customers may abandon the brand.

It can be tempting to take a prestige brand and adapt it to a large scale for the masses. At first, it will create a huge spike in demand and in profits. However, if the large scale destroys the prestige image, the brand will eventually lose its luster. It will be quickly abandoned by the elite customers. And when the masses see the elite abandoning it, they will soon follow. Therefore, the short-term boost can lead to a long term disaster.

There may be greater long-term success by not scaling up for the masses.

5. How Does Scale Impact Competitor Reaction?
If you are a small niche, the big competitors may ignore you. However, if you scale up large enough to threaten the big players, they will retaliate. They will either try to destroy demand for your product or design competing products. Either way typically leads to a price war, which will destroy your profit margin.

Always assume that the scale which comes from success will result in increased competitive retaliation (for more on that, click here). Put the economic impact of those retaliations into your strategic model to see if you can sustain the price cuts and other pressures. It may be more profitable to remain a small niche.

Also, consider in your strategy ways to increase the barriers to entry, making it harder for the eventual retaliation. One of the reasons why the iPod was so successful was the integration of hardware, software and iTunes. By attacking all three fronts with a seamless and superior business system, it was harder for anyone else to break into the market and retaliate.

6. The Additional Scale Does Not Have to Come From You
Even if you do not upset the status quo with large increases in scale, that does not mean that the status quo will remain. Others may upset the scale. Your business will be impacted by the change even if you did not create the change.

For example, China’s rapidly growing economy is impacting the global oil market. That can impact your energy costs, even if your business has nothing to do with China.

There was a road near my house in Ohio that was closed for quite a while due to the lack of a bridge. The reason? The high demand for steel in China had created a global steel shortage. The community I lived in did not want to pay a premium price to get the steel quickly. Therefore, the bridge was not built until they could get cheaper steel (by being willing to wait). If construction in China could affect my little bridge in Ohio, think of what remote activities could affect you.

Scan the environment to see where surges in scale created by others might occur that could affect your strategy. Then come up with plans to deal with these surges caused by others.

SUMMARY
Large changes in the scale of demand make the mathematics of the status quo environment obsolete. If you do not change your modeling and assumptions to account for the ways the volume will impact the ecosystem, your strategy will be flawed.

FINAL THOUGHTS
The good news is that China may be opening up a great new surge in demand. The bad news is that China may be opening up a great new surge in demand. The ratio of good news to bad news can be impacted by how your strategy adapts to this news.