Truth and trust, the watchwords of leadership. If you didn’t see this on LinkedIn this week, it is worth your time. Welch is spot on! (And a complete revolutionary “quietly” working to upend the education biz.)

 

Charles Murray makes an interesting case on how we might break the back of the regulatory state. His concluding remarks are especially poignant. Grab a coffee and put in the buds. And I say, bring on the Madison Fund!

Cato

 

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I listened to an excellent talk yesterday from my friend Clay Phillips. He was giving a brief overview of Lean Startup methodology and how intelligence can play a critical role in the Lean Startup process. His central point was that intelligence is all about understanding unknowns, and Lean Startup is about converting unknowns to evidence, decisions and market moves.

It also got me thinking about our theme of bad strategic advice.

When I talk to small businesses and budding entrepreneurs I often talk about the two great sources of new business ideas: The really different and the merely different.

The really different, as we discussed earlier in the series, is the cool, new-to-the-world thing that completely alters how customers or consumers solve a particular problem or address a need. The merely different is the better thing … the product or service that substantially improves how customers or consumers currently solve a problem or satisfy a need.

Which causes me to reflect on that often cited but rarely questioned concept of “first mover advantage.” Is there really such a thing? Do first movers really capture the lion’s share of value? Or do they often end up in the mouth of an orca, not unlike the proverbial first diving penguin?

Consider the recent rise and fall of Meerkat, the apparent first mover in “live video syndication” applications, to second comer, Periscope. I won’t pretend to understand the business model or appeal of the product, but it does seem that the second guy got the concept right.

This happens a lot more than “experts” want to admit. A quick look at the top companies in the world shows a bunch of “second movers,” perhaps the most famous being Apple.

Apple was arguably first in creating the standard Personal Computer experience (thanks to a certain fellow named Gates), but not first in the concept of personal computers. They were second to music and phones … and maybe one-millioneth to time pieces. Their success has been to make the products and experiences substantially better within the conceptual confines laid out by the largely forgotten “first movers.”

Google, Facebook, Wal-Mart … fill-in-the-blank … there are a lot of exceptional second movers out there.

This doesn’t mean that “first movers” don’t often rake it in. But the risks of going first can be substantial. And the supposed “advantages” of going first can become an achilles’ heel. All the research, marketing, supply chain, customer development, branding, etc., the “first mover” invests in, “second movers” can easily draft on while they concentrate on showing off how they are better. The first mover builds the house, the second mover lives in it.

Getting back to Clay Phillips’ talk. So much of the Lean Startup methodology is about getting ideas off the drafting table and into test so that “real evidence” of market and customer viability can be ascertained.

So what’s the best evidence out there? Current products and services. Often, the “first movers.” Robust innovation approaches with rapid learning models and rapid-fire prototyping and testing may mean that greater advantage starts to accrue to second movers.

Either way, we should never buy into “first mover advantage” as a fundamental truth. There’s more to it. Go first and build an empire? Or go second and replace an empire? Both may be valid approaches.

What do you think?

Watch this, it is worth every second!

The key point:  Just because you can afford to pay 30-300% more money to support your food philosophy, does that give you the right to condemn those who can’t?

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The news surrounding the merger of storied food companies Kraft and Heinz by buyout firm 3G Capital Partners garnered 3 separate Wall Street Journal articles last Thursday. Much of the flutter involved the supposed Draconian cost cutting associated with 3G’s insistence on “Zero Based Budgeting.”

It might surprise you that I think Zero Based Budgeting is actually a pretty smart thing. It won’t fix what ails these historic brands, but it is a much better approach to cost control than bench-marking or financial target derived restructurings that are the more common practice.

The reason the Zero Based approach makes more sense is that it is internally derived by those accountable to achieve results. Managers make their budgets, justify them, and then have to live by them. That’s called ownership. And it’s much better culturally than being hacked from above.

For up-and-coming managers and executives, the Zero Based internal justification process requires two very important things: 1) That they understand their business at a “cause and effect” level of detail that will make them smarter, more engaged and stronger advocates for their organizations; 2) That they take risks and decide what is really important. They have to put their money where their mouth is.

DifferentionRadar

Last week, we decried that hollow bit of strategic advice, “differentiate.”  So obvious as to be trite, so natural as to be assumed.

But for all its obviousness, differentiation is essential … and difficult.

Unfortunately, too many of us in the strategy world argue stridently about what is meaningful and “strategic” differentiation. It’s a wasteful argument and deters organizations from the hard work of building meaningfully different and hard-to-copy franchises.

As I said last week, differentiation has to happen on at least three different levels: Territorial, Economic and Propositional.

Territorial Differentiation

The territorial level is the highest and most classic differentiation and involves two critical questions. To paraphrase the Monitor or Michael Porter “Choice Structuring” approach: Where are we going to got to market? And how are we going to convince customers to buy our stuff instead of the other guy’s? (See Roger Martin’s and AG Lafley’s book.)  How you answer these questions are termed “positioning” choices. (The “Blue Ocean” types are essentially talking these same choices, suggesting the key is to make territorial choices that “hit ‘em where they ain’t.”)

The territorial choices you make imply equally specific options you will NOT pursue:

“We are going to sell in urban centers through distributors; We are NOT going to sell in rural areas through mass merchants. We are going to sell to Fortune 1000 firms; We are NOT going to sell to mid size manufacturers. We are going to sell on price; We are NOT going to sell on quality.”

The problem, of course, is that the number and value of “positioning choices” diminish as the business grows. The bigger you get, the fewer there are. An entrepreneur can be very precise about customer selection. But a large multi-national that already owns big market share positions, can’t make many “different” choices. Their oceans are red indeed!

To be fair, classical Choice Structuring does try to concentrate on the “customer value” element … how you position yourself to “win”.  But the process tends to simplify the process of designing a competitively meaningful business model, let alone digging down to the work required to ensure the firm’s products and services are distinguishable from others.

Business Model Differentiation

Business model differentiation … what I also term “economic” differentiation … is the one we see so often in high tech but tends to get short shrift in more traditional venues. Many traditionalists will say that “strategy” and “business model” are different things.  But dismissing the strategic elements of business model design, or trying to narrow the work to very specific transactional choices (i.e., your price position, or whether to outsource certain functions, etc.) cuts off some of your best opportunities to create real competitive advantage.

Business model design (or redesign) is really an essential element of a strategy.

The core idea is to put under the microscope the way customers transact with suppliers … of re-engineering how profit develops. Adrian Slywotzky wrote a lot about how business models capture value in the ’90’s. The Profit Zone should be required reading.

High tech has been all about changing the way money moves. Typically, they have used digitization to disaggregate value chains. Amazon removes the bookstore, the inventory, the marketing, and the cost of intermediaries. Uber crashes the licensed taxi monopoly. Ebay creates a virtual but liquid marketplace and, in so doing, eliminates seller’s opportunity costs.

Large, incumbent firms can dance too! I just did a war game where the large multi-national client sold each of its equipment lines as stand alone franchises, marked by a quality and performance story backed up by high reputation selling. The client was starting to have real problems with one specific competitor.

That competitor, also a large multi-national, was beating my client by portfolio selling:  Cracking accounts with “loss leaders” and sample kits and steadily adding more profitable and specialized items. In addition, the competitor was changing contract terms and metrics in ways that changed how customers perceived and measured value.

Purists might argue these are just different selling tactics. But the competitor’s approach is comprehensive, sophisticated and changing customer behavior. The competitor is capturing value is a different way, on a different time-line, and making bank on the bet that my client would find changing its ways too costly to effectively counter them.

The competitor’s choices are the essence of strategic!

Proposition Differentiation

The third level of strategic differentiation is propositional. How is the specific product or service different?

The battle lines on propositional differentiation are sharp. Tech minds and innovation pundits see it as essential and elemental. On the other hand, strategy mavens will often say it is not enough. Too few inventions and technologies have the power to sustain competitive advantage. They can be readily copied or mitigated.

(Funny how the naysayers don’t see the disconnect in their argument. Product and service innovations that force efforts to match or overcome … that drive change … sound entirely strategic to me!)

Product and service differentiation is complex and can be fleeting. But it is how most businesses come into existence. The problem -and a very strategic one- is how to keep it going. This problem drives entrepreneurs while it constantly trips up and diminishes the innovation capability of large firms (see Innovator’s Dilemma).

No amount of high level “fixing” can overcome the dilemma. Firms cannot do “one and done” on their “better than” proposition. They have to work out lines of innovation. Once they establish their “better” product or service, they have to start mapping out the next iterations and improvements. Then they have to marry these innovation lines to their business model and territorial decisions.

Some times the higher level choices are about protecting and extending the value created by propositional elements. Keeping competition out.

Other times they are about enabling and exploiting propositional elements. Taking on competition.

Bottom line, the greatest business strategies happen when firms differentiate on all levels: They differentiate in terms of the territory they stake out. They are different in how they capture value. And then they ensure the nature of their product or service causes customers to say “wow.”

 

Several weeks back I posted on the wisdom of retired Marine Corps General James Mattis. Here he his on Uncommon Knowledge. Every minute is worth your time. What a blessing to know such men serve and protect us!

How do you overcome today’s short and taxed attention spans? Everyone talks. Few listen. Fewer understand.

Well, if you happen to be in the vicinity of Columbus, Ohio on April 9th, I’ve got a sure bet for you! An engaging seminar on “personal branding” given by my friend Becky Okamoto, a former operations executive at Procter & Gamble and proprietor of Evoke.pro.

Becky will be teaching how to explain what you do and the value you bring in a more concise and compelling way.

We work in an instant gratification, multi-tasking, attention-deficit environment. Some days it feels like we only have 140 characters to connect before our audience moves on. Simple, clear communication is a competitive advantage for every professional. And it starts with being able to express what you can do for your audience.

This is especially true for those of us trying to relay intelligence and strategic insight to key decision makers.

Everyone’s heard of the “elevator speech” but few know how to craft it and deliver it.  In this interactive, hands-on event, Becky will show you.  In a world where we typically get one shot to make that first impression, Becky will give you practical advice and know-how to get noticed and make a big impact.  You won’t want to miss this session!

This is a SCIP SW Ohio event, but you don’t have to register online. You can simply click here and let me know directly. Cost is $15 for SCIP members  and $25 for non-members which includes a boxed lunch.  Schedule is below:

Date: Thursday, April 9, 2015  LOCATION HAS CHANGED!
Battelle Memorial Institute | 505 King Avenue, Columbus | Conference Room A

Agenda:

  • 11:15am-11:30am
    Arrive / Registration / Networking / Boxed Lunch Service
  • 11:30am-1:00 pm
    Program & Hands-on Exercise
  • 1:00pm-1:30pm
    Optional Networking

 

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Rebecca Okamoto
In 6 words, “Committing my voice to those without.” Rebecca is the editor of Evoke.pro. and principal of Evoke Strategy Group LLC, She has over 20 year’s experience as a supply chain leader and manager at The Procter and Gamble Corporation, most recently as director of Supply Logistics for P&G’s Salon Professional Division in North America and Latin America. Rebecca was P&G’s first Asian American woman at the Associate Director Level in the Product Supply function.

In addition to supply chain expertise, Rebecca is a recognized expert in the field of brand protection including anti-diversion, anti-counterfeiting, and copyright/trademark protection. Since retiring from P&G in 2014, Becky has been helping craft supply chain solutions that help firms make more money!

After a couple of weeks off from blogging it’s time to get back to our theme of bad strategic advice.

We started this discussion talking about the perils of the famous advice “focus”. We then explored the wisdom (or lack thereof) of avoiding price based competition. Now let’s take on that all-purpose bromide:  Differentiate.

You are not alone if you have grown impatient with that most quintessential of all strategic advice: “you have to differentiate.” Well, of course, don’t we all?

There’s even a book out there with the title, Differentiate or Die. I can’t comment on the book since I haven’t read it. But isn’t the insight damn obvious?

Every business is born “different.” Either it brings to market a new and innovative way to get at something … the really different. Or it provides a better, cheaper, smarter alternative to those currently in the market … the merely different.

The trick … the real conundrum … is how to differentiate. Too often those of us in the strategy making business commit malpractice because we leave this really hard question as follow-up. The client audience says: “Ah yes, differentiate.  Brilliant!” The consultant says: “Okay, go figure it out.” The most important work is consigned to a flip chart or post-it note.

Strategic change … the surfacing of options and pathways to being profitably different … is too important to allow this.

Experience and process flowcharts simply aren’t enough. You have to dig and discover. You have to be willing to tear the scabs off current assumptions and beliefs. And you have to be ready for the heavy organizational lifting of moving people and assets into place to take on the new direction.

Entrepreneurs do this as easily a little children learn to play. Established businesses with their many cultural, organizational and reward system hang-ups have a tougher time. They are chock-full of “yes, but’s”. Which is probably why high priced strategy consultants throw the challenge back in their face, take their fee, and go home.

Business teams or executive leaders think they can get away with investing a day converging on goals and aspirations or brainstorming new market moves. The real question is how many days, weeks or months are you willing to explore, study and test acts of real difference?

Differentiation can and probably needs to happen on at least three different levels: Territorial, Economic and Propositional. Working on one level, say a specific segment of customers or a unique method of financing a transaction, simply doesn’t get most firms far enough to make hay out of change.

Sadly, the various schools of strategy tend to emphasize one type of differentiation, not all three. The Michael Porter view tends toward the territorial. Technical or innovation views tend to emphasize the propositional. Investors and incubators cue on the economic. Some will also argue that it depends on the life stage of the organization, that a General Motors can do one kind of strategy while a Silicon Valley Start-Up does another.

Well, it may be harder and more involved, but great companies do all three. They utilize what we call Differentiation Radar and understand that being purposely and intelligently different on several levels is the key to their long term success:

DifferentionRadar

A certified member of the Greatest Generation passed away last week. My dad typified the kind of gentleman who made the world we live in worthwhile. My brother’s obituary of him gives you a great sense of the man.

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As business people, there are some important lessons from my father we could all benefit from. They may sound simple or sentimental but they are incredibly hard to live up to:

Don’t just say it, do it! Whatever it is, do the work. Work comes before play. And no matter how daunting or unpleasant, work is a source of both pleasure and enlightenment. A job well done stays with you and makes you a better and more interesting person.

Everyone you meet deserves respect and dignity. They have a story to tell and you might benefit from hearing it, so listen and give them the space and the ground to tell it as an equal human being.

Follow-up on your commitments. People deserve that from you and you will be rewarded in multiple ways for being good to your word.

Know what you’re talking about. Or listen to those who do. While my dad loved ideas and marveled at innovation and creativity, he was insistent on knowing the facts and understanding the argument. In his line of work -investments- he never accepted the press release or the punditry. He ran the numbers and reached out to those who could help him understand the details of a particular business or investment offering.

Don’t complain or draw undue attention to yourself. You can’t do anything about the water that has passed under the bridge. Focus instead on what you can do going forward. For my dad, optimism was your best head light AND tail light.

Be on time! Being on time is the simplest commitment you make, so punctuality should be easy. Plus, you can’t take on the world if you miss the bus.

Good manners are essential and they are only good if they come from the heart! My father had simply impeccable manners. They were natural. They came from inside because he always considered the dignity and interests of others. His chivalry was no game or ploy, it was simply the right thing to do … because men and women of all ranks deserved it.

Friendships are about your friends. Be a friend, no matter the circumstances. My father built wonderful enduring relationships because he never asked anything of friends but simply to be themselves. As a result, he kept an enormous correspondence and never failed to call or visit. He had friends all over the world. Nearly every family vacation was punctuated by hour or two visits with acquaintances he’d developed from childhood, college, the military, and through his professional life. It might be a rancher in Wyoming, or an aging bank secretary living in a trailer in Oregon, or his WWII bombardier in Pennsylvania who had fallen on rough times. It didn’t matter the person or the station, my dad never failed to reach out.

Bottom line, we could use a lot more Pres Brooks’s in our world! He lived a beautiful and meaningful life and we will miss him.