There’s nothing magical about business planning. At its core, it involves thinking through who your target customers are, how your proposed venture will profitably address their needs better than the competition, how you will communicate with these customers, and where you plan to get the funds to start it all up.
It’s ironic that a word like “transparency” can have several confusing meanings, even in a business context. While transparency as a concept is often most visible in the realm of social responsibility and compliance, its real benefit is when it’s seen as a business priority.
Transparency is about information. It is about the ability of the receiver to have full access to the information he wants, not just the information the sender is willing to provide. Transparency embodies honesty and open communication because to be transparent someone must be willing to share information when it is uncomfortable to do so. Transparency is an individual being honest with himself about the actions he is taking. Transparency is also the organization being upfront and visible about the actions it takes, and whether those actions are consistent with its values. What would cause someone act contrary to his or her values? What are the influences and factors inside an organization that cause individuals to veer from actions or decisions that they do not believe are right?
In an organization where there is alignment between their Standards and their Values, there is no fear in raising or disclosing difficult issues. A value of honesty is consistent with the ability to act on one’s concerns, or ask questions. Employees and managers can safely admit mistakes and can openly deal with problems and challenges. There is true open communication. If an engineer raises a concern about product quality, for example, that person is given a chance to be heard and have the issue either resolved. The engineer may not be correct, but there is enough respect that if he or she is wrong, they are given an opportunity to learn why, and the encounter has a positive outcome.
For employees to trust in transparency, they must first feel safe: physically, financially, and emotionally. Undue pressure and fear of losing one’s job make it difficult to take the risk of admitting mistakes or weakness. Employees must feel they have a personal relationship with their leaders to the point where they would feel comfortable having a conversation that involves some risk.
As an example of the strategic importance of transparency, look at the challenges that have plagued Johnson & Johnson in recent years. The manner in which J&J handled the 1982 Tylenol crisis has always been the model of transparency; an organization acting in a manner consistent with its values. J&J immediately pulled the product from the shelves without regard to the cost or public embarrassment, and certainly with no regrets over lost profits. In repeated interviews Jim Burke said that J&J’s Credo made it easy for him and his team to know exactly what to do: J&J’s “first responsibility is to the doctors, nurses, and patients, to the mothers and all the others who use our products and services.”
In stark contrast to how Jim Burke handled the 1982 crisis, McNeil leadership under Colleen Goggins has been described as evasive and not forthcoming. Consultant to over-the-counter drug companies, Donald Riker, was quoted as saying, “At every step in this process J&J has not been transparent. Every bit of information is cagey, secretive, and micromanaged.”
Companies with cultures that are working for them and not against them are ones where transparency is seen as an internal imperative, and not a external disclosure requirement.
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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to [email protected].
Business plans appear in many different formats, depending on the audience for the plan and complexity of the business. However, most business plans address the following five topic areas in one form or another.
It’s ironic that Charlie Sheen played the character with the ethical conscience in the 1987 film “Wall Street.” Now he’s at the center of a titillating Hollywood scandal that has lessons to teach us about business ethics and the business of Hollywood.
As has been widely reported in the Los Angeles Times and elsewhere, CBS Warner Bros studio announced that TV’s most popular sitcom, “Two and a Half Men” will be suspended, and perhaps canceled, due to the public dispute between the lead star of the show, Charlie Sheen, and the show’s writer-producer, Chuck Lorre.
Television critic Mary McNamera summarized the issue this way in a column this weekend in the LA Times:
If you are the star of a hit comedy on CBS, you can keep your job in spite of accusations of: threatening your pregnant second wife; holding a knife to your third wife’s throat on Christmas Day; and indulging in cocaine-fueled weekends during which your bizarre behavior causes your female companion to fear for her life.
But say mean things about Chuck Lorre and You Are Toast.
It is difficult to feel anything but relief regarding CBS’ recent decision to officially halt production of its hit comedy “Two and a Half Men.” A crazed Charlie Sheen once again took to the radio airwaves this week, this time to denounce the show’s creator, whom the troubled actor accused of stealing from him. Within hours, CBS and Warner Bros. finally put their foot down; for once, the writer trumped the performer, perhaps because Lorre also produces two other very successful comedies on the network, “The Big Bang Theory” and “Mike and Molly.”
The impact of both Sheen’s off-screen behavior as well as his dispute with the producer has significant financial ramifications. Some estimate that the cost of canceling the show could exceed $200 million in lost licensing revenue to Warner Bros.
In most other companies that generate this much revenue, there is clarity as to standards of behavior and accountability to meet those standards, or face the consequences. The stories of numerous CEOs who have been forced to resign for engaging in far less egregious activity are proof. But Hollywood, like many professional sports franchises, have trouble deciding how to treat their stars. Does the business demand that everyone adhere to certain standards, including the stars, or does the franchise revolve around the idiosyncrasies of its stars, apologizing and rationalizing unacceptable behavior? Would the show go on with a new star? There are many examples, in Hollywood and in sports, where the business transcends the personalities, and the franchise has the ability to withstand the personality foibles of any one individual.
Two and a Half Men is a major business. Clarity as to its values and standards would help guide its stakeholders to know how to best protect the value of the franchise for the long-run.
While many entrepreneurs tend to think first of selling products or services to consumers, far larger markets exist in selling to other companies. Those sales, known as business to business, or B2B, roughly account for ten times the sales directly to consumers. So if you are undecided about what kind of business to launch, and are looking for larger, more consistent markets for selling your products, consider business to business. Continue reading “Plans for Business-to-Business Ventures”
If you are interested in the theories of business strategy covered in the blog post below, you may want to read Henry Mintzberg’s excellent book, Strategy Safari: A Guided Tour through the Wilds of Strategic Management. For example, Mintzberg and his co-authors provide a more lucent (and compact!) description of Michael Porter’s Five Forces Model than does Porter himself!
The demise of the cozy and friendly book store was well told in the Meg Ryan/Tom Hanks classic, You’ve Got Mail. Tom Hanks shows up in character as Joe Fox, and his Fox Books mega-store pounds the quaint little store owned by Kathleen Kelly (Ryan) out of business. Even as the movie graced screens in 1998, we watched the real life rise of twin titans Borders and Barnes & Noble as they dominated the book seller scene, crushed the small business booksellers, and absorbed the struggling mall vendors Waldenbooks and B. Dalton (remember them?) .
Don’t you remember places like Ryan’s Little Shop on the Corner, where you could talk to someone who knew every book and would happily fill your order within the week? We got our answers and stole away to find the book we needed cheaper– and in-stock– at Borders, B&N, or — just as likely — at Wal-Mart.
But as Ryan’s shop keeper might say, what goes around comes around. Just this week, Mike Edwards, the President of Borders announced that the company would enter Chapter 11 Bankruptcy. Battered by poor sales, continuing financial losses and heavy debt, the company will close about 200 of its 642 remaining stores and lay off about 6,000 of its 19,000 workers.
At its peak in 2003, Borders operated 1,249 stores under the Borders and Waldenbooks names, but now it will soon prune itself down to a third of that number. Its annual revenue has fallen by about $1 billion since 2006, the last year it reported a profit.
“You’re at war,” Hanks told Ryan. “’It’s not personal, it’s business. It’s not personal it’s business.’ Recite that to yourself every time you feel you’re losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death.”
This week, Borders announced it was losing the war. Citing reduced customer spending and a lack of liquidity, Edwards says the company “does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term.”
Strategic Thinking
Let’s turn to Michael Porter’s Five Forces model to understand betwixt which rocks and hard places Borders now finds itself. Porter recently wrote that “ In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. “ In addition to the competitive forces evident in today’s competitive landscape, Porter stresses the importance of the additional four “forces,” as shown in the graphic below.
Barnes & Noble entered the on-line sales in time to play second banana to Amazon. Borders didn’t open an online store until 2008. Too little too late. Big-box bookstores have struggled, as more people buy books online, in electronic form, or at grocery stores or discounters such as Wal-Mart
Substitutes: In Porter’s Five Forces model, substitutes are thought of as challenges from other industries. In this case, there are a remarkable number of industries beginning to infringe on the turf of the bookseller. Amazon and the internet, sure, but what about the telephone industry, for goodness sakes? You can read books on your smart phone now! And why wouldn’t Starbucks begin to feature content for readers next to the featured CDs they already offer. Why, they could hand you a classic book on a thumb-drive you can start reading before your latte is finished.
Buyers: Clearly, consumer habits are changing, our culture irreversibly affected by innovations in technology. Next time you fly, walk up and down the airplane aisle and look to see what people are doing. I see 20% watching movies on laptops, 15% listening to music on their iPhones, 30% reading a book or magazine, and as of today, a full 35% are reading their Kindles, iPads and Nooks. (Yes, these statistics are entirely made up by the blogger, but the point of my story is nonetheless true.) Suffice it to say, consumer habits are changing, and changing fast.
New Entrants: Here in the second decade of the 21st century, internet services and electronic book readers are hardly new entrants. Best guess for the future, look to the Apple iPad. Once upon a time, a company called Wang enjoyed modest success selling dedicated word processing machines, until consumers realized they could do the same tasks – and so much more – on personal computers. The makers of Kindle and Nook know this, but as they work to add functionality to their machines, look for the iPad and other tablet computers – not to mention our smart phones – to take market share from the dedicated reading tools.
Suppliers: Some publishers have already stopped shipping books to Borders altogether. But of Porter’s five competitive forces, the supplier base has the least impact on current market dynamics. The relevant suppliers are the book publishers, authors, artists and other content providers. Traditional publishers stand to lose along with Borders, and continue to fall into the black hole already populated by the uh, record companies (remember them?)
Back to the Little Shop on the Corner
You May Not Be Interested in Strategy… But Strategy Is Interested in You… Leon Trotsky
So as we see, the game of strategy is being played around us all the time and we are all actors in the play. As Trotsky said, we may not be interested in strategy, but strategy is interested in us, and will continue to affect our everyday lives. We can learn from this war over book-selling and apply insights to our own businesses and other endeavors.
Whatever business you are in, the winds of change are blowing your way too. What to do?
Suggested Reading:
Strategy Safari: A Guided Tour through the Wilds of Strategic Management.
Click on the Image of the book for further information provided by Amazon.
(Guest post from Michael Zipursky.)
Lack of focus.
That’s one of the biggest mistakes you can make as a consultant. It doesn’t matter what industry you’re in, whether you’re a marketing, management, or public relations consultant (or any other type of consultant for that matter). The client of today has almost infinite possibilities to choose from when it comes to selecting a service provider to help them. And if you fail to give them an overwhelming reason to do business with you, they simply won’t.
Today, at the click of a mouse, a potential customer can leave you and your business in the dust as they scoot off to find someone that does a better job of catching their interest and engaging them. So how can you stand out in such a crowded consulting marketplace? Let me introduce you to the Unique Selling Proposition – widely known as the USP – and how your business can benefit from it.
A USP is a memorable statement about your product or service that gives your customers a compelling reason to buy from you. There are two components to the USP.
When every business in your industry is saying the same thing: “High quality” “Customer satisfaction” and all that other hoopla… the best way to differentiate your business is by making your difference stand out.
Let’s take a look at one of the most memorable USPs around: “When your package absolutely, positively has to get there overnight.” That one statement from FedEx, repeated all through its marketing and advertising, over time propelled them to the top of their industry.
Let’s take a look at another one: “Fresh, hot pizza delivered to your door in 30 minutes or less.” Dominoes dared to be the first to make a bold promise to the consumer about delivering pizza right to their door and getting it there in a timely manner.
The key to a winning USP is to make sure that you not only state what is unique about your product, but also how it benefits your customers. To create a USP for your consulting business take a look at your competitors and try to find gaps of unfilled customer needs around things like the guarantee offered, speed of service, superior quality, and better prices to name a few. Don’t just use those words as jargon though, figure out what your customers want that no one else is offering or talking about, and then craft your USP in easy to understand language so that it speaks directly to your customers.
The next step is getting the word out. Include your USP in all of your marketing materials, advertisements, signs and other communications. Remember, your potential customers aren’t looking for more options. They’re looking for the right one. Stand up, stand out and you’ll be well on your way to attracting more business.
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Michael Zipursky is a marketing consultant and co-founder of Business Consulting Buzz – a site that features articles, interviews, tips and more to help you set your consulting fees and become a more successful consultant.
Imagine that you could dump all the words of a million books from the past 500 years into a giant database, and look to see how various words have waxed and waned in usage over the centuries. You could look and see when archaic words like thou and yon disappeared from popular usage. You could identify the year the word internet first appeared, and when people started saying garbage instead of rubbish.
Oh… You can do that now?! Yes, the Google Monolith has indeed scanned more than a million books into a searchable soup, and we can now play with this facility using something called the Google Books Ngram Viewer. Let’s put the thing to work and examine our favorite topic: Strategic Planning. In the graph below, we can see the degree of usage of the words planning (in red) and strategy (in blue) since 1860.
Strategic planning is an oxymoron. Strategic thinking does not lead to a plan, it leads to a strategy. Rather, planning must follow strategy. If you don’t want to call it operational planning, call it “Planning that Follows Strategy.”
Henry Mintzberg, The Rise and Fall of Strategic Planning
Mintzberg argues that organizational strategy is often “emergent.” That is, answers to strategic questions do not arrive like the result at the bottom of a math equation. Rather, strategy emerges and changes as the strategist observes the world and reflects upon the dynamics of the competitive environment. Of course, there is debate among experts as to what exactly constitutes strategic thinking. Michael Porter, perhaps the most widely cited expert on organizational strategy, says that “strategic thinking rarely occurs spontaneously.” As if to prove his point, Porter provides a dry, methodological approach to the quest for competitive advantage and organizational strategy. Porter provides a set of strategic analysis tools that are serious and rational enough to make any Taylorist or Behaviorist proud. And granted, I have often found Porter’s framework and methodology useful in understanding the competitive dynamics of an industry.
But a quick study of the History of Strategy provides a blinding flash of the obvious: Successful strategy-making is most often an “emergent” process. Employing the emergent approach, the strategist maintains an open mind as to the future direction of the organization, and seizes the moment when opportunity matches organizational capability. In the end, strategy-making must be thought of as a creative process, as rich in spontaneity and magic as any other art. To apply these notions to our own decision-making , remember that strategic thinking is a yin and yang of left and right brain thinking. To engage in strategic thought, think and reflect on the big picture – the diverse players and forces in your environment. Think about the future. Use your left brain’s capacity to generate rational questions and answers. Use your right brain for intuition and wisdom.
Since every business has competitors, every business plan needs competitive analysis — also known as competitive intelligence.
Direct competitors provide more or less similar products or services, such as coffee shops. Indirect or generic competitors provide different things, but customers will often choose between them. For example, nearby restaurants may offer different eating options, but compete for customers. Shall we do Chinese or Mexican tonight? Incidentally, another form of competition is for customers to opt out entirely. Shall we eat pizza at home tonight?
Here’s how to do competitive analysis:
Find out from potential customers how they currently get their needs met. What products or services do they already consume that your offerings might be better, cheaper, more convenient? Figure out the 3-5 “best” competitive choices for your target customers, and study them intensively.
Visit in person or online, shop anonymously, read up about them in the trade and popular press, talk to industry experts. Try to get a solid but objective handle on each firm’s strengths and weaknesses, particularly relative to your customers’ preferences. Determine the key success factors for this industry.
Next, write a brief profile of each major competitor, summarizing information such as products, markets, facilities, pricing, marketing strategies, and finances. Carefully assess how each competitor might or might not pose a competitive challenge to your firm, and what you would do to overcome that threat.
Finally, prepare a table or spreadsheet to summarize your findings. On the left side of the table, list the most important success factors — such as product reliability, customer service, capital investment, distribution channels, pricing, and so on. In the next column, weight each success factor so that the total adds up to 1.0. Then, in the remaining columns, list each of the major competitors. Working across the table, rank from one to five each competitor on each of the success factors, then insert a column to weight your rankings, which is obtained by multiplying the ranking by the weighting. At the bottom, add up the weighted values to create an overall assessment of which competitors represent the most serious challenges to your company.
Use this competitive analysis to help you decide how to position your business to compete (or cooperate) most effectively with your primary competitors. It’s not that hard if you follow these steps, or you can bring in a consultant to do this as part of your business planning process. More information at: https://staging.management.org/mrktng/cmpetitr/cmpetitr.htm
Good luck!
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For more resources, see our Library topic Business Planning.
Today’s Wall Street Journal reported the story of the progress BP is making in re-characterizing its culture in the aftermath of the April 2010 Gulf Oil Spill.
According to the Journal, new CEO Bob Dudley has created a new global safety division at BP, a company that also suffered a 15-fatality refinery explosion in Texas five years before the lethal Gulf accident. He has given the division power to intervene in or shut down any operation seen as too hazardous.
The safety issue goes to the heart of BP’s corporate culture, say some critics, who contend that compared with its Big Oil rivals, the company has historically been focused more on deal-making and less on safety and operational excellence. “Other companies were less aggressive on growth and more focused on their safety-management systems,” says John Hofmeister, a former president of Shell Oil Co. “Changing the culture is hard.”
BP is under tremendous pressure to make changes. Reorganization may look good on reports to government regulators, but strategic plans won’t succeed if there aren’t changes in the field. And those changes often involve the way in which individuals are treated, and given incentives.
The Journal reported that Phil Dziubinski became BP’s ethics and compliance leader for Alaska operations in mid-2006, shortly after the company suffered a 4,000-barrel oil spill on the North Slope. That happened a year after the refinery explosion in Texas City, Texas, an accident that led a federal agency called the Chemical Safety Board to suggest BP managers didn’t listen enough to what workers were telling them.
“Reporting bad news was not encouraged,” the report said, “and often Texas City managers did not effectively investigate incidents or take appropriate corrective action.”
Phil earned a reputation as a bulldog, staying after organizational leaders that lagged in implementing safety fixes in Alaska operations.
At a meeting in March 2007, Mr. Dziubinski disagreed with a supervisor’s assessment that the company was on track to fix all safety issues. Mr. Dziubinski said that several problems flagged by workers in the past still hadn’t been addressed, and that BP was taking too long to deal with workers’ current concerns.
“We tend not to listen to the workers,” Mr. Dziubinski said, according to notes of the meeting taken by union leader, Marc Kovac, who was there.
Dziubinski raised tough issues, such as how excessive overtime was linked to safety violations because the sheer exhaustion of employees working repeated 16+ hour shifts. As reported in the Journal, after repeated efforts to raise these issues, Dziubinski’s responsibilities were assigned to others and eventually he was laid off as part of a reorganization in Alaska operations.
Listening is hard. But any serious effort to change the culture of an organization as large as BP’s must start from the ground up. Developing new safety policies is one thing. But real change won’t happen until the organization demands that managers listen to those in field that are living the issues that need to be addressed.
