5 min. read

Management Fads of the 21st Century.  #3. Digital Everything

“Digital usually refers to something using digits, particularly binary digits.” A digital strategy is “often characterized by the application of new technologies to existing business activity and/or a focus on the enabling of new digital capabilities to their business.” 

All we seem to read at the moment (apart from Bitcoin, oh, and AI and Brexit and what happened to 3D Printing?) is about Digital presence, Digital plans, Digital strategy,  Digital champions,  Digital culture,  Digital divide,  Digital economy,  Digital world,  Digital future,  Digital risk,  Digital marketplace,  Digital citizens, and the list goes on – and on. A veritable Digital revolution… But is it really?

A cynic might comment that everyone wants to be on the latest bandwagon, especially if there is money to be made, and only until the next bandwagon heaves into view. Looking underneath the frenetic activity I wonder if the cynics might have a point.

Your company needs to understand these changing times and prepare to re-position yourself in the future, OK, but these ‘changing times’ are complex, interesting and suggest the type of transition the world only sees once every 60 years or so (more about the Kondratieff or Long Waves in a later blog) as can be seen in the diagram.

If the trend analysis is to believed we are living with the outputs of the 5th wave, IT and Communications, which, of course means ‘Digital’.  Looking more into the idea of a communications ‘revolution’, we can find the work of Elin Whitney-Smith (2011), who says that the ‘digital age’ is just the last in a long line of Information Revolutions that the human race has experienced over the years. Note the word ‘Information’ in the title; she suggests the following:

  1. Among hunter–gatherers just before the invention of agriculture;
  2. The rise of counting and written language;
  3. The fall of Rome;
  4. The invention of the printing press;
  5. The electric information revolution that accompanied trains, telegraph, and telephone;
  6. The digital information revolution that we are now living through.

Looking at this list, it seems to me that we have focused on the word ‘digital’, at the expense of the word ‘information’.  Everywhere I look people are falling over themselves to create the biggest, smartest, cleverest channel ever invented – but I don’t hear much about the message that is being pumped down the channel, or whether/how it is being received by its target audience. Maybe one measure of this success is the almost 40% of people who use ‘ad blocking’ software to deal with what has become known as spam. Let us remember that the name of the game is not send lots of messages but getting them received in such a way that they create the desired behaviour.

The Interactive Advertising Bureau (IAB) have been surprisingly open in their assessment “We messed up, as technologists, tasked with delivering content and services to users, we lost track of the user experience… The fast, scalable systems of targeting users with ever-heftier advertisements have slowed down the public internet and drained more than a few batteries. We were so clever and so good at it that we over-engineered the capabilities of the plumbing laid down by, well, ourselves. This steamrolled the users, depleted their devices, and tried their patience”

Despite research regularly saying that, apart from branded websites, customers prefer to see advertising on customer reviews, newspapers TV and magazines than digital ads online or, least of all, mobile; the advice is to do more digital. A triumph of hope over experience I wonder, or a case of Emperor’s new clothes?

But I am not one to get embroiled in tactics. Look again at the diagram above and you will notice that the ‘Great Recession’ of 2008 (we absolutely must never use the word depression) brought the 5th wave, driven by ITC, to a crashing end. If past experience is anything to go by then the 6th wave is in its infancy now and should be taking off during the next ten years. Unfortunately nobody knows what will drive the 6th wave. There are many opinions but all are driven by how we see the world now. Few would have believed that a few geeks working out of their garages in the 1970’s could have changed the world so much.

The big money has already been made on the 5th, ITC wave and you can name the billionaires as well as I can – all that is left now are the crumbs from the table which everybody is trying to hoover up.

Everything-is-Digital is a dangerous obsession that distracts us from the future.  Everything was land until the industrial revolution, everything was steam until the internal combustion engine and everything will be digital until the 6th wave starts.

By all means ‘go digital’, but not at the expense of the information you are trying to communicate and not at the expense of missing the 6th wave – which is coming your way soon.

In the meantime, as Tom Goodwin, in his excellent article (see references) says “Dream don’t engineer, don’t look back on the past, work around the unmet needs and unstated dreams of customers in the modern age. And yes, of course that includes a mobile website.”

References:

Tom Goodwin: https://www.weforum.org/agenda/2017/04/forget-about-digital-strategy-your-company-doesnt-need-it

Elin Whitney-Smith: http://information-revolutions.com/overview-of-the-six-parts/

 

 

2 min. read

Get if off your chest!- #1. Thinking

There is no expedient to which a man will not go to avoid the labor of thinking”  Thomas A. Edison (1847 – 1931)

A colleague of mine has a student evaluation form framed on his office wall, from an MBA student we jointly taught a few years ago.  It marks us a very low 2/5.  The comment accompanying this scathing mark is the Professors made me think for myself, it was far too hard and not the reason I joined the MBA programme”.

Why is thinking for ourselves so difficult?

There are so many reasons that have been suggested that we really don’t know where it start. The dominant Western education system comes in for most flak, as a “system designed to rapidly equip the common person with the sort of skills they would need to competently work in factories or farms back in the 1800s”, and university is described as a “clone factory”.

Certainly culture plays a huge part, even the Western, supposedly ‘Individualist’ culture, tribe membership comes with costs attached; it pays not to criticise the leaders and not to annoy your peers. It can even be a survival strategy when living among ‘abusers’ – Uber springs to mind although I have seen others. Extroverts tend to do better than Introverts in the corporate world because they are more likely to actively court approval from peers.

The dilemma is that, research suggests that Introverts are more likely to think for themselves. Group think explained. Fit in, or stand out….

More generally, people may simply lack the motivation or have the ability/skills. The fact is that the daily toil most people have for a life simply does not require them to think.

Worryingly, according to Sofo Archon, people are simply afraid to think for themselves.  Why?

  1. Thinking brings change.
  2. Thinking brings doubt.
  3. Thinking brings responsibility.

Why is thinking for ourselves so important?

With robots and AI approaching it might be reasonable to suggest that the ability to think for oneself may be the only ability any of us needs to master in our lifetimes.  Certainly it is the source from which all future invention, advancement, prosperity, knowledge, and wisdom are likely to flow. Why is it critical?

  1. Thinking brings change – The business environment is already changing faster than most managers can deal with – inevitably they fall behind. History is littered with companies that simply failed to change.
  2. Thinking brings doubt – Certainty, stability and predictability is simply a figment of the business world’s imagination*, it has never existed. Business is risk. Tomorrow’s manager needs, not only to embrace doubt and uncertainty, but to see it as an opportunity.
  3. Thinking brings responsibility – To be a leader, one first needs followers. Followers respect leaders who accept responsibility. The past few decades have witnessed the widespread avoidance of responsibility, by politicians, religious leaders, as well as senior business leaders. As part of the structural change since the ‘crisis’ of 2008, the “I didn’t say that”, “It wasn’t my fault”, “Everybody was doing it” is being treated with growing disdain – the future belongs to those who will relish, not shirk, responsibility.

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” George Bernard Shaw (1903)

* (See Management Fads of the 21st Century. #2, Complexity)

2 min. read

Management Fads of the 21st Century.  #2, Complexity

The state or quality of being intricate or complicated.” Complexity describes the behaviour of a system or model whose components interact in multiple ways and follow local rules, meaning there is no reasonable higher instruction to define the various possible interactions.””Chaos is the science of surprises, of the non-linear and the unpredictable. It teaches us to expect the unexpected.”

According to the business press and commentators it would seem that since the ‘crisis’, we have somehow stumbled into an unusual and terrifying world of uncertainty, doubt and unpredictability. Prior to 2008, complexity was usually associated with the successful growth of a business – a nice problem to have. Since 2008, it has become a more widespread challenge as managers try to understand the new and shifting environment.

The first issue is the nature of the 2008 shift. It is not a recession, even a great one, but a ‘discontinuity’, a break with the previous times which are not coming back. But more about that in a different article. What it does mean is that whatever is coming in the future will not be a replay of the past.

Mihály Csíkszentmihályi

This break from the past makes everything look unpredictable because we are out of our comfort zone – what we used to do doesn’t seem to work any more; forecasts are wrong and pressure on margins is increasing.  In short, the challenge has increased and we lack the new skills necessary to deal with the new reality. Mihály Csíkszentmihályi called this being out of the Flow, or Zone. Before, we felt motivated and in control – now we feel anxious, worried and powerless.

The solution to this is not to stand still and wait for the good old days to return, they won’t. But there are things we can do:

  1. Accept that the past is not coming back and look to the future, then
  2. Listen to customers & prospects and identify how their needs and wants have changed
  3. Work with your customers to anticipate upcoming, evolving needs.
  4. Distribute this insight/knowledge by cross-functional sharing of the information inside the company.
  5. And the most difficult; Unlearn knowledge, models, techniques and beliefs that are no longer relevant

Of course, none of this will work unless we can accept that the world, and our markets, have not changed, they were always unpredictable and chaotic but we understood the rules of the previous game – until it changed. As Proust said, we don’t need new landscapes, we need new eyes.

Finally, the answer to today and tomorrow’s success is not inside the organisation. All we will find inside the organisation is history, immediately rendered obsolete by the events of 2008 and subsequently. Unusually, one of the current jargon words, co-creating, proves very apt – if we can manage it we need to accept that we no longer know best and the future lies, not in making things, but in co-creating value with your customers. Let me know how you get on.

The brain is a wonderful organ; it starts working the moment you get up in the morning and does not stop until you get into the office.” (Robert Frost)

2 min. read

Sacred cows make the best hamburger”*  #2, Cost Cutting

What is a cost?

“Initiatives that focus on reducing expenses to decrease facilities expenses in order to improve the financial health of an organization.”

Everybody is doing it; there is always fat to cut; we don’t have a choice; we have to remain competitive; ‘lean’ and sharp……”

We have all heard about cost cutting, but does it stand up to closer scrutiny?

I was invited to deliver a basic marketing session to a group of MSc in Finance & Accounting students.

Two questions they couldn’t answer:

  1. Where does cash flow come from?
  2. How do you define a cost?

Very disappointing if tomorrow’s CFOs don’t know that customers provide all the cash flow and profits.  Even more worrying if they think that a cost is any large expense.  Strangely, I wasn’t invited back the next year.

When I looked up the course references later, I was (almost) sympathetic:

All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses.” 

“The outlay or expenditure (as of effort or sacrifice) made to achieve an object.” 

In business and accounting, cost is the monetary value that a company has spent in order to produce something.” 

“In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset.”

“Cost includes all costs necessary to get an asset in place and ready for use.”

I also looked up the definitions for Investment:

“In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.”

“The act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this.”

The investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.”

You can see where I’m going …

If this is the very best experts can come up with then no wonder finance departments may be unable to tell the difference between a cost and an investment. Cutting the wrong big number could destroy the business. And it seems any ‘big number’ is fair game to the cost-cutter, even if it eventually kills the company – as long as it happens in a future accounting period, of course.

Let’s apply some simple common sense and approach the problem from the Outside-In. It seems obvious to me that from the customers’ (the source of all cash flow, profits and job security) perspective, the company can take a huge axe to everything they do that doesn’t deliver customer value. They could then invest more in projects that customers do value and they want to buy in the future.

No matter how complicated the internal analysis on the spreadsheet, cutting big numbers without getting your customers to tell you whether it is a cost or an investment is no more professional than Russian Roulette.

It was a pity thoughts always ran the easiest way, like water in old ditches.” Walter de la Mare.

“Sacred cows make the best hamburger”- Mark Twain.

2 min. read

Management Fads of the 21st Century. #1, Big Data

“Big data is high volume, high velocity, and/or high variety information assets that require new forms of processing to enable enhanced decision making, insight discovery and process optimization.” –Gartner.

The current state of play could probably be summed up as “If the data isn’t big, it’s worthless.” But before you fall under the spell of what might just be the latest ‘management fad’, think a little deeper. Big data has been variously described as “The next frontier for innovation, competition, and productivity” (McKinsey) and “Hubris” (researchers at Harvard).

It is true, there is much more data out there than ever before, thanks to the Internet and modern computing power, but ‘data’ isn’t ‘information’, ‘knowledge’ or ‘wisdom’. To be transformed into those, data needs to be processed somehow, by machines and humans, and then translated into terms that make actions possible.  Advocates and critics of Big Data clash in this area.

The pro-Big data lobby suggests that analysis could, among other things, “Segment populations to customise actions,” “Replace/support human decision making with algorithms,” and “Innovate new business models, products & services.”

Big data’s critics meanwhile suggest that what started as ways to speedily store, retrieve and process large volumes of machine generated data, Big Data has taken on a life of its own as the end rather than a means to answering life’s questions. A symptom of the well-known ‘Hype Cycle’ effect in which a technology’s early proponents make overly grandiose claims, that are rarely met in the short term.

Critics also note there is always inherent bias in the data, especially when its from different sources and collected for its own reasons. That crashing together vast data sets from diverse sources, they say, increases the risk of ‘spurious correlations’ – associations that are statistically robust but happen only by chance. Humans would question the association between, for example, per capita cheese consumption and the number of deaths from becoming tangled in bed sheets or the age of Miss America and murders by steam, hot vapours and hot objects – clearly spurious.

It seems to us that today’s dependence on the algorithm (“In mathematics and computer science, an algorithm is a self-contained sequence of actions to be performed.”) is at fault. The rise in AI and Robotics notwithstanding (possibly the subject of a future article), secondary data (Big or Small) can tell you lots about what, who, when, where and how; but it can never tell you ‘why’.  When it comes to customer choice behaviour, which is directly correlated with your revenues and profits, understanding their motivation is crucial.

Add that to a growing ‘segment’ of people voicing privacy concerns over the use of their data without consent and we might be looking at the ‘trough of disillusionment’ before things get better.

2 min. read

What is a ‘Management Fad’?

According to the Harvard Business Review, “fads are typically: simple, relying heavily on buzzwords, acronyms and reductive ideas; prescriptive, listing actions to take under specific circumstances instead of supporting interpretation; falsely encouraging, promising to deliver big results; one-size-fits-all, taking little or no account of differences between companies; novel instead of radical, meaning their originality is superficial; and supported by gurus or disciples, constantly touting the prestige of adherents rather than using hard performance data.”


Management Fads have been popular for decades and in the modern era probably started with Frederick Winslow Taylor’s work on Time & Motion. Since then management has swooned over such fads as Management by Objectives – or by Walking About, “Excellence”, Total Quality Management, Kaizen, Matrix Management, Six Sigma, Balanced Business Scorecard, Investors in People, De-layering, Lean, Customer Relationship Management (CRM), Post-Modernism and Post-Materialism. The list goes on……..

What these and other fads and fashions in management have in common are short lives and flimsy evidence. The management world is highly susceptible to crazes: fads and fashions that change as frequently as clothes styles. And just like clothes styles, some come back again after a few years away, repackaged, re-branded, but essentially the same.

Contrary to what is often thought, management fads aren’t fads because they’re something new. What makes them fads is human nature and its herd instinct.  Like alchemists, managers are constantly looking for the universal panacea that will solve all their ills.  They know one doesn’t exist but hope springs eternal. Then when they see others jumping on the latest fad bandwagon, the two strongest forces in human nature kick in:

  • Greed – This might just be the genuine silver bullet.
  • Fear – That the competition may get ahead in the race.

The rest really is history.

Adrian Furnham has suggested the following ‘process’ for fads:

  1. Academic Discovery: Many faddish ideas can be traced to the stuffy and distinctly un-faddish world of academia.
  2. Description of the Study: This process can last a long time, it usually involves a lot of elaboration and distortion in the process.
  3. Popularisation in a Best Seller: A business writer/guru takes up the call, hears about the finding gives it a catchy title and before you know what, the fad is about to begin.
  4. Consultant Hype and Universalisation: It is not the academic or the author that really powers the fad but an army of management consultants trying to look as if they are on the cutting edge of management theory.
  5. Total Commitment by true believers: At this point the evangelists move from the consultants to the managers.
  6. Doubt, Scepticism, Cynicism and Defection: After pride comes the fall.
  7. New Discoveries: The end of one fad is an ideal time for trainers, writers and consultants to spot the next gap in the market.

Let’s think for a moment who gains from all this?  And who really suffers………

2 min. read

“Sacred cows make the best hamburger”*  #1- Benchmarking

Sacred cows make the best hamburger”*  #1, Benchmarking *Mark Twain

The process of comparing one’s business processes and performance metrics to industry bests or best practice from other companies”

Sounds good on paper – and it’s hugely popular, but does it do any good?  Mostly it does positive harm.

Viewed from the customer perspective (the source of all your firm’s cash flow and profits), benchmarking makes no sense at all.

First, the concept of ‘industry’ means nothing to your customers.  Industries are created by organisations who make similar products and services. Customers will inevitably compare your offering to the ‘next best alternative’ and only the customer knows what that might be. For easyJet it might be Skype, For Volkswagen it might mean a family holiday. What are you benchmarking?

Second, industry ‘best practices’ rarely deliver superior customer value, focusing, as they tend to, on internal costs and efficiency rather than customer benefits.

Finally, as Michael Porter remarked in 1996, “As a result of benchmarking, companies imitate one another in a type of herd behaviour in quest for productivity, quality and speed.  Driven by desire to ‘grow’, this creates unnecessary ‘hyper-competition’. Operational effectiveness is necessary, but it is not sufficient to win and it is not strategy.. Competitive strategy is about being different.

The good news is that it doesn’t have to be this way.  If you can’t stop benchmarking – it has become a ritual for many – you can start using the data correctly.

  1. Stop looking for costs that can be cut and search instead for differences (that the customer values) and invest in these instead.
  2. As others in the industry unthinkingly match costs and approach commoditisation, look for opportunities to add value that customers are seeking
  3. Broaden the benchmarking, like ‘open innovation’ into other industries that are competing for your customers.
  4. Benchmark how well you are performing in your customers’ eyes. That is Real Benchmarking.
10 min. read

Cargo Cult Marketing

I wrote ‘Cargo Cult Marketing’ after a business trip to Australia in the late 90s and it struck me as equally relevant today. History appears to go like that. While I was there I heard about the cargo cult Indians in the isolated pacific islands. Everybody seemed to think that their behaviour was extreme and unreasonable and the result of their isolation from ‘civilisation’. I was not sure that they were really so strange – or that we are really any different.

On a recent business trip, I came across a reference to the cargo cult Indians of Papua New Guinea. Cargo culters inhabit the upland areas of the country and have seen from their mountain strongholds the great silver aeroplanes landing on cleared strips of ground in the valleys, to disgorge great quantities of food and materials for the native people. They have worked out what is going on and have cleared runways near their mountain homes ready to receive the lumbering aircraft they have seen below them. Now they just wait.

Gifts From The Sky

Elsewhere, on a Pacific island with a memory of Red Cross aid, the islanders dance in front of red-painted crosses and wait for food and other gifts to descend from the sky. On other islands natives worship at an office-like shack where holy men exchange pieces of paper just like bureaucrats. In Vanuatu the local cargo cult, which started in 1940, believes that a man will arrive to free them of missionaries and Europeans and bring them cargoes of refrigerators, canned food and cigarettes. In an effort to speed up his arrival, this cult even fielded candidates in a national election.

In every case the locals have a similar belief – just continue faithfully carrying out the rituals that they have witnessed and one day the materialist Gods will reward them and bestow upon them all the things that they need.

And how do we in the West see rituals like the cargo cult? Well, they are “nice and quaint aren’t they?”, “Picturesque”, “Ought to make a good documentary”. Whatever our words, we are secure in the knowledge that only the “backward” or “underdeveloped” parts of the world could possibly generate such behaviours. The cargo cult mentality could never happen in Europe, we’re just too advanced for all that.

We may not dance in front of red painted crosses or build runways in the mountains, well not quite, but are we really acting differently to the cargo cult islanders of the Pacific? Are we acting differently or, yet again, have we taken the same human behaviour and are acting it out in ways that don’t seem quite so silly to the Western eye?

Now, economic slowdowns may not be very pleasant times in which to try to scrape a living, but they do serve to uncover types of business behaviours that tend to be hidden during the good times. Talking to people in successful and less successful organisations over the past few years there has been a remarkable sense of increased activity everywhere. Everyone you meet is working harder, longer and is under greater pressure than before. But still there is increased competition, falling demand, rising redundancies and firms going out of business daily. So what is happening to all this extra effort? Managers are certainly tired and personal lives and families are being sacrificed to the greater good of the company but still profitable sales are elusive. So what is going on?

What is happening is that we are all dancing in front of our own red-painted crosses because it’s what we know how to do.

We have been trained to do it and we know that we do it very well indeed – never mind that it doesn’t actually improve the business and produce badly needed revenue – when things get bad we’ll all have to dance a little harder. That’s what we’re paid for isn’t it? – well, no actually.

It all comes down to the Western manager’s predisposition to confuse motion with progress, or activity with results. Managers are not paid just to be, nor are they paid to spend long, busy hours in the office. Since managers are paid out of revenues, they must in some way contribute to the creation of revenues (sales) just to cover their salary costs. The panic and uncertainty generated by recent economic scares has forced many managers to think about how to keep their jobs, unfortunately they have not come up with the right answers. Let us look at some of the bigger repainted crosses that have come in for serious adoration in the ‘nineties.

Red-painted Cross No1 – Costs

As soon as the business looks like turning down, get in the cost cutters! As long as we just cut the wastage without affecting the investment in the business that allows us to satisfy customer needs – then fine. Unfortunately, the cost cutting is normally given to the accountants who, being mostly concerned with internal matters, approach this task in ‘efficiency mode’, reducing the problem to a simple accounting equation “big” = “cost” and the priority order of cutting is related to their own understanding of the issues. So systems costs continue but advertising stops now! The time and money spent on cost cutting exercises is vast and does nothing to stimulate revenue generation; often it just makes additional sales in the future even more difficult to achieve because the means of attracting and satisfying customers have been cut away. We have taken the easy option. We have danced round the cross – and been praised for it.

When cost cutting fails to produce better profits… see cross No 7.

Red-painted Cross No2 – Systems Strategies

Systems are “a good thing”; they make us more “efficient” because they can generate a “management information system” to tell us how well we are doing. But they don’t sell and, more often than not, they don’t play a major part in satisfying customers’ needs either. So why are we spending valuable time creating internal upheaval to “upgrade” or install a new system? Again, we know the painted cross and how to dance round it – it helps us take our minds off the difficult problems for which we have no answers “How do we better satisfy our customers’ needs and so attract more business and make more profits?” Too many systems strategies still seem to be all about more paperwork, more forms to fill in (albeit electronic) and the creation of more powerful control systems on people. The ‘nineties, we are told, are about “enabling” people and improving customer service. Although some organisations have moved the IT responsibility to line managers there are still far too many systems that force people into pre-determined moulds. Nevertheless the belief is, as soon as the new systems strategy is in place, miraculously, we will be awash with business again. So that’s all right isn’t it!

When we are not awash with business … see cross No 7.

Red-painted Cross No3 – Databases

That great god of the ‘eighties, The Database, comes in for a remarkable amount of veneration and sacrifice in most organisations. Some businesses have almost been taken over by The Database and the Data Warehouse and countless hordes of acolytes exist purely to satisfy its unquenchable thirst for more data. This red-painted cross has been growing at an unspeakable rate. But what is it all for? Ordering, subdividing and classifying data doesn’t sell. Turning databases into control mechanisms doesn’t sell either. If The Database doesn’t, in some way, improve what you do outside the business (with the customer) it is a Pointless Activity. Spending all week hunched over the computer is not the same thing as meeting and talking to real, thinking, breathing customers who can tell you, face to face, why they bought what they bought and what they will want from you in the future. For those with no interpersonal skills it is of course preferable to spend time with a computer than a real person. Unfortunately, until the business depends on satisfying the needs of machines rather than human beings, the organisation is better off employing people who can do more than just spell “empathy”.

When the Perfect Database fails to improve profits… see cross No 7.

Red-painted Cross No4 – Capacity

This is an obsession that is with us even when there is no recession. How often have you seen the numbers oriented manager push for major investment in plant, production capacity or people based on meticulously researched and prepared financial forecasts (technically known as “a wing and a prayer”), and without any attempt to assess likely customer demand? When challenged, of course, he points to the budgeted returns and declares that “business is not for the faint hearted”, that “one has to take risks to make a return”, “when the going gets tough the tough get going” …and so on, and so on… This is all macho-management nonsense and was never relevant, even in the ‘eighties. Just like the runway in the mountains, let’s build the capacity and, as if by magic, the new business required to fill it will turn up just because the capacity has been created – neat! Overcapacity is a disease that currently afflicts almost every sector, from car manufacture to financial services – and still they want to build more.

When the capacity turns out to be a cost not an investment… see cross No 7.

Red-painted Cross No5 – Fad Surfing

And “Management by Objectives” begat “Management by Walking About” begat “Strategic Business Units” begat “Time Management” begat “Customer Care” begat “Globalisation” begat “Excellence” begat “Total Quality” begat “BS5750” begat “Re-engineering” – and each would solve all our ills. And of course they didn’t. How can this have happened? It has happened, quite simply, because most fads concentrated on measuring the easy things like standards, controls and internal customers that can be classified, processed and boxed rather than difficult things like external customers who don’t always know exactly what they want but do pay all our salaries. Today’s fads include “Loyalty”, “Data Warehouses”, “Micro-Marketing” and “Customer Relationship Management” (CRM), only of course they are not fads – they are the real thing!

This red-painted cross says that working hard to create change internally will, somehow, give the customer exactly what he wants – if only.

Ah yes but it’s not our fault it didn’t happen… see cross No 7.

Red-painted Cross No6 – Y2K

Too important to be a fad, Year 2000 activities are soaking up budgets all over the place. As Y2K hasn’t happened yet, any word against the activity is, of course, heresy. But what is it really all about? Vast amounts of money being “invested” in updating systems that were never meant to be running this long, expanded by managers keen to cut headcount regardless of long-term consequences. Just like BSE, nobody seems to be to blame. While the “investment” goes on, other budgets are reduced and sacrificed to the Y2K altar. But what happens in 2000? What happens when we find that business has not ground to a halt and customers are still impatient to be served? What happens when we try to compete with businesses that have not cut every budget to meet Y2K needs and have continued to invest in marketing and their most important asset, their customers? We can’t say that Y2K is not important, the Californian earthquake showed what happens when a company loses all its data, but it is a wonderful excuse to do absolutely nothing about the world beyond the company walls.

When this one, too, fails to deliver the business… see cross No 7.

Red-painted Cross No7 – Blaming those who are doing the business

If we are giving prizes for longevity, this must be the oldest Red-painted Cross in the clearing. For thousands of years, managers (those who stay at home) have been successfully laying off the blame for non-performance on the poor grunts who have to do the work. The much-maligned salesman or marketer whose job it is to try and implement the elegant but impractical plans worked out by people who have never seen, let alone spoken to, a customer. The biggest problem is that dancing in front of this particular cross, is not a ‘neutral’ activity, it can actually do harm. As the people in the business realise that, in spite of the elegant mission statements and quality promises, what really matters round here is not the customer but the internal System, they either: 1. Leave, or more likely, 2. Dump the customer; spend more time in the office and get down to some serious politicking. The fact that the customers are leaving gives them less of a System to manage doesn’t seem to worry anybody – it’s probably the ideal opportunity for them to “review”, “develop” and “enhance” the System into something even bigger and better.

THE MORAL

Like smoking, there is never a good time to give up dancing in front of the Red-painted Crosses. You have to believe it is better for you and that eventually you will be rewarded. Common sense alone says that it must be more profitable to concentrate on looking after the customer rather than the Internal System, because that is where the revenue comes from. Nevertheless, you can be sure that the way will be strewn with obstacles; you should bear in mind the following.

  • Never forget the customer is the business
  • Never let anyone else forget the customer is the business
  • The business will survive by what it does outside, not inside the business
  • The internal System can stop you succeeding, but cannot make you succeed
  • If the old ideas didn’t work, try something different
  • Don’t be infected by the panic of the non-visionaries
  • Those that shout loudest typically know least
  • Don’t confuse motion with progress

BACK TO BASICS …

It’s probably about time that we all looked again at how we approach business. To the innocent it must seem that we are unnecessarily complicating what is, after all, an extremely simple situation.

If you are to remain in business then you have to create and retain customers. You will do this by giving the customer what he or she wants, at a price that is both attractive to the customer and profitable to the organisation.

There really is nothing secret or complicated about the concept of basic marketing. It might not always be the most fashionable approach, nor always the most macho – but it is undeniably the most effective. Allow yourself to be distracted by anything or anyone else and all you will have is lots of free time to spend dancing in front of Red-painted Crosses.

2 min. read

Identity Crisis at Yahoo

When senior Yahoo executives gathered at a San Jose hotel for a management retreat in the spring of 2006, there was no outward sign of a company in crisis.

The internet pioneer, not yet a teenager, had just finished the prior year with $1.9 billion in profits on $5.3 billion in revenue. The tough days of the dot-com bust were a distant memory, and Yahoo Inc, flush with lucrative advertising deals from the world’s biggest brands, was enjoying its run as one of the top dogs in the world’s hottest industry.

But for one retreat exercise, everyone was asked to say what word came to mind when a company name was mentioned. They went through the list: eBay: auctions. Google: search. Intel: microprocessors. Microsoft: Windows.

Then they were asked to write down their answer for Yahoo.

“It was all over the map,” recalled Brad Garlinghouse, then a Yahoo senior vice president and now COO of payment settlement start-up Ripple Labs. “Some people said mail. Some people said news. Some people said search.”

The lesson here is simple – if you don’t know what business you want to be in, your customers will never work it out. Organic food had exactly the same problem so suffered badly when the Recession hit. The result of Yahoo’s indecision resulted in an agreement this week to sell the company’s core assets to Verizon Communications who will probably blend it with its existing AOL division.

Yahoo’s lack of clear focus on what business it needed to be in, and the subsequent customer confusion led to a number of missed opportunities (because they couldn’t be sure if they were opportunities or distractions) described in the Reuters article as a failed bid to buy Facebook for $1 billion in 2006. A 2002 dalliance with Google similarly came to naught. A chance to acquire YouTube came and went. Skype was snapped up and Microsoft’s nearly $45 billion takeover bid for all of Yahoo in 2008 was blocked by Yahoo’s leadership.

There is nothing new here and we can travel right back to Levitt’s ‘Marketing Myopia’ in 1960 for insight. It might be an exercise that top management don’t like doing but lack of a crystal clear business definition means that Yahoo’s customers didn’t understand Yahoo’s business. In addition, Yahoo didn’t understand which customer needs it should be satisfying, where it should be investing for growth, the boundaries for effort (what it should stop doing or do more of), who it was competing with and, most dangerous of all, who was it’s core market – that it had to look after above all others.

Do you know what business you are in?