PM Quote of the Day — Dietrich Bonhoeffer

If you board the wrong train, it is no use running along the corridor in the other direction

New Leader Focus Area — Creatively Wielding Occam’s Razor

I’m wrapping up this first series about what goes into taking over a new organization (earlier posts (herehere, here, and here).  The theme of simplicity and parsimony gets mangled during many discussions; for example, sometimes people think that “simple = easy”.    Also, that old simplicity maxim — Occam’s Razor — focuses on analysis to the exclusion of creation (BTW, it wasn’t given its modern form by William of Ockham himself). 

Ockham’s own phrase Frustra fit per plura quod potest fieri per pauciora [It is futile to do with more things that which can be done with fewer] better expresses the essence of elegant design.  Notice the shift from “explain” to “do”?  With Ockham’s words in mind, let’s consider these HBR New Leader leading questions about complexity:

  • How complex are your product or service offerings, and what is that degree of complexity costing you?
  • Where is your innovation fulcrum?
  • What are the few critical ways your products stand out in customers’ minds?
  • How complex is your decision making and organization relative to competitors’?
  • What is the impact of this complexity?
  • Where does complexity reside in your processes?
  • What is that costing you?

New Leader Focus Area — Competitive Position

Per earlier posts (herehere, and here), I’ve been thinking about what goes into taking over a new organization.  This post takes a look at competitive analysis via benchmarking.  Benchmarking is always useful, though I’m always wary of getting too hung up on one’s competitors.  I don’t have any particular comment on the eight questions from the HBR New Leader article, but you might want to look at the strategy outline on the QuickMBA site (here):

  • How do you and your competitors compare in terms of returns on assets and relative market share?
  • How are the leaders making money, and what is their approach?
  • What is the full potential of your business position?
  • How big is your market?
  • Which parts are growing fastest?
  • Where are you gaining or losing share?
  • What capabilities are creating a competitive advantage for you?
  • Which ones need to be strengthened or acquired?

New Leader Focus Area — Customer and Profit Pools

Per earlier posts (here and here), I’ve been thinking about what goes into taking over a new organization.  In my last post on this topic, I may have given the impression that costs and prices should be one’s main focus. 

To that end, this area is one that I’ve neglected — the HBR New Leader article wisely emphasizes looking at customers up front.  In a past role, I spent too much time working cost, price, and process issues.  When I finally got to the customers I realized that I had left considerable revenues and profits on the table.  

  • Which are the biggest, fastest-growing, and most profitable customer segments?  This should tell you whether you’re in the right segments.
  • How well do you meet customer needs relative to competitors and substitutes?
  • What proportion of customers are you retaining?
  • How does your Net Promoter Score track against competitors?  There are a number of doubts about this specific methodology, but a systematic look at loyalty scores — and the reasons behind loyalty or switching behaviors — is essential.
  • How much of the profit pool do you have today?  How is the pool likely to change in the future?  Again, the authors are from Bain and are referencing a Bain-aligned approach.  On the same topic, I recommend this book on Strategic Cost Management by a business school professor of mine.  Shank and Govindarajan introduce some great tools for looking at the value chain.
  • What are the opportunities and threats?  Opportunities and threats to WHAT?  Use the preceding questions to focus the SWOT analysis.

New Leader Focus Area — Costs and Pricing

Per an earlier post (here), I’ve been thinking a lot about what goes into taking over a new organization.  Considering the economy these days, this may happen to more of us!   

Anyway, the principle that costs and prices almost always decline over time is a reasonable foundation for looking at one’s competitive and operations health.   Below are six questions from the HBR New Leader article I originally referenced which help to focus the analysis:

  • How does your cost slope compare with your competitors? In other words, are your costs lowering or rising more or less quickly than your competitors?
  • What is the slope of price change in your industry right now, and how does your cost curve compare?
  • What are your costs compared with competitors?  I’d also look at prices as well… competitors with prices eroding faster/slower than me should tell me something about the sweet spots in the value chain, offerings most valued by the market, etc.
  • Who is most efficient and effective in priority areas?  A pretty generic suggestion.  Looking at relative pricing and what that tells you about the market should give hints about “priority areas.”
  • Where can you improve most, relative to others?  Look hard at the capabilities you actually have or could build quickly.  Avoid immediate focus on topics that you can’t change.
  • Which of your products or services are making money (or not) and why?  Don’t automatically trust the received wisdom on who makes and loses money.  Invest some time and money is getting REAL numbers and answers.

Perils of being a “brand protector”

I’m sure you all have seen the bad publicity SAP Services got via a news story on Bloomberg about the Shane Company bankruptcy filing.  Josh Greenbaum picked apart the piece pretty comprehensively (here) and the Shane Company itself came out with provided a statement that SAP can use to clear the air (NOTE: struck out section reworded in bold to clarify):

Press coverage resulting from the Shane Company Chapter 11 bankruptcy filing has unfairly characterized SAP as the cause of Shane Company’s cost overruns based on the software applications licensed from SAP in 2005. Project implementation cost overruns were caused by a failed implementation process utilizing multiple third-party industry experts.  After not meeting expectations, the Shane Company contracted SAP Services to restart the project which they played a key role in implementing, stabilizing, and further enhancing the system.  In fact, we have a strong business relationship with SAP and will continue working with them as we emerge from our Chapter 11 bankruptcy filing.

It is a different consulting business when you’re the services arm of a product company, especially one with a prominent brand.  SAP Services must be vigilant to ensure that our brand value protection efforts aren’t in vain.  It is tough enough to get projects back on track without then seeing stories that suggest we weren’t effective.

More on the McDonald’s Revival

The New York Times yesterday had an excellent feature on the revival of McDonald’s over the past five years (here).  I don’t quite buy this characterization of the change by Bob Goldin at Technomics, however.

[T]he McDonald’s rebound had been singular because of its simplicity: “execute the basics, flawlessly.” He described the McDonald’s strategy as “three yards and a cloud of dust,” adding that “it’s not revolution stuff.”

I’m not sure what revolution looks like… a new format, new menu items, new hours, etc.?  My guess is that commentators are looking for a visible manifestation of wrenching change.  But perhaps the revolution at McDonald’s is in the way it can implement change.  From a franchisor, Ken Hullings:

It seemed like every other month I was putting something on the menu or taking something off, he says. We were looking for that magic bullet, that magic pill. And I think what we realized that it wasn’t just one thing.

I think that there’s a better football analogy for this business approach — the West Coast offense (especially Bill Walsh’s version).  This approach is in many ways conservative and disciplined, yet enables diversity and unpredictability in one’s play calling.  It also values players who can react in real-time to the unfolding competitive enviroment (i.e., the defense).  In fact, it sounds an awful lot like what the IBM Global Survey (here) envisioned as:

The Enterprise of the Future [which] embraces unpredictability as the new routine…

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