Archive for October, 2011

A “BEMI” – Does It Work And Is It Really New?

Friday, October 21st, 2011

In the last 2 weeks I’ve seen 3 blog posts talking about growth, all more or less claiming that their concept is the best or only way to grow companies in the future.

But do these concepts really work (in anything smaller than a global corporation)? And are they really new?

The first one is all about “big-enough market insights” or BEMIs¹  and is based on the argument that real, rather than incremental, top-line growth can only occur when there’s a significant change in the nature of demand.

That change is caused by either a shift in customers’ circumstances or in their thinking e.g. when the housing bubble burst or when tablets became simple, affordable tools for use at home and at work.

1.    What is a BEMI?

When a business owner can see the connection between a change in demand and the lucrative market the change will eventually create she has found a BEMI.

That Insight becomes the foundation for either a blockbuster product or for a suite of offerings.

2.    Identifying a BEMI

BEMIs are usually spotted first by employees at the fringe of the organization. For example in the 80′s, a Toyota executive in California saw that increasing affluence and the growing number of yuppies was creating an opening for a new kind of luxury car – the Lexus.

More recently, the Air Wick Freshmatic originated with a brand manager in Korea.

Closer to home, one of our clients realized in the late 90′s that, as cell phones began to be adopted, users would want cases, rechargers and extra batteries for them. Consumers would be more easily upsold if these accessories were packaged in a kit rather than sold as individual items.

3.    Embracing a BEMI

BEMIs often face a lot of resistance from inside the company. Many critics opposed the Lexus because e.g. setting up a separate network of Lexus dealerships, had the potential to alienate existing dealers. They also attract opposition if the company doesn’t have the necessary expertise to develop the product e.g. Reckitt Benckiser had little experience with the electronic technology required for the Air Wick Freshmatic.

In the late 90′s the cellular carriers were the major distributors of accessories via their retail outlets. Our client had to overcome the carriers’ resistance to kits by acquiring the technology and resources to design, assemble and package for them.

4.    Exploiting a BEMI

Pursuing a BEMI can take a lot of perseverance because they rarely lead to a surge in revenues and profits over the short term. That’s because they originate in an understanding how shifts in current trends will change markets – and using that insight to create an opportunity for the future while sidelining competition.

Pampers disposable diapers, introduced in 1961, took advantage of the growing desire for greater convenience, and the fact that women were increasingly joining the workforce. But they had to be made by hand, making them uncompetitive with diaper services. It took years before P&G could mass-produce them and that did not come cheap. However Pampers created a multi-billion dollar market.

5.    So do they really work and are they new?

It took time to launch cellular accessory kits but consumers really took to them and sales took off. So I’d say that the concept works equally well in any size of organization.

However I’m not sure they’re new. I think strategists and business owners have been doing this for a long time but just calling it something else (trends analysis springs to mind).

But regardless of what you call it – it works and works well.

__________________________

¹Where Top-Line Growth Really Comes From HBR, 6 Oct 11

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Design Thinking and Strategy Development

Friday, October 14th, 2011

A little while ago I asked our LinkedIn group the question “Is design thinking dead in the water or does it still have something to offer strategy?”

I did it because I was on the fence a bit and Bruce Nassbaum who was one of Business Week’s major advocates for design thinking, had recently come out¹  and said he was moving on to something new.

But now I don’t agree with him and here are a couple of reasons why.

1. The Baby and the Bathwater.

Nassbaum states, quite correctly I believe, that design thinking is a process which generates the real deliverable – creativity.

He goes on to argue that because it had to fit with the existing concept of business process, design thinking “was denuded of the mess, the conflict, failure, emotions, and looping circularity that is part and parcel of the creative process.”

I can certainly see a few of the more analytically oriented CEOs and business owners I’ve known taking that stance! But Nassbaum goes on to say that in the few companies where CEOs and managers accepted the “mess along with the process” then “real innovation took place”.

So what’s the real issue? If it’s that design thinking only works where the culture supports it then the process isn’t the problem. As is so often the case, the real culprit would appear to be the execution or implementation of the process.

To abandon the process in these circumstances would appear to be throwing out the baby with the bathwater.

2. And In the Other Corner….

The MIT Sloan Management Review says that “Design thinking — distinct from analytical thinking — has emerged as the premier organizational path not only to breakthrough innovation but, surprisingly, to high-performance collaboration, as well.”²

And the Rotman School of Management (in the interests of full disclosure, I am an alumni) offers a “unique program that merges the practices of business and design at our Strategy Innovation lab”³

Being the skeptic that I continue to be, I am reluctant to believe something simply because an academic has said it.

But you have to attach credibility to an academic with an MIT pedigree (no pun intended). While Rotman, with its mission “redesigning business education for the 21st century” has it’s MBA program now ranked in the top 15 in North America by the Financial Times.

3. The Clincher.

I’ve encountered and read several other articles and blog posts which suggest that design thinking is alive and well and continues to have a role to play in strategy development. But the clincher is an article4 I read recently (oddly enough in the Rotman magazine) which lays out a design thinking tool kit for managers.

The authors link the concept of design thinking to the process they’ve laid out and the 10 tools they recommend. I like the logic and I’m familiar with the tools. I can see how it would complement the strategy development process we use.

I have some questions still about the practicalities of the tool kit but, for now at least, I’m off the fence.

There’s still time for you to express your views – either here or on our LinkedIn group

If you enjoyed this you will also enjoy Why Strategy Is Still Worth A Business Owner’s Time and Adaptive Strategy – A Way To Profits In The New Normal?

¹Design Thinking Is A Failed Experiment. So What’s Next? www.fastcodesign.com/1663558/design-thinking-is-a-failed-experiment-so-whats-next

² Design Thinking – Hard skills from a soft science http://sloanreview.mit.edu/special-report/design-thinking/

³ Rotman School of Management www.rotman.utoronto.ca/businessdesign/default.aspx

4 Designing For Growth: A Tool Kit For Managers, by Jeanne Liedtka and Tim Ogilivie in the Rotman Magazine, Fall 2011, page 17

Why You Need A Consultant With Hands-On Experience

Thursday, October 6th, 2011

The word on the grapevine is that the “brand name” consulting companies are getting push back from their clients.

Why, because business owners want results not just recommendations. And the “brand name” companies may not be able to deliver.

One reason is that they use associates in their mid-twenties or early thirties, usually the recent products of MBA programs, to do the front line work. While they bring a ton of theory to a project they have absolutely no practical, operational experience.

1. Why is operational experience so important now?

It’s the difficult economic times – which, if you believe the pundits, are here to stay for much longer than in recent recessions. The pressure is on to not only get an acceptable return on every dollar spent/invested, but also to get it quickly.

But the nature of a consulting assignment – particularly strategy consulting – is that the consultant is long gone before the actual results of acting on the output from the assignment can be determined. If the output – e.g. recommended action, new systems or processes – doesn’t work the dollars spent/invested in fees will either fail to produce an acceptable return – or produce no return at all.

So unless some way can be found to keep the consultants around, or bring them back, when the actual results appear, there is no way to hold them accountable. This means that the most a client can do is minimize the risk of the new systems or recommendations failing.

2. There are at least 3 factors which affect the risk of failure.

The first is the analytical skills, knowledge of business models and process, logic and creativity the consultant applies to the situation. Even MBA’s in their mid-twenties or early thirties should have the first two.

Second is industry or subject matter knowledge. Consulting companies provide this by focusing on either one or two industries or business processes and developing repeatable “models” which they apply with future clients.

Finally there’s operational experience gained actually implementing similar recommendations or installing similar processes/systems while responsible and accountable for the results.

This kind of experience comes from holding a management/executive role in an operating company. The more senior the role, the greater the experience. Because there’s no substitute for the stomach churning, cold sweat inducing realization that the buck stops with you.

3. A consultant with operational experience offers a client 2 clear advantages.

One – she will use the lessons learned from her practical experience to reduce the risk of her recommendations failing in ways that a consultant who only has theoretical or subject matter knowledge cannot.

Two – she is used to being held accountable and will expect it from a client.

4. The consulting industry has to change too.

I believe that the industry, built on telling everyone else what to do, is going to have to change itself. Consultants – particularly strategy consultants – have to develop business models which enable them to:
• Put more people with operational experience in front of clients.
• Remain involved until the results of our advice become apparent.
• Link our fees to our performance.

We, and some others, are working on ways to do both of those things (call us if you want to know more). But many are not. It’s as if the industry that’s paid to show other companies how to adapt for the future is firmly in denial.

If you enjoyed this post you’ll want to read “How to Keep Control When You Work With Consultants” and “3 Reasons Why Consulting Assignments Fail“.

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