Archive for December, 2013

“It’s The Worst Product But It’s The Cheapest” Isn’t A Viable Strategy

Tuesday, December 31st, 2013

Given the developments in data science, it was inevitable.The worst product but the cheapest - not a viable strategy

After spending 7 or 8 years building databases and algorithms, Thomas Thurston has determined the factors that are common to businesses which succeed – and those which fail.

His models can now be used to predict the outcome of investments by
•  Mid- and large-size companies in business development, and
•  Venture capitalists in startups and early stage companies.

Clayton Christensen who, in my opinion, is one of the best thinkers about business today, has recognized Thurston’s research and predictive models.

So you have to take them seriously.

Thurston says that a company’s strategy is where they find most predictive variables. He doesn’t say whether it’s the strategy itself, the way in which it’s executed, or both, that matters.

He does, however, make a couple of interesting points about strategies which work and those that don’t.

For example, brand new startups, which claim to have the best “widget” on the market, fail about 90% of the time. On average, however, “only” 70% – 80% of businesses fail in their first 10 years.

Thurston claims the best widget startups face worse odds than average because, if they are right and their product/service is the best available, bigger competitors, with deep pockets, put them out of business.

His favourite strategy is to “go to market with the worst product but it’s the cheapest”, citing Walmart, McDonalds and Southwest Airlines as examples.

I take his point but have a problem with calling them all the worst products. If that were the case, for example, Southwest Airlines would have a much worse safety record than other airlines.

He seems to be suggesting low cost automatically means low quality which is not necessarily the case.

Walmart stocks brands that are perceived as offering quality at a lower cost i.e. better value than at other stores. Walmart keeps those costs low by the way it redefined the traditional retail model.

McDonalds, Southwest and Walmart may have grown by taking value-conscious customers away from their larger competitors, leaving them the customers they perceived as “best”.

But I dispute that any consumer adopts the worst product on the market simply because it’s the cheapest. If they did, they’d try it once – and never go back.

That’s my view. What’s yours?

You can see the article, which provoked my little rant, here.

If you enjoyed this post you’ll also enjoy Prices – 6 Reasons to Keep Them Up.

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn


5 Timeless Hiring Tips for Business Owners

Tuesday, December 24th, 2013

People are key to the success of a strategy and, therefore, a company.5 timeless hiring tips

That’s not news. It’s the very opposite.

Articles about people management regularly appear in the press and there are blog posts published daily about the impact of culture and leadership on success.

Yet some business owners still deal poorly with the people part of strategy. And it often starts with how they hire.

So, here are 5 of my favourite tips (that also aren’t new) for hiring.

1.  Be Clear About The Role. Make a list of the things the role contributes to the execution of the strategy. That will determine the skills and experience required by applicants and make the responsibilities of the position very clear.

2.  Always be Hiring. Think about everyone you meet as a potential hire, particularly those you think would be great to work with. Keep their names in a database. Build a relationship with them in case you do ever decide to offer them a job – and reduce the risk of making a bad hire. Drop those who don’t measure up.

3.  Don’t Settle For the Best of the Bunch. I mentioned skill and knowledge earlier. But you also want people whose attitude and values fit with your culture. And that combination doesn’t pop up every day. That database of potential hires can help you avoid having to settle for the best of the candidates who happen to be available. So can patience and a willingness (and ability) to wait.

4.  Consider a “Test Drive”. Hiring people you’ve worked with previously is similar to test driving a car before buying it. So is hiring someone on a short-term contract, or taking them on as a sub-contractor, to complete a project. All 3 provide an opportunity to get to know their values and attitude. That’s better than hiring someone who looks good on paper – we know that more people are “massaging” their resumes than ever before.

5.  Onboard, Onboard, Onboard. Many companies consider the hiring complete when their offer is accepted. That is just plain wrong.  An onboarding program ensures a great first impression; it allays the stress a person experiences when dealing with new processes, fresh expectations and people they don’t know; and it reduces the time it takes new employees to become productive.

You can find a more tips here.

If you enjoyed this post you’ll also enjoy Little Things Can Have a Big Impact.

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

5 Traits Effective Business Owners Share

Tuesday, December 17th, 2013

I believe the single biggest thing that separates companies that grow from those that don’t is the owner’s awareness of the need for change and their willingness to do so.Traits shared by effective entrepreneurs

So, I was interested in a recent post about traits that effective entrepreneurs share. Sure enough, it contained a quote saying that if owners commit to learning more about themselves and becoming the best that they can be, they’ll find that challenges are really opportunities.

But what other traits, according to the post, do effective entrepreneurs have?

1.  They’re surrounded by people who share their passion. They need to be because, in our experience, entrepreneurs expect everyone to want to work long hours, get by on a shoestring and to continue to persist in the face of adversity.

We often find that even owners of well-established businesses expect every employee to feel the way they do about the company.

2.  They know themselves. The post makes the point that “When you know your strengths and weaknesses, you’re better prepared to build a team that complements you and can help you reach your goals”.

True, but while some of the owners we work with understand their strengths, they don’t – or won’t – admit their weaknesses. While prevailing wisdom may say that’s a bad thing, I’m not so sure.

Some of the personal characteristics that make great leaders – in politics, the military and in business – can also be considered weaknesses. But you can’t have it both ways. You have to deal with one to benefit from the other.

3.  They are true experts. Most of the successful business owners we deal with had been working in their industry for some time before going it alone. And they made the break to deal with a gap, shortcoming they saw.

So they are subject matter/industry experts. Unfortunately they often think this expertise extends to all other aspects of building a business.

4.  They take action. I totally agree. They are unafraid of risk and willing to make decisions without waiting for perfect information. And that is not the same as being reckless because, in fact, the best entrepreneurs are not.

5.  They fail well. Mainly, I think, because they see failure not as something negative, but simply as a step toward success.

There are so many examples. Like Edison and his 900 odd attempts before getting it right. Or Winston Churchill (not an easy person to be around) who said, “Success is stumbling from failure to failure with no loss of enthusiasm.”

You will find the author’s take on these traits here.


If you enjoyed this post you’ll also enjoy Perspective – It Really Matters….

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2 Simple Words – 1 Expensive Mistake

Tuesday, December 10th, 2013

I’ve always believed that words matter. Put it down to my education.When is "innovation" not innovation?

In the northeast of Scotland, in the 1960’s, you were expected to know the precise meaning of the words you used and, therefore, to use them correctly.

Failure was not an option in those days of high academic standards – and corporal punishment.

So, when I see and hear people misuse, overuse or otherwise mutilate words it frustrates me intensely.

I’ve railed in the past about the abuse of the word strategy. People seem to believe that attaching it to a topic automatically elevates the level of that topic’s importance.

There are other similarly abused terms. “Synergy” leaps to mind. “Leverage” is another beauty. A post I noticed yesterday drew my attention to another one – “innovation”.

The post refers to a recent article that highlighted the problem. Here are a few selected tidbits.

•  Hewlett-Packard executives used “innovation” 70 times when they addressed shareholders on a recent conference call.
•  In 2007, 99 companies in the S&P 500 mentioned “innovation” in their third-quarter conference calls. This year the number was 197.
•  The CEO of Kellogg’s referred to their peanut butter Pop Tarts as an “innovation”. (And here I’m thinking product line extension.)
•  Executives from Red Robin Gourmet Burgers Inc. (their burgers look good and their stock price is great) used the words “innovate” or “innovation” 21 times to describe pepper hamburger buns, beer-can cocktails and beer milkshakes. Seriously? How is this not product line extension again?

So what’s the problem?

Well, a product line extension is “different colored diapers. You haven’t changed the functionality, cost or quality. It affects nothing in a significant way.”¹

An innovation, on the other hand, is “something original, new, and important – in whatever field – that breaks in to (or obtains a foothold in) a market or society.”²

A business owner trying to break into a highly competitive market would be wise to know the difference. A product line extension may not offer much, if any, protection from being perceived as “me too”. A product or service, which is truly innovative, will.

Failure to understand the words, and use them correctly, could result in a very expensive mistake.

Time to stop venting and close with an “oldie but goldie”. Say what you mean – and mean what you say.


¹ “Is a Peanut Butter Pop-Tart an Innovation?”, Wall Street Journal, 3 Dec 2013


If you enjoyed this post you’ll also enjoy Is Innovation Part of Your Growth Strategy?

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3 Leadership Tips From A Great Scotsman

Tuesday, December 3rd, 2013
3 leadership tips from Sir Alex Ferguson, retired manager of Manchester United soccer team

Courtesy of

I’ve rekindled my relationship with an old love. I did it mainly because my wife wanted me to.

She thought I was doing the same old things all the time and that some variety would be good for our relationship.

It’s working really well. I’m happier and my wife is taking a more active role in it than I ever imagined she would. That’s providing a whole new level of enjoyment for me………..

Yes, starting to watch the Barclays Premier League soccer matches regularly again was a great idea. And talking to Deborah about the teams and games is really neat.

One of the absorbing aspects of this season is what’s happening at Manchester United.

Sir Alex Ferguson, who was their manager for 26 seasons, retired at the end of last season. David Moyes, an experienced, proven manager, and Ferguson’s chosen successor, joined them soon afterwards.

The club is one of the most successful and valuable franchises in sports – anywhere. During Ferguson’s reign, they won 13 English league titles and 25 other domestic and international trophies, almost double that of the next-most-successful English club.

Since Moyes has taken over, the team has struggled.

It isn’t really a strategy problem.

United’s lack of control in the mid-field and vulnerability to a quick break are more tactical than strategic. They have, more or less, the same players. But they don’t appear to be as creative, sharp or hungry for the win.

It’s more an issue of leadership and/or culture. But strategy, leadership and culture are inextricably connected.

Harvard Business Review recently published an article on “Ferguson’s Formula”, capturing 8 aspects of Sir Alex’s approach to leadership. Here are 3 that I think all business owners can use.

1.  Start With The Foundation That foundation is people development. He built depth by developing young players to replace his current stars. How many owners, executives or managers continuously develop replacements for their key people?

2.  Set High Standards – And Hold Everyone To Them Adversity made Ferguson determined never to give in and so one of his mantras is “If you give in once, you’ll do it twice.” He expected hard work and he led from the front. Yet he had confidence in the people he hired, trusting them to do their jobs and not micro-managing them.

3.  Never Stop Adapting The world of soccer changed dramatically while Ferguson was manager. He believes that you control change by accepting it and he focuses on 2 things. Understanding, even when you’re “at the top” that you can’t afford not to change. And exploring new, unproven ways of improving.

You can see the other 5 here. I’m off; I have a game to watch……


If you enjoyed this post you’ll also enjoy 3 Things That Shape A Good Strategy

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