Posts Tagged ‘opportunity’

The People Pipeline

Thursday, February 9th, 2012

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Of all the interesting and valuable things Tony Hsieh says about managing people in his book “Delivering Happiness” for me, one concept stood out.

That was “The Pipeline”.

Hsieh makes the point that, unlike many companies, Zappos doesn’t believe that (individual) people are an asset. They think of a pipeline of people with varying levels of skill and experience as the asset.

Here’s why I really like this approach.

It Solves 3 Fundamental Problems

First, traditional thinking is that people are a company’s greatest asset. But if an employee leaves, the company has lost an asset.

The second problem (which we see all the time) occurs as a company grows, an employee who was considered valuable, or even outstanding, at an earlier stage of the company’s life begins to disappoint and become a liability. It’s usually a result of the employee not developing or upgrading his or her skills as the company grows.

The third problem occurs when the company deals with the other 2 problems by bringing in someone from outside the company.  The new person may bring the right skills and have great experience – but they don’t fit the company culture.

The “People Pipeline” Solution

  • Bring almost all new hires in via entry level positions. This offers two benefits.
    • If they aren’t a fit for any reason the company faces the least expense and disruption by making another quick change.
    • Entry level positions will likely attract people with limited experience. The new employees are more likely to be open minded about adopting the company’s processes – and culture.
  • Provide a comprehensive training program and mentors for the new hires. Then offer a series of courses, either internally or at local colleges, which cover the skills the employees will need in order to progress in the company.
  • Make the route upwards quite clear.
    • Set expectations around when employees can expect to achieve each level.
    • Make completion of certain courses a pre-requisite for promotion.
    • It helps if a company is growing at the rate Zappos did (and is doing) – that generates lots of new positions in the org. chart. However, positions further up the organization will become available as people move on (natural attrition). At this point a business owner could argue that all of the investment in that person has been lost. That’s possibly true – but every company loses some employees (e.g. they move to another city, make a change in career).
    • By investing in training and offering a career path a company may keep those who would have drifted away for much longer.
  • With the pipeline there is always someone ready to fill the shoes of the people who do leave, who have been training for the opportunity and who know the culture.

A Couple of Points to Consider

When Hsieh arrived at Zappos he was an experienced, successful business manager. And he brought one or two key management team members from his previous company – most notably his CFP – with him. So at least some members of the management team knew each other’s strengths and weaknesses and that they could work together.

On the other hand, one of the original Zappos team, Fred, joined as a buyer and rose to become a senior executive.

The pipeline can only be used when a company reaches an appropriate size. A start-up doesn’t have the resources.

If you enjoyed this post you’ll like 10 Strategy Tips from Tony Hsieh.

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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

How Strategy Evolves – A Great Example

Wednesday, April 20th, 2011

We consultants love to hold forth about how strategy and business models can, and should, evolve. But today I came across an article written by someone who has actually proved that it works.

Here’s how.

Worm Your Way Into Business – The Original Strategy.

Tom Szaky, a Canadian immigrant, started TerraCycle as an eco-friendly waste management company. His customers paid him to haul away their organic waste and, instead of dumping it in a landfill, feed it to worms.

In less than a year he realized that they couldn’t get customers to pay them enough to make a profit doing it.

Then they figured out that instead of making money only by providing a service they could also turn the output into a saleable product.

Evolution # 1 – Turn S#*t Into Gold.

TerraCycle took the worm waste and sold it as premium, organic Plant Food, packaged in recycled soda bottles. The product was sold by major retailers – e.g. Home Depot, Wal-Mart – and revenues grew to over $3 million in 4 years.

They sourced bottles via their web site and a program launched in schools. TerraCycle paid the shipping to get the bottles to their plant and made a 5 cent per bottle donation to a school or charity of the sender’s choice. The program was so successful that they were soon paying out hundreds of thousands of dollars. And that almost broke the bank.

So they tried to find sponsors to pay the shipping and donations in exchange for publicity. That idea didn’t work but it did lead to another opportunity.

Evolution # 2 – More Waste = A Broader Product Range.

Sponsors didn’t want to pay to haul away waste created by other companies – but they did pay TerraCycle to take away their own waste. The opportunity was to turn that waste into raw materials to be used to make consumer products e.g. backpacks made from used juice pouches.

Within a year the new products were sold by the major retailers who agreed they embodied the same values as the Plant Food – better, greener and cheaper.

But once again, success brought a problem. Over time TerraCycle had learned how to bottle worm waste profitably. But it didn’t know how to manufacture these new products, manage supply chains or compete against low cost, Chinese manufacturers.

In 2008, TerraCycle lost $4.5 million on sales of $6.6 million.

Evolution # 3 – Focus On Eliminating Waste.

Szaky, walking through a major retail store one day, noticed that Disney had products in a wide range of categories – from shower curtains to food products. He realized that one company could not be an expert in so many consumer product categories – and then a friend explained licensing.

TerraCycle evolved once more and now even their Plant Food is manufactured under licence. The company has grown to over $13.5 million in sales, is operating in 14 countries – and is profitable.

Szaky says that they will stick to their core business (eliminating waste). But he knows there will other challenges to deal with and that more evolution may be required.

Summary.

It’s easy to assume that a company has always done business using its current strategy/business model. But it frequently isn’t that way – e.g. Starbucks original strategy was for customers to stand, listen to classical music and be served by baristas with moustaches.

Execution – Flexibility In Practice

Wednesday, December 22nd, 2010

There’s been a lot written about the need to be flexible now that uncertainty plays such a part in the new normal. And, like so much else, it sounds like good, profound advice. Especially when you’re giving it, which, as strategy consultants, is something we have been doing for some of our business owner clients.

But, every now and then, life hands us a very practical opportunity to practice what we preach.

For example, for a number of reasons, I have to go to the U.K. at Christmas. For the first 5 or 6 years I did this my travel plans went smoothly. Last year I had a few weather related challenges coming back to Canada. Still, it was manageable.

But this year I have already been handed an opportunity to develop my flexibility – and I haven’t left yet!

I was supposed to fly out last Sunday night but, that morning, my flight was cancelled. Not a “biggie”, I reworked my strategy, developed an action plan and began to implement it.

I had to react quickly because there were lots of competitors also trying to grab the available seats. I had to alter my route, but I saw that as an opportunity to avoid Heathrow and the ongoing threat of bad weather there. And I may have saved a few dollars on the cost of the original fare. Bonus!

As in business, there were “knock-on” effects. But I rearranged the rental car and called in additional resources – my relatives. Their offers of help were gratefully accepted.

Now, it looks as if we (my wife is also scheduled to leave tomorrow night) are going to continue to have opportunities to work on our flexibility. Will our connecting flights be operating and will the roads on the final leg of our journey be passible? Then, in 10 days’ time, we have to get back home.

However like, I suspect, some of our business owner clients I find the mechanical aspects of being flexible – e.g. changing schedules or the start or completion dates of action plans or modifying budgets or forecasts – relatively easy.

But developing and executing an action plan to deal with the intangible aspects is more difficult. Chief amongst the intangibles in the case of my example is the impact on the person we are going to see – my Mother. She’s 82 years old, lives alone and her health is not as good as it used to be.

Reassuring (while not promising) her that everything will be fine and that we will be there for Christmas requires different “skills” than re-booking a flight or a rental car. Recent changes in her health have created new threats because she lives alone and mean that, while we’re there, we have to find new opportunities to provide support for her.

I find that responding to the requirements of being flexible is much harder when I’m managing people and their needs and expectations. I suspect that some of our clients find that too.

So perhaps being reminded that there’s more than one dimension to flexibility is the real lesson of the last few days. It’s an essential one because people are much more important than anything else.

And so my first New Year’s resolution is to bear that in mind when I work with our clients in 2011.

“You Can Achieve Any Result You Want To……”

Wednesday, September 29th, 2010

If you’ve read any of my earlier blog posts you’ll know that I play golf. I realize that not everyone shares my enthusiasm for the game so you will find absolutely no discussion of the technicalities of golf in the following paragraphs.

In fact, if you want, you can substitute any game you personally prefer and still get the benefit of the points I’m going to make.

At the beginning of the summer I decided that my golf really had to improve. As a result, I took some lessons from someone with the experience to help me improve my swing. He turned out to be a terrific teacher who not only helped me improve my practical skills but also gave me confidence in my ability to become a “decent” golfer.

At one point, when we were discussing my goals, he said to me “You can achieve any score you decide to.” These were words of great encouragement for me. When I thought about it later I realized that he was pointing out two things:
• I alone had control over how much of my potential I realized.
• My attitude would play a large part in determining how good I actually became.
Adrian also told me that I had to practice hard, 2 or 3 times every week.

I’m sure you can see where this is going.

After taking stock of my personal strengths and weaknesses as a golfer, he gave me the opportunity to develop a better swing by avoiding the threats of a bad grip, bad posture etc. (OK so I lied a little bit about golf technicalities.) This was the golfing equivalent of a business owner developing a strategy for growing her/his company.

But actually making an improvement in my game would depend on how well I executed that strategy – the consistency of each swing at the ball (a process); how often I practiced (implemented the action plan) and how I adapted to what happened on the course each time I played (regular reviews using feedback from actual results). Also similar to the things a business owner has to do when he/she is growing a business!

I don’t want to draw this metaphor out for too long so let me tell you what happened. For a number of weeks I practiced regularly, improved my swing and learned my lessons when things didn’t work out during a game. My scores steadily got better.

Then, just as happens so often in business, things began to get in the way. I had to go to the UK, then we had house guests arrive. Work was being crammed into early morning and late night sessions.

I stopped practicing regularly (lost focus on my action plan) because I “had” to deal with these other things. My performance on the course (that great golf marketplace) and my scores began to slide again. I did wake up before I’d fallen too far behind (that razor sharp analytical mind at work). And I have improved, but not to the extent that I might have done, could have done, should have done.

I fell into the classic trap that we face as business owners – the day-to-day, tactical stuff took more of my attention than the strategic stuff.

So, the lesson I’ve learned this summer is that I have the potential to achieve a “decent” score in golf. I was certainly able to develop a better strategy (swing) than I’ve ever had before. But my attitude to execution meant I didn’t get to reap the full benefit of my strategy.

But I am now keeping a keen eye on the execution of my business plan (see Physician Heal Thyself)!

Have You Ever Seen a Business Plan that Worked?

Saturday, October 3rd, 2009

Well have you? Personally, I’d say “Yes, but….” But what you may ask? Well, firstly the plan wasn’t written from the back forwards. In other words it wasn’t written as a result of a statement like “We need to get $X thousand/million from the bank/lenders.” Secondly, it wasn’t written because someone (I hope it wasn’t a consultant) said “A company of our size should have one”. Thirdly, once written it wasn’t put on the shelf and forgotten for the rest of the year. And, finally, no one expected things to happen exactly, and I mean exactly, the way the plan predicted.

A plan that starts with a look at what’s going to happen in the industry and then at how the competition are positioned, helps highlight opportunities and threats. Combine this with an honest assessment of the company’s own strengths and weaknesses and you’re on the way to developing a fairly logical strategy. Using that to develop three financial forecasts – a “best case”, a “worst case” and a “most likely case” helps keep people’s feet on the ground. It also helps if the assumptions made in each case are carefully recorded. Compare this approach to starting to write a plan knowing what the final financial numbers have to look like and you can figure out, fairly quickly, which of the two plans is most likely to “work”.

A good reason to write a plan is to figure out the answer to a question – like “What would we have to do to increase our profits in each of the next 3 years?” People will be more motivated to approach the process in a logical, thoughtful way than if we’re doing it because “we should have one”. Part of the answer is working out what the company will have to do – for example buy plant and equipment, add people, and change the way things are done. Those things would probably be written down somewhere anyway – with, once again, all of the assumptions made – so why not put them in a plan? If the money we’ll have to spend and the people we’ll have to hire are related to the increases in sales they’ll help to generate, it becomes easier to see them as investments instead of expenses.

Plans that work are dog eared. Why? Because they’re pulled out regularly and reviewed. During the planning sessions the “big” goals – increase sales by $500K – are broken down into smaller actions – introduce a new product, hire new sales people. Action plans – with SMART (specific, measurable, attainable, realistic and time related) objectives – are developed and written right into the business plan. Someone is designated as the “champion” for each action. She/he is responsible for getting it done. It’s easy to check, for example once a quarter, whether well defined actions like these have been completed. At the same time actual developments in the economy, industry and marketplace are compared to the assumptions and the strategy updated. Financial results are compared with the forecasts and adjusted if necessary. These are “no blame” sessions – if there are performance problems with some individuals they’re dealt with separately – just an opportunity to update some projections with reality.

Why aren’t these guilt filled, finger pointing sessions? Because the people who did the planning know that they can’t predict what the weather will be tomorrow, what the stock market will do next week or how their favorite sports team will finish the season. They measure how well their plan has worked by how close their estimates came to reality. If any of us could exactly predict the future – well, I wouldn’t be writing this and you wouldn’t be reading it.

I tell myself that one of the advantages of getting older (there have to be some surely) is that you gain a lot of practical experience – both good and bad. A couple of the things I’ve noticed, along the way, are related to business plans. Firstly, the companies that I’ve been involved with which had good business plans always performed better than those which didn’t. Secondly, those companies hadn’t written their plans to meet some predetermined outcome; they’d written them to help answer key questions affecting the future of the business. Finally the owners had a realistic approach to forecasting the future and, most importantly, they made their plan come to life.

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