“Mass” was the economic drive of the last few decades. Mass markets replaced national markets, which had replaced local markets. Walk into any city’s retail centers and malls a decade ago, and they looked identical. Manufacturing automation and global supply chains made goods cheaper. Clothing, curtains, bedding, hairdryers, blenders … much of what we buy has become so cheap that we throw items away rather than repairing them. My seamstress, who has been in business some 40 years, cannot believe how poorly made clothes are today. And her comments refer to the pieces she is seeing, the ones worth repairing. True, cars are more expensive. But based on their quality, longevity, and performance, they are a hell of a lot cheaper than their predecessors considering lifetime costs. And have you noticed that they increasingly look alike? IKEA brought us furniture so cheap that…
Trust makes the world go round
“Love makes the world go ’round,” according to the famous saying. But, in reality, it’s trust that makes the world go round, trust that is at the center of so many points of human interaction. Currency. We use the dollar because we trust the US government stands behind it. Without that trust, we’d be stuck in a barter system with a much lower standard of living. Our currency used to be backed by gold. We trusted our government enough that it removed the gold standard, opening opportunities for even more commerce. The dollar is the world’s trade currency because there is more trust in the US central banks than others. Business partnerships. Sure, contracts, long and short, codify the agreement. But ultimately, contracts are built on trust. Each party trusts that the other will try to fulfill its commitments or, there would be…
Create stronger external support for your business model success
Too often business leaders put a key fact on their mental backburner – their business is surrounded by a “containing system” that shapes their company’s opportunities, risks and outcomes. Not only should leaders align their business models with external market trends, they should try to influence or shape their containing system to best support their businesses. Here are two cases in point. As supply chain gurus, Boeing and GM have already assessed the impact of Japan’s recent natural disasters and are scrambling for parts. Less astute companies will discover over the next six months that their supply chains are more dependent on Japan than manufacturing managers ever understood. Journalist Barry Lynn predicted these disruptions in his 2005 book End of the Line: The Rise and Coming Fall of the Global Corporation. According to Lynn, America’s manufacturing sector has undergone a twin revolution. The…
Trader Joe’s Business Model Wins in a World With Excessive Choices
All too often the rationally best alternative comes with subtle trade-offs that reduce the emotional benefits of your purchase. Take the Accura I purchased owing to the high service costs I had experienced with my Audi. Within hours of driving out of the Accura dealership, I grieved the Audi’s zippier feel and realized that I had just paid a huge price premium for a Honda with fancy wrapping. The emotional loss need not always be the case. Take Trader Joe’s, in a class by itself when it comes to grocery stores. Fortune magazine captures the Trader Joe’s experience perfectly in saying, “Trader Joe’s is not an ordinary grocery chain. It’s an offbeat, fun discovery zone that elevates its shelves with a winning combination of low-cost, yuppie-friendly staples (cage free eggs and organic blue agave sweetener) and exotic, affordable luxuries – Belgian butter waffle…
Honesty Advances Business Model Innovation
Milwaukee Brewers owner Mark Attanasio demonstrates one of the most important qualities of a strategic leader – an honest assessment of the status quo. “We know we’ve got a problem, which is starting pitching. We as an organization need to face that reality and address it, as opposed to shrink from it or excuse it. Our offense is so good, if we were just average in pitching, we’d be a contender. We’ve had two seasons now of having a top offense and extremely poor pitching.” Attanasio then admits there is no one coming up through the ranks to solve the problem, suggesting a trade may be necessary. Imagine if someone somewhere in the J&J leadership team spoke up, “Our drive for earnings is leading plant managers to compromise quality to meet earnings expectations. If we don’t address our quality issues, I’m calling the…
What business are you in?
Baby carrot farmers are attempting to transform their vegetable into a daring, naughty snack food. The tiny orange roots are now branded Baby Carrots Rock. New packaging, bold ads and social media are part of a $25M marketing campaign. Two young entrepreneurs start College Hunks Hauling Junk, differentiating the experience they offer from what you’d except when the typical crew of a local mover shows up on your doorstep. Second Harvest Food Bank of Southern Wisconsin, which supplies food pantries with food donated by grocers and others, faces an insufficient number of food pantries to serve a growing number of needy families. Driven by its mission to eliminate hunger, it transforms itself into a mobile food pantry business after purchasing and outfitting large trucks. Harley Davidson changes the concept of its business from motorcycles to motorcycle experiences and the rest is history. Sweden’s…
When Is Bigger Better in Business Model Innovation?
I spent the weekend in Scotland, where one cannot escape RBS’s logo, RBS standing for The Royal Bank of Scotland. Its brand imagery stands out exiting the airplane, passing city billboards, and reading or listening to local media. Today, the people of Scotland own close to 70 % of RBS because the former (duly fired) CEO and his board believed that bigger is better. With a small domestic market of 5.2 million residents (about the size of Minnesota) and strong English competitors, RBS acquired what turned out to be a poorly run Dutch bank in order to grow. Thankfully, a strong domestic position will keep the bank in business; but it will be a long time before Scottish taxpayers are repaid for keeping RBS afloat. Small is beautiful. Consider PNC, the regional bank headquartered in my hometown of Pittsburgh compared to Bank of…
Are your business model and brand strategies aligned?
A new client asked me a good question today. “You talk Kay about helping us find our value promise, but my communications agency is totally focused on our brand platform. What’s what and why does it matter?” The answer rests in understanding communication challenges. The internal communication challenge Employees need a shared and actionable aim that advances the company’s success. It must be actionable so that employees and teams know how to go about their work. The aim must also be shared or else actions by one part of the organization hurt another part’s success, creating distrust and silo-mentality. (These two requirements are why “Grow profits and revenue” as the only aim fails.) The best internal directive is a value promise. It’s the promise the company makes to its target customers and the basis on which it wants to win business. Internally, it…
Business Model Strategy Execution Rests in the Details
“You’ll find the style you want at the optometrist store on State Street,” my most stylish girlfriend advised. Sure enough, I walked into rack after rack of brands and styles upon entering the shop. While the amount of choice was reassuring at first glance – surely there is a look here for me – I soon felt frustrated. Already daunted by the prospects of wearing glasses full time, selecting “my best” style felt as confusing and full of potential regrets as selecting a college felt when I was 17. “Can you advise me on a good style for my facial shape?” I asked the elderly clerk ten minutes into my trying styles on. “No. You’re on your own. But I can access the most expensive brands in the locked cases if you want.” Half an hour later, I left. The store’s “best choice”…
Without Appeal, You’ll Be Bypassed in the Slow 2010 Economy
From Oslo I attended an economic briefing from the Chief Economist of a major European bank yesterday. It was fascinating to hear the financial crisis and recession described from the perspective of the OECD, where the recession has been much worse than in North America. For example, Germany’s GDP fell 6.5% from its peak, with its manufacturing down 25% and exports down 26%. And despite massive European fiscal and monetary stimulus, his expectation for 2010 and 2011 is slow OECD growth, as is mine for the US economy. His most insightful comment was a quote from a UK central banker, “It’s about the level, stupid,” an analogy to Bill Clinton’s 1990’s campaign comment that helped him knock George Bush out of the U.S. presidency. The gap between actual economic performance and full-capacity economic performance is so great across the industrial world that the…