If P&G can’t get it right, what will the rest of us do? P&G the master of consumer branding recently reported a 11% year-over-year revenue decline, more than analysts expected. The maker of Tide, Pampers, Bounty, Charmin, Crest, and Olay blames market share losses for part of the drop as more consumers switch to lower-priced products (e.g., store brands). According to the Wall Street Journal, “In recent years, Procter & Gamble has put more focus on higher priced products – like pricier Olay creams – in an effort to drive growth. That strategy has hurt the company during the recession as consumers cut discretionary spending in areas like beauty and traded down to cheaper pantry staples.” The key uncertainty facing P&G is: Where is the consumer headed? For national branded goods companies, Main Street or national big box retailers, Prada, in fact any…
Four Seasons Is Down But Not Out if They Adopt a Business Model Innovation Lens
One window into the nature of the current recession and the uncertainty that it’s causing is through the fancy curtains at the Four Seasons Hotels and Resorts. The revenue per available room (the hospitality industry’s key financial measure) is down 25% year-to-date and for the first time in its history, the hotel management company has cut headquarters staff by 10%. In this recession, Four Seasons’ customers are hurting – wealthy individuals, the business service companies that cater to Fortune 1000 companies and the vibrant venture capital/IPO markets – significantly reducing stays at Four Seasons. Hotel property owners who contract with Four Seasons (which interestingly does not own any of its hotels, it only manages them) to hire and train their staff and manage their hotel properties are pressing Four Seasons to cut back on expenses and lower room rates to attract more guests….
On CNBC’s “The Call”, I Disagreed with Supply-siders Predicting Higher Inflation
I had occasion yesterday to be on The Call, a CNBC television show hosted by economist Larry Kudlow. Like other supply-side economists, Kudlow follows Milton Friedman in assuming that the inflation rate is driven solely by monetary policy. My topic as a talking head: Where is inflation headed in the US? Inflation matters because it affects the stock market, interest rates and our real wealth and income. I think horse racing is a good analogy for inflation predictions. A lot of people are betting on the horse called inflationary expectations: the Federal Reserve’s monetary stimulus will create higher inflation rates so let’s build that expectation into today’s interest rates and prices. Another horse is medical costs: pharmaceutical companies and health care providers are raising rates in anticipation pricing pressures once the Democrat’s national health care policy is enacted. Yet another horse is energy…
Capitalize on Customer Frustration with Your Industry
“What is your bank trying to sneak by you?” appeared in bold letters on my computer screen. The screen was then filled with the complex and confusing words we’ve all seen in small print documents communicating our banks’ fees and financial charge practices. I hate those documents, don’t you? In one of the cleverest business model innovations of the year, GMAC Financial Services, a $180 billion global financial institution built initially upon the General Motors’ brand, has renamed its bank as Ally Bank and redefined its value promise. Like a river seeking lower ground, Ally Bank moved right into the heart of our frustrations and forced compromises with the banking industry, offering a solution that we’ve been waiting for – a bank that’s on our side. Ally Bank’s value promise is relevant, compelling and differentiated: Bank with us and you’ll keep more of…
Value Promise and Profit Potential, Part One
Image via Wikipedia All customers buy on perceived value. Unfortunately, Walmart’s advertising has led us to define value as lowest price. We’ve forgotten that there are value promises beyond lowest price in today’s recession. Value is a mental scale with benefits on one side and costs on the other. Both sides contain tangible and intangible, emotional, functional and/or social factors. More benefits, more value, a formula Target exploited and Sears forgot. We stay in business if the customer exchange (benefits for price customers pay) is consistently profitable for us or, if we’re a venture-financed start up, promises profitability. Value promise and profit potential are interrelated. Understanding this interrelationship explains how to win. Way #1. Build the lowest cost structure for delivering required benefits. Your higher margins can be channeled back into the business to create further advantage. McDonalds dominates Wendy’s. Way #2. Offer…
The Real Strategy Work Is Business Model Innovation
Image via Wikipedia Many business leaders debunk strategic planning. “The external environment is too uncertain,” they argue. Or, “Strategy is decided at the point of contact with our customers and markets.” I also hate strategic planning because the decisions from strategic planning are strategic in name only. We delude ourselves into thinking that we’re planning strategically, when really we’re working at varying levels of the tactical. Year long tactical plans are as wasteful as a one-year plan for parenting teenage girls. Parenting tactics are decided daily subject to vision and values. There’s no other way through the confusion this age presents, just as there’s no other way through rapidly changing markets. The core strategy decisions for an organization are deceptively simple. The challenge rests in finding answers, as these questions are highly interdependent; and, strong competitors may have already claimed the obvious business…
Business Model Innovation – About My Blog
It’s gotten harder and harder to succeed in business for a long list of reasons that, like gravity, pull leaders into a short-term focus. Our planning deceives us into thinking we’re being strategic when in reality we’re just working at different degrees of tactical. The end result is that we’re too often operationally terrific and strategically shortsighted. Are you ready to unearth an exciting new growth strategy versus incremental improvements to today’s business? If so, you’re ready for business model innovation. My blog uses the lens of business model innovation to help you radically rethink what your business is all about in order to see previously hidden growth opportunities. Together, our conversation will help you create the mindset, mental-wandering, strategic thinking and knowledge that produces better growth strategy decisions and faster execution. Every organization has a business model whether or not leaders articulate…