I’ve been thinking lately about how to balance two opposing goals. One is keeping our economy open so that we avoid a deep recession. The second is containing the COVID-19 Pandemic. Companies have these kinds of seemingly opposing conflicts. A decade ago, British Petroleum was balancing the need to increase oil production (through drilling at sea) with the need to protect water and workers. More recently, Boeing was balancing the need to get the 737Max to market at an attractive overall cost against the safety needs of travelers. In the early 2000s, the Boards of Directors of US banks wanted higher stock prices through growth in assets without depleting capital. We all know these balancing acts went awry because leaders pushed one goal at the expense of another, leading to major crises. Further, the solutions to these imbalances were all costly. Pushing up…
Business model success demands strategic leadership, societal consciousness and civil cultures
I wonder if the editors of the January-February, 2013 issue of Harvard Business Review connected the dots among their articles. As a reader I did. “The 100 Best CEOs in the World” is the cover story for an issue that also includes the article “Strategic Leadership: The Essential Skills.” Too many CEOs and their C-Suite teams invest too much of their time in operational management. They fail in the role only they can perform: designing a winning portfolio of business models and the hard-to-copy company capabilities, processes, culture, and ecosystems that they leverage. Strategic leadership is all about this work. I am not saying that operational work is unimportant. Indeed, it is vital. No customer will pay your business for inefficiency or quality issues, and competitors will likely use them to seize advantage. But the leadership team’s role is to establish the measurements,…
A sad “Kodak moment” business model failure
Louis Pasteur — “Chance favors the prepared mind.” This quote motivated Bill Welter to co-author The Prepared Mind of a Leader: Eight Skills Leaders Use to Innovate, Make Decisions, and Solve Problems (Jossey-Bass, 2006), a thoughtful leadership book. Bill’s also principal of Adaptive Strategies, a small business that specializes in the application of critical and strategic thinking for business through workshops, strategic thinking behavior programs and one-on-one coaching. And, as I write on the day after Steve Jobs’ sad passing, I am sure Bill would agree that Jobs modeled the attributes Bill wrote about. (See below.) From The Prepared Mind of the Leader Observing. Seeing beyond the obvious Reasoning. Moving from the known to the undetermined Imagining. Envisioning the future before it arrives Challenging. Pushing for higher and deeper thinking Deciding. Choosing with consequences in mind Learning. Keeping a developmental mindset Enabling. Exercising…
Wall Street ruins many sound business models
Have you ever observed the energy that leaders of publicly traded companies exert to announce and then deliver promised quarterly financial results? Surely, like me, you’ve wondered how multi-billion dollar companies composed of multiple divisions, and even more business units, achieve their financial forecasts – exactly. My concern is not just about the non-value added time leaders spend pulling orders forward into the quarter and costs back into the next quarter so that reported results match predictions, lest stock prices plunge. I am far more concerned about the value-destruction set in motion by yet another prevalent dysfunctional behavior – promising unrealistic growth, which appears to also happen a lot. A recent analysis of earnings trends by strategy firm McKinsey & Company shows that earnings growth is much lower than many companies’ publicly announced growth targets. From 1997-2007 (go-go years in the economy), large…
Best practices from mid-size gazelles with winning business models
Four fast-growing mid-size company CEOs shared success drivers at the recent Milwaukee Biz-Tech Conference-Expo. With rapid growth rates and distinctive business models, their advice is worth heeding. The panelists Mary Isbister, President of GenMet, a custom metal fabricator Mike Malatesta, founder and president of Advanced Waste Services, Inc. a customized service provider that reduces customers’ risks and waste. Sue Marks, founder and CEO of Pinstripe, Inc. a talent sourcing solution Craig Schiefelbein, president and CEO of PDS. PDS architects, supplies and implements IT solutions for mid-size companies. (See my PDS blog.) Their advice Never waste a downturn. Pinstripe invested in self-service infrastructure during the downturn that will speed throughput of candidates and allow its employees to do more work and higher-level work as the economy recovers. According to Harvard Business Review, market shares shift significantly during a downturn, a lesson Pinstripe capitalized upon….
Brown goes green with a smart business model strategy
I have long admired UPS for its continuous improvements in customer value. With a mission to “synchronize the world of commerce by developing business solutions that create value and competitive advantages for our customers,” the world’s largest package deliver company has emerged as a leader in supply chain management services and less-than-full truckload shipping. These additions enable even the smallest of companies to compete with the big boys without distribution issues precluding ever being considered. Indeed, UPS is one of the reasons barriers to entry have fallen in many industries. UPS argues that logistics (the planning and control of the flow of goods) is intricately linked to sustainability, as the goal of logistics is to use the least resources to transport items from one place to another. In a one-page advertising spread in last week’s Wall Street Journal UPS touts its efforts…
Businesses start to die when business model innovation stops
Young women and teens are ruthless customers, shifting from one on-trend store to another as quickly as they shift love interests. The retail clothing industry is therefore a great place to learn this vital leadership lesson: In today’s information-age economy, business model innovators emerge as winners, while those delaying business model innovation steadily lose market share. Business Week’s Benetton: A Must-Have Becomes a Has-Been tells a sad story of a retail chain I first encountered and fell in love with in the late 1980s. Founded in 1985, this Italian clothing maker brought consumers the look and feel of European clothing at an affordable price, accompanied by its bold United Colors of Benetton advertising that paralleled the bold colors of its clothing lines. By 1993 the company was 7,000 stores strong, with locations in high-end shopping malls in major US and European cities.While Benetton…
Leading Business Model Innovation
Craig Schiefelbein, CEO/owner of Wisconsin-headquartered Paragon Development Systems, Inc. (PDS) exemplifies strategic leadership. Is it any wonder then that his Information Technology Solutions (IT) company has grown in twenty-two of the last twenty-four years and strategically partners with healthcare IT departments across the Midwest? Schiefelbein’s strategic leadership rests first and foremost in his willingness to change his company’s business model. “We’ve changed our business model seven times. Every time I’d think we had it all figured out only to discover we’d be out of business if we didn’t change. The challenge is in running the business while also rerouting it, and doing it before the changes become mandatory.” PDS started humbly in 1986 as the computer component wholesaler, Memory and More. Today PDS architects, supplies, implements and manages entire IT hardware infrastructures. Its business model involves aligning PDS’s unique blend of leadership, services,…
Business model innovation starts with challenging hidden assumptions
Impressionist artists were excluded from top official exhibitions because their “fuzzy paintings” did not fit the mold (i.e., set of assumptions) of what constituted great art of its time. So Monet, Van Gogh and others formed their own association, held their own exhibits, and attracted an art dealer who needed to differentiate himself from established art sellers. And that’s how modern art was born. Do these century-old reinvention patterns feel familiar? Treating an assumption as a fact can be very dangerous, as dealers of classical art discovered. Great leaders are willing to unearth hidden assumptions and challenge their validity. Consider the watch industry, at the edge of creative destruction with the explosion of digital communication devices telling time. If you’re like me, a millennial generation parent, you may know that look of disbelief when you ask your child if she’d like a watch…
Three business model lessons that Walmart forgot
Love Wal-Mart Stores, Inc. or hate it, you have to admire the consistent business model strategy its leaders followed to emerge as the world’s #1 retailer. They dramatically improved distribution productivity – in fact, supply chain as a revered specialty arrived with Walmart, as did a measurable bump-up in US productivity due to Walmart’s efficiency. They then leveraged growing power over its suppliers to fulfill Walmart’s compelling value promise – “everyday lowest price.” It took decades for competitors to figure out how to stop the Fortune 500 company’s march. Did leadership hubris then lead to Walmart Stores, Inc.’s weak post-recession performance? Walmart stores open at least one year lost .75% revenue each quarter over the past year while Target, Costco and Family Dollar saw same-store revenue climb. Walmart’s decline is about more than post-recession consumers shopping-up. The American consumer is still highly price-sensitive,…