A general focuses on the battlefield and where the enemy is coming from, while the soldier in the foxhole keeps his sight within a 10-yard perimeter. In a similar vein, business leaders must understand the lay of a more expansive external environment while others define and execute day-to-day tactics. Leaders supply fresh strategic insights by connecting the dots between things they observe, read or hear about to identify patterns and themes. It’s called conceptual thinking. Let’s see how it works. Three articles caught my eye in one day’s news. In the first article, The Council of Public Relations Firms was reported to be reinventing itself and the PR profession as traditional PR strategies of media relations and placement backfire in an era of consumer-generated social media. The profession made sense when NBC could reach 1/3 of US TV viewers. Now there are thousands…
Has the drive for efficiency through cost cutting gone too far?
The drive for efficiency has gone too far in my estimation. “But efficiency is always good,” you might protest. True, productivity gains increase incremental profits all else equal. But “all else equal” rarely holds true in practice. Therefore, like all good things pushed too far, gains from incremental efficiency initiatives may not be worth the price paid to secure them. Why is the Efficiency Goddess who brought us big box miracles like Staples, online retailing and record corporate cash balances failing us? Efficiency initiatives usually pay attention only to readily measurable costs, ignoring unintended consequences and opportunity costs. Why do CIOs limit support to only PC-computers? Why do CFOs reduce support staff, forcing administrative work onto revenue-generating managers? Such is the thinking of modern corporate managers: They are brilliant at measuring costs and lousy at measuring professional productivity. Shortsighted trade-offs are magnified as…
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,…
Business Model Strategy Built on Collaboration Succeeds
Two vastly different news stories, one about Alzheimer’s and the other about dollar stores, together convey an important strategic leadership lesson about the importance of alignment with partners in achieving an organization’s goals. Dollar stores (Dollar General, Family Dollar Stores and Dollar Trees) are growing rapidly at the expense of Walmart. Recently the dollar stores have added a lot more branded products e.g., Kraft, Heinz and others. Better packaged food selections, plus dollar stores’ closer (than Walmart) proximity to low-income neighborhoods has attracted new customers and larger shopping trips as rising gas prices increase the cost of driving to Walmart. Lipton Cold Brew Iced Tea and Jello No-Bake Cheesecake in a dollar store? I suspect that after decades of Walmart’s ruthless purchasing practices, consumer goods companies seek any opportunity to diversify their channels to gain supplier power to fight Walmart’s Herculean purchasing power….
The Corner Gas (Book) Price Wars
Do you remember when gas stations offered auto repair and maintenance services and teenage male employees filled your gas tank without an extra charge? Then you remember the corner gas price wars in which two gas stations located opposite one another on a busy street corner used penny differences in the price of a gallon of gas to lure drivers to their shop. I always drove to the gas station with the cutest boys. My parents shopped price. Can the Amazon Business Model Retain Its Lead? Walmart and Amazon are engaged in the same war today. The first battlefield is best selling books, where the two on-line retailers are losing money for each “Top 10 List” hardcover book they sell and ship to customers. But the war will be waged on a much larger battlefield – leadership of on-line retailing, the consumer channel…