1.  19% of respondents are more negative about homeownership than they were 6 months ago

2.  37% of American see their ideal home as being less than 2000 sq ft…big deal out here in the Southwest where homes have been built bigger and bigger

Change is not a negative in and of itself.  However, not recognizing change has occurred and then thoughtfully planning for it is.

Frankly, lessons and general principles are easier to learn in an exaggerated environment.  Often case studies in business school play up this fact by including over the top details that make it easier to learn a new concept or approach.  As many of us know, real life rarely has that kind of clarity.  So sometimes, the larger-than-life nature of reality TV makes it a classroom of sorts for those willing to weed through the context.  All this brings me to Whale Wars…have you seen this crazy show.  A group of committed environmentalist (Sea Shepherd Conservation Society) staunchly opposed to the whaling by Japanese fisherman in the Antarctic, race around the Japanese boats attempting to disrupt, annoy and if possible bring an end to the whaling.  Needless to say, this is dangerous work and the Japanese, to their credit have been fairly stand-offish, though quite vocal in their frustration with the group.  Yesterday, things got more serious, as one of Sea Shepherd’s speed boats (which looks a little like the Bat mobile I might add) was run over by a Japanese security escort (video below).

The specifics of how it happened, is not the point of this post.  The takeaway I had was that when small and mid size companies, compete with larger enterprises, eventually there will be run-ins and clashes.  Especially, if your small and mid sized business is providing extreme value and disturbing the traditional supply/demand curve for your market by introducing a new approach, perspective or passion.  Thus, the forward thinking CEO and Owner must be prepared for this eventuality.  Here are two principles to keep in mind:

1. Competition is Good, but Respect is Crucial – Too often I have seen sales people and managers in the field, earn business at the expense of competitor’s reputations.  The other provider is not just more expensive but also a low trust firm as an example.  Rather than staying focused on advantages their product or service has to offer, the easy sale is to impeach the approach of competitors.  You must know and understand without a doubt, eventually your competitor will hear of this.  A client will defect and share the pitch you and your team made.  Many times, there will be no response but if you pull a dogs tail enough, eventually it will bite you; and the bigger that dog is, the more that will hurt.  Remember, large, national and multi-national competitors have pricing advantages that can allow them to hammer down on supply chain costs or they may just well cut prices till you have run low on cash.  In today’s economic environment, price is very important part of the decision calculus for companies.

1. Relationship is Critical – You probably know this.  In fact, it may well have been the impetus to begin your company or join the small to mid size firm you call home now.  However, over time, it is easy to forget and with the focus on staying profitable and conserving cash right now, relationship can fall to the bottom of the priorities list and with it…your advantage.  As mentioned above, larger firms can enjoy pricing advantages meaning your customers need a compelling reason to be with you.  Have no fear though; relationship is such a vital component to all aspects of our lives that this can carry much weight, as long as it is managed correctly.  One CEO I worked with often said, “You can pick up the phone and say it or you can say it in person and show you care, which will it be?”  His focus on the personal touch has made his company competitive, even with prices 2 to 3 times higher than his competitors.

By following these two principles, you can insulate yourself should you ever have your own “Whale Wars” type confrontation.  In fact, they might just help you avoid it all together or open t he doors to collaboration and  buyouts.  Respect your completion and focus on the relationship with your customers…basic, simple and vital.

To help, Rose/Matlock Consulting (RMC) will be starting a  new series:

This will be a multi-part exploration of back to business basics, leadership insights and organizational breakthroughs to enrich your 2010.  Come along with us as we explore the fundamental behaviors of success for individuals and companies; we will also be looking at case studies and sharing experiences.  You will not want to miss a single one.  Make sure to subscribe to our RSS feed or look for a *new* newsletter and update subscription option soon!

Christopher Matlock, is available to train and speak with your group, management team or upcoming conference.  Email or call for rates and availability.

chris@rosematlock.com              

623-521-0875

     The second little boy strode valiantly towards a different goat.  He too offered up single bites and the goat took them.  However, for reasons that may never be clear, the goat grew impatient with the morseled approach and in his hasty move to grab the rest of the snack, bit the young boy drawing blood.  The young child screamed in shock more than agony.  The father rushed forward, pulling his son into his arms, quickly joined by mom, and they both reassured and soothed the boy, telling him he was safe now, the bad goat could not get to him anymore. 

     For the rest of their days, the two boys, who grew up in the same house, same parents, same schools had one thing very different about them.  How they thought about goats.  The first little boy, upon reflection, thought of that beautiful day, his loving parents and brother and a wonderful day with some farm animals.  The other little boy, instead remembered a vicious attack by an angry goat, ruining what could have been a fine day.  Since that time, anything having to do with livestock but especially goats fills him with a fear that causes mental anguish if not a physical dread.  Same day.  Same parents but such different viewpoints and perhaps most importantly those experiences are still shaping them today.

     This is nothing more than a fable (your intrepid author has visited many a petting zoo and emerged unscathed) but the lesson it teaches is very real.  Our experiences shape us.  Many times, it is positive.  We win a big piece of business through a particular marketing campaign.  A certain employment ad leads to a phenomenal hire.  We establish a  strategy and development plan that leads to huge growth in sales and morale.  All of these experiences build on themselves in a virtuous circle that leads to greater momentum for future decision making.  However, they can also blind us to other alternatives, process improvements and opportunities that do not fit our current paradigm and experiences. 

     The first little boy in our story cannot envision a visit to the petting zoo that does not go incredibly well.  Sure, he’s heard the story of his brother but he has not experienced it first hand.  It is simply not real to him and so does not shape his decision making.  Leaders and managers are not immune to this positive stimulus blindness.  A tendency to imagine the best possible outcome not because it the most likely but because it is the only one they have known.  One, need look no further than the most recent debacle involving mortgage backed securities (MBS).  CEO’s, boards of directors and risk managers seemed blind to the possibility that home prices could turn south.  Certainly it had occurred before (in fact the Depression of the 1930’s can be partially attributed to a real estate bubble) but the success of MBS’ through the 1990’s creates an echo chamber of success that screens the possibility of failure and since no down-line managers want to be labeled as the “negative nancy’s” of the team, group think prevails.

     Another example of this happened in the early 1990’s at Quaker Foods.  Snapple was created in 1972 in New York and eventually became the category king of ready to drink (RTD) teas.  In 1993, Snapple went public but within 12 months began to run into problems as the market for RTD teas quickly became crowded.  Seeing the weakness, Quaker stepped in and bought the company for $1.7 billion representing a  staggering 28.6 times earning and 330% of revenues.  Could the purveyors of oatmeal be blind?  What would have caused them to step into the breach against competitors such as Pepsi Co and Coca Cola at such a rich price?  Gatorade…that’s why.  When Quaker purchased Gatorade back in 1983 and took it from $90 million in sales to over $2 billion.  Success begets success right?  If we made Gatorade a household staple surely Snapple cannot be far behind.

     Quaker made two classic mistakes.  First, they assumed the success of Gatorade was an outgrowth of their management and branding.  Was a portion of the achievement attributable to their foresight and strategy?  Sure, but certainly it was also a case of having the right product at the right time (as is so many times the case).  The right product combined with Quaker’s distribution network spelled winner.  The second mistake was to think Snapple was Gatorade.  I don’t know about you but when I get done with a workout, the first I think is…Tea!?!?  No, Snapple is a beverage enjoyed in an entirely different context and perhaps by a different group of people.  In fact, much of Snapple’s success was due to catchy, off kilter advertising (remember Wendy Kaufman, the receptionist at Snapple?)  Gatorade and the way it was marketed, distributed and sold was the polar opposite of the niche-y, sheik nature of Snapple.  Trouble’s brewing!   Quaker quietly sold Snapple in 1997 just three years later…and at a loss.

     What about the other little boy.  The second child’s bad experience has blinded him just as much from the possibility that not all goats are evil.  His negative encounter has colored all future interactions he has had; both the real and the theoretical.  Many leaders and managers suffer this same fate as success blinds us so does failure.  Dead ends, poor outcomes and events that have previously invited criticism become behaviors to avoid and the physic pain associated with them becomes a mental electric fence keeping us from opportunities.   Consider  this thought:

In the struggle to hold onto the past we often miss the opportunity to grasp the future

     Too many times, leaders and managers ignore opportunity by being overconfident in worn out ways of accomplishment that blind them to change or by avoiding that which they remember to be so painful.  The truth and frankly the genius of success is too fall somewhere in between.  Organizations, like the pendulum of a clock, swing endlessly back and forth between these two extremes and the challenge for leaders is to pick the right point to act as well as the right issue to stimulate their teams.  With careful self reflection, you can identify your own petting zoo, your own goats that seem to keep you from the extremes.  Examine these mental maps and ask yourself:

• �
  • �
    • What am I missing by just enacting the same strategy and plan again and again?
    • What am I most afraid of and how is that influencing the decisions that I make?
    • What are those that I lead most afraid of and how is that influencing their behavior?

     Thoughtful time spent on these issue and more can help you unlock your potential.

Christopher Matlock, is available to train and speak with your group, management team or upcoming conference.  Email or call for rates and availability.

chris@rosematlock.com              

623-621-0875

The takeaway for business is to think critically about what products and services they are putting into the market.  Are you targeting your most profitable client?  Is it a sustainable advantage?  What would happen if you had to re-price to the down side by 5%?  10%?  Worse yet, how about 50%?  Answers to these questions are best viewed use a blank sheet or Greenfield approach.  Collins, in building off this analysis advocated by management guru Peter Drucker, argues that you need to challenge yourself with what you might need to “un-plug”.  Companies and individuals simply cannot be all things, at all times to all people.  Attempting to do that or worse yet, failing to move on to the new expected product or service evolution can lead to irrelevance or failure in a blink of an eye.   

In a contrasting example, I watched one company grow from zero to $10 million in revenues almost overnight, based on the founder’s ability to create revolutionary products. Unfortunately, the company stalled out and was eventually acquired, because it never made the transition from being a company with an innovative founder to being an innovative company. The founder tried to solve the company’s problems by working extra hours on new products—in short, by more doing…he should have done less, which would have forced the company to become innovative independent of his genius. – Jim Collins

What do you need to un-plug from in 2010?  Given the chance to start from scratch, with what you know now…what would you do differently?  Do not be afraid of the answers because no one said the changes had to be implemented overnight but with reality based assessments here, you can build a rock solid implementation plan for the future..

Of course, once you start eating it, the whole look and smell of the meal will be destroyed!  How dare you!  I want that meal preserved at all cost!  Obviously, this would be the ranting of an un-well man wouldn’t it?  Yet, many business’ and individuals engage in the exact same flaw in logic.  Sometimes referred to as “anchoring” or “focalism”, the logical error is the result of making a decision using only one piece of data, while typically ignoring newer, more relevant information.  Two stories this week brought me back to this:  Pepsi and Saab.  Soda and Cars?  Read on…

Pepsi announced this week that they will not be paying for advertising during the 2010 Super Bowl, the first time they will be not involved in 24 years.  Many in advertising are calling this madness.  Won’t Coca Cola gain an extraordinary advantage?  How can Pepsi survive…without the masculine frivolity that Super Bowl spot provide.  Simple – they have looked beyond the one fact most have focused on, namely they have had an ad for the last 24 years and instead are focusing on the future and other more relevant data points.  To begin with, Google News shows 347 articles just in the last 12 hours about Pepsi NOT advertising.  Jeez, that’s almost as good as having a spot but…it’s free!  More importantly, Pepsi is recognizing that while mega-brand halo advertising still has a place, it now has to share space with niche marketing, viral videos and social networking.  Each of these functions as a result of feeling like the viewer is in a small and unique group.  The Super Bowl is regularly promoted as one of the most viewed television events of the year.  How can one be special…if everyone saw it?  Good job Pepsi.

The second story that caught my attention was the announcement that Saab would be shut down by GM at year end after failing to attract the right buyout and financing offer from bidders.  The news has been met with dismay from many and lamented much as the loss of Saturn already announced earlier this year.  A careful analysis show that the retirement of these brands is not the result of failing to have credit liquidity or a freezing of M&A in the car market.  No, it is the inevitable outgrowth of consolidation in a capital heavy industry and perhaps just as an importantly…these were two brands that had simply not kept with the times.  In the late 80’s and early 90’s, Saab and Saturn were desirable cars (albeit by different groups) but those halcyon days of yore have been long since past.  Each new ad campaign by Saturn became more laughable as it tried valiantly to stay relevant and when was the last time anyone was truly yearning for a Saab?  No, the taste and desires of the next generation of car consumers have begun to move past these legacy brands and for the health of GM and really the industry as a whole, its time they became the content for the next Car & Driver review of great cars of the past.

Here at RMC, we are launching a new service in 2010.  Do we have the skills for it?  Sure.  The experience needed to pull it off?  Yet, it is personally uncharted territory and while we have the talent needed, it will be a new application for it.  Over the last few months, I have been surprised and thankful time and again as I have mentioned some of these new goals and how others have offered their advice, support and encouragement.  I have come too realize, that a goal inside your head can quickly turn from joy to terror as you constantly ask yourself questions that have no answer.

Instead, share your ambitions; enroll others in your vision for the future.  A manager I once worked with said, “The bigger your vision, the more people that can come along”.  If that is true, then one could also say that the more people you bring along, the bigger your vision can become.  Dell computers may have started in a college dorm room but it certainly did not stay there.  Dave Hewlett and Bill Packard may have started in a garage but it certainly did not stay there.  A desire left unrevealed is one that will eventually suffocate.

As you look to 2010, ask yourself what dreams, ideas and aspirations you have that have gathered cobwebs in your mind.  Its time to dust them off and offer them the light of day.  Will they all hold up?  No.  Are they all meant to be the “big one”?  No.  However, it is from the ruins of our mistakes that the seeds of our success are sown.  Most importantly, the big goals require more than one person’s hard work but often the combined talent and drive of many.  How can someone else sign up to help create your dream if you haven’t shared it with them?

James Newman, attorney at Holland and Hart and Howard Olson of M3 Planning lay out the most common ways closely held business’ are transitioned:

• Simply selling the business;
• Taking the company public
• Securing a strategic partner
• Merging with another company
• Transfer ownership to a family member
• Sell to employees or other owners
• Liquidate

Each of these approaches has their own benefits and risks and should be evaluated not just in a financial light but also an emotional.  True, some strategies will produce more payoff than others but it is how the owner and proprietor feels that often carries the most weight.  Is this business a function of many years of sweat equity, a reflection of the owner’s passion for many decades, perhaps a family name involved?  If any of these are true, merging or partnering may not be the best outcome as autonomy may be lost.  As Newman states:

It may sound odd, but when you plan your exit, it’s also important to know what kind of deal or deal terms you don’t want. This way if someone presents you with something you can’t live with, you can simply move on

On the other hand, if the business is more detached and has simply been a source of income, then going public, selling to others (family or not) or even liquidation might be just the trick.  As I said, the key to each of these is too evaluate not just the financial implications but the emotional ones as well.  One would be wise to also consider if they desire any ongoing involvement with the business as a manager, consultant or another position. 

At Rose Matlock Consulting, we recommend confronting the issues of business transition at least five years in advance.  This allows you and your team enough time to determine your ideal point of arrival (POA) in five years and begin to move your business processes, hiring, management and strategic planning into alignment.  Organizations that do this, not only lessen their own stress about change but also identify potential buyers as well. 

Are you looking for advice about how to prepare your company for your retirement?  Sale?  Or just reaching the next level? 

Call today at 623.521.0875 or email at chris@rosemaltock.com

When Collins and his team began to examine what behaviors or cultural mores supported this out performance, many themes emerged.  One of those, was the “hedgehog concept”.  The hedgehog concept is the nexus of three important questions that successful companies ask themselves:

1.  What are you deeply passionate about?
2. What can you be the best in the world at?
3. What drives your economic engine?

Collins uses a diagram to illustrate where these ideas intersect as seen below:

Collins and his team observed that companies who made the leap from good to great had invested significant time in examining, debating and identifying their hedgehog concept; an average of four years in fact! 

…if you have the right hedgehog concept and make decisions relentlessly consistent with it, you will create such momentum that your main problem will not be how to grow, but how not to grow too fast. – Jim Collins, p. 112

 How does this impact the small to medium sized business? Building a business often means becoming a master of many tasks , approaches and in a dynamic business environment, many types of products and experiences.  However, as Collins research shows, too many specialties is a recipe for just being good.  True market dominance is ultimately the result of a fanatical devotion to executing not just on a core competency but one that moves you into a market position you can uniquely dominate.

The last decade has had a steady supply of cheap money and as a result, consumers and businesses have had the luxury of not being very discriminating in their purchasing decisions.  Many product and service providers have been lulled into a false sense of assumptions about their offerings, blaming current performance on the recession at large and not a reflection of their own value proposition.  I would suggest that 2010 is not just an opportunity to manage margins better but also to correctly identify your hedgehog concept.  The pervasive lack of credit in the small to mid market means business’ will have to make smarter decisions and will put more pressure on supplier sot be best of breed.  That only happens when a companies’ resource (both people and product) are aligned behind the right actions.

What’s your hedgehog?  Call today to schedule team with our team to plot your path to market dominance in 2010.

623.521.0875

“The direction is clear,” Obama said. “When you think about how this year began … today’s report is a welcome sign that there are better days ahead.” – USA Today

So, have we turned the corner?  Is this now the fast track to better days ahead?  Can we all come out of our collective bunkers and resume our ways of prolific spending, consuming and unmitigated economic growth?  Not so fast…

What is being little reported is that in the month of November, 100,000 people STOPPED looking for work.  The tricky thing about employment statistics is they are comprised of multiple pieces of data.  It is not an issue of straight arithmetic but instead an ever changing universe of potential jobs, current jobs, seasonal work, etc.  In this case, the improvement in unemployment is largely a result of a small cities worth of people give up the fight to find new work.  How is that a good sign?  Millions more are only getting part-time employment when they desire fulltime.  Overall, 8 million people have lost their jobs in the last 18 months.

Over and over, we have been told that the US economy is a function of consumer behavior.  Nearly 70% of it in fact.  How can we have robust GDP growth in the future, if we maintain a 10% to 11% unemployment rate into the future?  Perhaps an even more salient issue is how can we continue to consume when much of the last decade’s growth was a result of cheap money and lax lending?  The economy does not rebound based on the stock market or asset bubbles.  Instead, real increases in productivity and employment are supposed to be the pre-cursor to a run up in asset prices.  Price refelct an increase in value and that is not what we have been witnessing for the last 6 months.

American business’ need to continue to stay conservative in planning for cash flow and inventory.  Focus on getting he most out of what you have, exploit opportunities in the market when they present themselves but do not be lured by the siren song of Wall Street right now and its predictions of a quick recovery.