Wednesday, February 25, 2015

The Status Quo = Steady as She Sinks

There are many metaphors describing the human tendency to avoid making hard decisions.  My favorite is “steady as she sinks.”
One of my earliest bosses taught me the meaning of that catchy phrase, and the importance of provoking decisiveness. Our business unit was trying to break into a new market. We had assembled a team of diverse people, each bringing strengths without much overlap. The theory of our leader was that we needed to cover a wide front with expertise in order to detect, assess, and react to opportunities.

Our modis was to collaborate as a team to pick our battles, and then to adjust the profile of our unit to respond accordingly. But, not knowing which battles would be presented to us, we needed a generalist orientation.

In many ways, we acted like a startup business, even though we were part of a much larger organization. The market we sought to penetrate was polluted with entrenched competition and a client base that tended to stay within a known community of service providers.

We had to work hard to gain recognition. Our targeted clients were comfortable with the familiar, and we were a new entrant. How could we challenge the status quo and the perceived lower-risk of doing business with the old guard?

We adopted "steady as she sinks" to provoke our clients into asking themselves whether the old guard were the right partners for the next era.

I liked the multiple interpretations the phrase conveys. To me, it challenged complacency and the tendency to take the easy or comfortable path. Like the boiling frog, just because everything around you feels familiar and stable doesn't mean that you're not losing.

We were quite successful with our strategy of provocation; our business unit grew with some impressive wins.

The adage holds true even better today.

I recently helped several companies think about new sources of growth for their very successful businesses. As leaders in defined markets, the executives couldn't help but constrain their thinking to the boundaries within which they'd always worked. They perceived that reaching beyond those limits would be too foreign, require new skills, and entail uncertain risks.

Most of these companies were faced with the fact the markets are changing at a pace that is unprecedented; the old boundaries are being blown away by new capabilities that are being conceived and implemented with great pace. They could fight to keep share in the markets that they knew well and were most comfortable, or look to redefine the boundaries and reset the game.

Making no decision is tantamount to refusing to change. Look at the increasing tendency of activist investors who are indicting the decision-making of incumbent management for inadequate aggressiveness around change.

On one recent occasion, as we weighed the merits of a bold move into an adjacent market, an executive asked, "If this is such a great idea, why hasn't anyone done this already?" 

The answer? Often times, fortune favors the bold.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: born1945/Flickr

Monday, February 23, 2015

Perhaps You Haven’t Yet Escaped Y2K ...

Perhaps You Haven’t Yet Escaped Y2K...

When they were younger, my kids seemed fond of asking for a "do over" whenever they made a mistake or failed to achieve some goal. They cherished the ability to wipe the slate clear and start fresh.

You probably have the same desire in business.
Serving in various leadership roles, I commonly found myself wishing for the option to build new services from scratch, rather than wrestle with legacy encumbrances.

In 1999, I was appointed CEO of one of the world's foremost Y2K consultancies. The entire company was engineered around solving one particular problem, the millennial date change.
I leapt into the role with the belief that there were assets in that company - smart people, trusted client relationships, detailed knowledge of corporate applications and insight into complex operating environments - that would one day allow us to develop a new set of marketable services.

Sure, there might be a dip in the financial performance of the company as we re-tooled for the future ... that would be expected. Having come from a world of running complex global operations, I knew that there would be great demand for accomplished practitioners in combing the hairball of systems that most companies use to run their business.
Surely a Y2K consultancy could be relevant after the passing of that one event. Right? Those assets were to be leveraged, weren't they?

We didn’t count on the burst. Those weren't the best years to reinvent a small publicly-listed, one-trick pony. We ended up selling the firm.
Across many industries today, I sense a similar ambition for reinvention. They look to their current assets - organizations, talent, products, clients, etc. - with the hope that those can be refreshed for relevance in new economic conditions.

Almost every executive enjoys the intellectual exercise of a "greenfield" design. What would you do if you were starting your company today? Increasingly, this way of thinking is fueled by nimble competitors and even activist investors. If someone else can build a better mousetrap without the burden of existing people, processes, and business constraints, shouldn't you be able to take those same actions?
This notion reads much easier than it lives. It’s a tough ask to be able to see through the obstructions of present-day business burdens to reimagine a business that truly leverages assets in a new model. It takes hard scrutiny to recognize which of your current assets are truly valuable for the future versus being a drag on your ability to change. Blockbuster probably thought their retail footprint was an asset.

In 2000-2001, many industries rebooted. Companies failed. Others merged. Fortunes were lost. Unbridled optimism for bright and shiny new business models overtook common sense. Neither the hare nor the tortoise survived.
There's a real art in designing for the future when so much disruption and change is occurring all around us. Almost feels like a millennial date problem, doesn't it?

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.


Image: Mil/Flick

Tuesday, February 10, 2015

Manage Your Risks Like Uber Does


I love Uber.  The car-on-demand service has changed how I think about transportation. It’s allowed me much more flexibility in my plans, by giving me confidence that I can secure a car within minutes, from virtually any metropolitan location.

At the center of the Uber proposition is the question of risk.  I think of this in three forms:

1)    What is my risk, of NOT being able to secure transportation via Uber? So far, in my experience this risk is very low.

2)    What is Uber’s risk, of there not being enough customers using its service to cover its fixed costs? Based on their reported volumes, so far so good (with the notable blip around reputational risk from misuse of customer data!)

3)    What is the average Uber driver’s risk, of there not being enough demand for their services to pay for their cars and their time? I ask every Uber driver how the deal is working for them. Every one of them has been positive.

Do you want more risk in your life? Do you wake up each day and ask, “How can I increase my risk today?”  It’s natural for you to seek rewards in abundance, and minimize the your risks. 

Did Uber go buy a fleet of cars and hire a herd of drivers in the hope that the demand would follow? Nope. 

Uber’s business model spreads the risk. Uber doesn’t bear the burden alone. They achieve this lighter-risk mode of service in a way that makes it easy for their customers to do business with them.

Why are you bearing so much risk?

Most businesses grow slower than Uber, but take more risk. That is illogical.

For many years, common wisdom said that you must own and operate the assets that you use to serve customers. Look at the history of corporate acquisitions that were motivated by collecting scale in hopes of creating a dominant market capacity.

The world is shifting from a focus on economies of scale, to one that celebrates economies of skill.

Uber is skillful in making it easy for travelers to secure a car. They are similarly skillful in vetting their drivers as positive extensions of the Uber brand. They own the processes necessary to do this, but not many of the underlying assets.

Look at the increasing frequency of crowdsourcing for new ideas (paying for actionable outcomes, rather than for the effort to think), or the adoption of robotics/automation for business processes. These are examples of techniques that tap into intellectual assets without carrying much risk.

In the old world, R&D costs were substantial and focused on features; marketing was about promotion; sales was about closing deals; and service was about implementation and repair.

The shift of risk manifests across that lifecycle. Companies such as P&G spend considerably less today on product R&D than they did in the past, despite having a culture of product innovation. They’d rather pay for a good idea from an external source than carry the costs and risk of owning this responsibility themselves. P&G’s contribution to success comes through the brands that it manages and the promises those brands make to the consumer.

Ask yourself this: why does my business need to carry so many costs, and bear so much risk?  There must be a better way. 

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.


Image: afagen/Flick