July 31, 2005
Tech grows up?
If our colleague Geoffrey Moore is to be believed (and who wouldn't believe him, given how many times he's been right), life cycle determines destiny. I keep seeing signals that Silicon Valley and tech in general are growing up, growing older, maturing... (see the July 25, 2005 Fortune article about Larry Ellison - "A Bad Boy and His Business Grow Up" (p. 36).
Does that mean that tech companies are finally going to have to invest in real management? What would they look like? A lot more like GE and a lot less like pets.com? Food for thought!
Posted by Rita at 07:46 PM | Comments (0) | TrackBack
Flowers at Chevron-add empathy
Loved the snippet on Seth Godin's blog (http://www.typepad.com/t/trackback/2894478) showing a photo of fresh flowers at a Chevron station. Reminded us of the many ways we have observed companies to create differentiation through adding a quality we call "empathy" - making a boring old experience like getting gas more interesting, exciting, nicer or funnier.
Posted by Rita at 07:44 PM | Comments (0) | TrackBack
July 26, 2005
A new use for Botox
One of our colleagues, Jim Thompson, passed along a tidbit that expands even further on the Botox story we wrote about in MarketBusters. It seems that Botox, which is actually a highly dangerous substance in certain forms, does more than help people reduce the appearance of wrinkles, which it does by paralyzing certain muscle groups. Now it turns out that Botox may be a boon to another group of customers, those who suffer from the production of excessive and uncontrollable perspiration. Yes, Botox appears to block certain nerve impulses sent by the brain to the sweat glands.
The condition (called "hyperhidrosis" if you really wanted to know that) is so difficult to control and so embarrassing for its sufferers that it can interfere with their ability to have a normal life -- in fact, many times such patients don't understand that their condition has a medical, not a personal, cause. We'll stay tuned to see whether this new discovery will further extend the growth of Allergan, the California company that turned a deadly substance into earnings gold.
Posted by Rita at 02:16 AM | Comments (0) | TrackBack
July 21, 2005
Korean parents send their kids to China
On our trip to Korea, we learned quite an interesting little snippet about where Korean parents are placing their bets for the future. It seems that it is now quite typical for Korean families to send their middle- and high-school children to China for some years. There, they get to learn the language, understand the customs and build networks beginning at quite an early age. Isn't this a fascinating long-term play? It reminds me of the educational push in the 1960's and 1970's in which many Korean students came to the United States to learn enough to form the intellectual foundation for what are now some major industries here, such as semiconductors and insurance.
Posted by Rita at 11:07 AM | Comments (0) | TrackBack
Backward looking consulting frameworks
Our Korean colleague, Hyokon Zhiang, is the Managing Director of a newly formed consulting practice, the Innomove group (www.innomove.com). He was a rising star at Bain, but decided to pursue building his own innovation-oriented consulting group after extensive experience with the tools of consulting left him discouraged. Many of the most time-honored and productive tools (such as the product-portfolio matrix, or portfolio allocation tools) are based on trends from the past. Although useful for making certain kinds of decisions, he notes, such tools aren't really helpful when it comes to finding new opportunities. That is a process which begins with ideas, and is future oriented, rather than starting with what's around today.
We have had the same concern about other consulting type tools - such as Design for Six Sigma (DFSS). Although just fine to use in certain contexts, we've noticed a tendency for companies to try to fit them to everything that they are doing, with what we suspect will be disappointing results.
It all supports and argument we've made for a while - while frameworks and management tools can be helpful in the right circumstances, part of the skill of using them is figuring out what tool works when. Clayton Christensen and Michael Raynor make a similar argument in their book "The Innovator's Solution" in which they make a plea for better management theory to guide actual decision making. There is no silver bullet, and no one-size-fits-all approach to innovation. The good news is that there is thus plenty of opportunity to benefit from infusions of fresh thinking.
Posted by Rita at 10:54 AM | Comments (0) | TrackBack
July 18, 2005
Cash-rich, imagination poor?
It stunned me to read that the 80 technology players comprising the Standard and Poor's index have $229 billion in cash and equivalents on their balance sheets (reportedly more than 2 times what they had at the end of bubble-year 1999). Depressingly, what are they doing with all that cash? Stock buybacks, acquisitions and dividends -- things shareholders like, but that don't necessarily create opportunities for the future. Indeed, one used to buy technology companies for growth, not for cash out. And yet, I constantly hear leaders in high-tech companies complain that they don't have the resources to manage both today's shareholder expectations and meet tomorrow's growth needs.
Perhaps the agenda should include more investment in time for the kinds of opportunity identification MarketBusting suggests.
Posted by Rita at 11:58 AM | Comments (0) | TrackBack
An Update on Service Corp. International
Euphemistically named Service Corp. International (SCI) is actually a mega-presence in the world of funerals. We wrote about their strategy of 'industry roll-up' in MarketBusters (chapter 5) noting that the company had skillfully managed to take inefficiencies out of the business through a series of acquisitions of small, fragmented players. This in turn led Service Corp. to be able to gain scale when many competitors can't. The strategy at the time was to emphasize product sales, such as high-priced caskets and other accoutrements to the funeral experience. But, as we predicted in the book, nothing lasts forever.
The Web has made easy comparison shopping for funeral-related products possible, leading to customers' becoming far more price-sensitive than they once were, even about such a delicate issue as saying goodbye to a loved one. Such behavior has now eroded SCI's one-time advantage. New CEO Thomas Ryan (appointed in February 2005) has instead repositioned the company to, in effect, pursue a different MarketBusting strategy, one we call reconstructing customers' consumption chains. He was recently described in Business Week (July 18, 2005 issue) as seeking to have his funeral directors 'focus on customer needs' as opposed to pushing products. So far, his new push into customer-centricity seems to be paying off: funeral revenues were reported to rise 4.7% in the first quarter of 2005.
Posted by Rita at 11:43 AM | Comments (0) | TrackBack
Japan surges forward
I just read a short piece in Business Week (July 18, 2005 issue, p. 30) in which evidence of Japan's recovery - even resurgence - are detailed. Among the numbers I thought were very interesting were that growth in non-manufacturing (services) has been seen to be 'improving' since March of 2003, with 20% of companies in a recent survey reporting confidence in improvement in this sector. As I've said before, Japanese companies have qualities that I believe will make them formidable competitors in the next round of competition in global services.
Posted by Rita at 11:36 AM | Comments (0) | TrackBack
July 09, 2005
New bankruptcy laws and entrepreneurship
On October 17, the Bankruptcy Abuse Prevention and Consumer Protection Act will make the use of bankruptcy as a way to erase debts and create a fresh start much more difficult. Although clearly some people end up bankrupt from poor money management, poor discipline or even bad luck, I do have some concerns about the long-term effect of the new bankruptcy law on entrepreneurship. If you compare the United States (with a rather high rate of business founding to the population) with other countries, such as Japan or Germany with far lower rates, differences in bankruptcy laws stand out very starkly.
In both Germany and Japan, debtors have to pay off all or most of their debts and have all their assets (homes, for instance) at risk. Over time, the specter of total personal disaster in the event of a business failure has had the effect of increasing the downside of starting a business. In Japan, for instance, it is not all that uncommon for owners of failed businesses to commit suicide as their only way out of an untenable financial situation.
In the US, in contrast, although entrepreneurs do not generally believe their businesses will fail, there is some comfort in knowing that if worst comes to worst all is not lost on the personal side. By increasing the downside of bankruptcy, the new law makes starting a business less like an "option" and more like a fixed commitment, right from the start. Such a change in incentives is likely to have unforseen consequences, but one that we can probably predict is a chilling effect on willingness to take personal risks on the part of our entrepreneurs.
Posted by Rita at 04:18 PM | Comments (0) | TrackBack
July 06, 2005
Where Japan's new growth could come from
I've just two days ago returned from a visit to Japan, where I met with people from an incredible diversity of companies while giving talks and directing the Columbia Business School Program "Creating Strategy". Although it's standard commentary now to bemoan lack of creativity in Japanese companies, I had a different take on the issue. It struck me forcibly that the very habits that make it hard for Japanese companies to sustain a great deal of diversity in thinking and behavior might prove to be a godsend in the area of services. Think about it: to create a massively profitable, service based business, a firm either has to generate substantial margins from a few large clients (as IBM tries to do), or it has to figure out how to capture scale in services.
Scaling up a service business, as anyone who's ever tried to provide customers with a uniform service experience can tell you, can be really tough. Here's where Japan's potential advantage comes in: once a procedure is in place, there is enormous cultural and habitual support for continuing it more or less unchanged. While that may not be so great if you are after divergent thinking, it could be a godsend when what you need the same reliable, repetitive actions no matter where your company is operating.
So let Japanese companies figure out that similar techniques that have made them such fearsome manufacturing competitors will offer advantages in services, and we could be seeing a whole new wave of Japan-led innovation. An interesting example of this next wave of Japanese competition might be the company Recruit. The firm covers job recruitment, as the name suggests, but also publishes and engages in other service businesses, and publishes a large number of magazines and other popular publications.
Posted by Rita at 11:05 PM | Comments (0) | TrackBack
July 05, 2005
Websense tames the Wild West of the Internet for Profit
Websense (WBSN), a software company, has hit a sweet spot for growth by making products that allow employers to optimize their people's use of the Web. Some interesting data from the company's web site (www.websense.com):
Internet misuse at work costs American organizations more than $85 billion annually in lost productivity.
Although 99% of companies use antivirus software, 78% of them were hit by viruses, worms, or other malicious applications.
37% of at-work internet users in the U.S. have visited an X-rated website from work.
Over 72% of internet users utilize high-bandwidth applications, including instant messaging, downloading music, and watching video clips.
Imagine - these are issues that even ten years ago would never have been understood as significant for most leading corporations. Websense, by providing tools that let organizations monitor and control how their people use the Web, has enjoyed explosive growth (48.9% last year alone). The company's story shows how entirely new market moves can pay off handsomely for companies adroit enough to capitalize on them.
Posted by Rita at 10:03 PM | Comments (1) | TrackBack
Radical Surgery gives Renault a MarketBuster
In late 2004, Renault launched a new car, the 'no frills' Logan, which exemplifies how eliminating complexity can provide a powerful engine for growth. The stripped down cars offer roomy, basic transportation, and that's it - few electronics, few components, a flat windshield, and no built-in radio or power steering. Eliminating complexity allows the cars to sell for a great price - $9,300, half the price of a Ford Focus or a WV Golf. Renault expects to sell 175,000 Logans this year alone, with a goal of ramping up to more than a million by 2010. Core principle? Take out attributes customers don't care about to offer an irresistible price.
Source: Gail Edmondson and Constance Faivre d'Arcier writing in Business Week July 4, 2005.
Posted by Rita at 06:29 PM | Comments (0) | TrackBack
