Competitors Aren’t the Only Threats

Posted: May 3, 2012 in Brilliant Manoeuvres, Business, Contingency Planning, Crisis Leadership, Enterprise Robustness, Ethics, Exploiting Change, Leadership, Leadership Catalyst Newsletter, Management, Military Lessons, Risk Management, Strategy
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One of the things that I’ve noticed lately is just how vulnerable many companies (and other organizations) are to non-competitive threats.

I’m not talking about the traditional corporate bogeymen of big government and big labour. I’m talking about environmentalist groups, political action groups, and even lone bloggers launching verbal rockets from the comfort of their homes. Some of these external groups have good points, but many don’t. Their positions are often non-sensical or ill informed, especially when it comes to science-based facts. The ability to propagate disinformation quickly through blogs, online petitions, Twitter, and Facebook contributes greatly to the capabilities of anyone with a message or a cause.

Organizations need to be aware of this phenomenon and to take measures to protect their operations. Here are four cases in point:

•    A meat processing and packing company in the US called BPI came under attack last year by a lone woman in Texas when she started an online petition against using the company’s product in school cafeterias. BPI’s product, a kind of highly processed meat, apparently excites revulsion among some consumers, even though there have never been any cases of contamination or any other form of associated danger. It just appears to be ‘icky,’ to use a thoroughly scientific term. The consequences on BPI have been disastrous. It’s had to close 4 of its 5 production facilities because its clients—the Walmarts, Taco Bells, McDonalds, and others—have abandoned or put severe restrictions on it as a supplier.

•    Hydro-Quebec, the massive electric monopoly in Quebec, is planning on installing what they call ‘smart’ meters in homes across the province. These will enable more detailed data gathering and information transmission about consumption patterns so that the utility will be able to increase its efficiency. There are some 15 or 16 applications for this technique at the present time, and probably many more in the future. But some people find the fact that the meters emit radio waves to be a harmful side effect. Never mind that the emissions are so weak that they can only be measured in a lab similar to an anechoic chamber, Hydro-Quebec has to fight off ignorant opponents who don’t know the first thing about basic physics. Let’s hope the project goes through nonetheless.

•    TransCanada Pipelines has to fight against opposition to the Keystone XL pipeline from environmental groups in the US. The purpose of the pipeline is to ship oil down from the Alberta oil sands. I’m sure these groups have a lot good points, but the alternative to a new pipeline from Canada is to ship the oil from Venezuela and the Middle East by oil tanker which, once it’s on US soil, still has to travel in a pipeline. Unless the US starts consuming radically less oil—something I don’t think will happen anytime soon—I don’t see how shipping oil from another continent in a combination of oil tankers and old pipelines is safer than in a single brand new pipeline. It’s a question of balancing risks, not eliminating them altogether.

•    Stratfor bills itself as a ‘strategic forecasting’ consultancy, providing geopolitical and military-strategic assessments of the world and regional situations for paying clients around the world. It’s safe to assume that some of these clients are corporations trying to work in dangerous environments and governments seeking independent sources of information. Stratfor’s website and computer servers were hacked late last year, with the theft of competitive and client information such as credit card data and repeated illegitimate email blasts to the company’s client lists. The hacking had all the makings of a deliberate attack to discredit and disrupt Stratfor’s operations and credibility. The company has spent millions getting its operations back on a secure footing.
I’m sure readers have their own experiences or know of other companies and organizations that have had to react to these types of threats. I could have included SNC Lavalin’s dubious connections in Libya, or Talisman Energy’s difficulties in Darfur ten years ago, or even Apple’s Chinese sub-contracting practices.
I write about this phenomenon in my forthcoming book, Brilliant Manoeuvres. It is my contention that many companies need to worry as much, if not more, about nebulous threats from non-commercial entities as they do from traditional business rivals. As we’ve seen from the examples above, the threats can be costly and, in some cases, disastrous.

These types of threats can come from anywhere. Here are some questions to ask in identifying potential threats:

•    Do any of our activities or products, though legal and approved, nonetheless elicit opposition in some way?

•    Has anyone ‘threatened’ to take us down or harm our operations in any way?

•    Is there anything we do that we feel uneasy about making public, even though that activity may be perfectly legal?

•    Can what we do be interpreted in a highly negative light from the standpoint of the environment, politics, or labour practices, whether in North America, Europe, or anywhere else in the world? (Think of the opposition to Apple’s sub-contracting practices with Chinese companies with abusive labour practices.)

There are many other questions that can be asked. The point is that someone somewhere may not like what a company is doing, and can take action quickly to sully the company’s reputation, sometimes with massive effect on its business. I will blog more about this topic in coming weeks, specifically on what to do about it.

© Alcera Consulting Inc. 2012. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

Consumers Can Vote with their Tweet

Posted: April 18, 2012 in Business, Contingency Planning, Exploiting Change, Strategy, Ethics, Crisis Leadership, Marketing and Business Development, Military Lessons, Risk Management, Management, Enterprise Robustness, Brilliant Manoeuvres
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Remember when the expression was “Consumers vote with their feet”? The meaning was obvious. A company often doesn’t know that it has a problem with consumer satisfaction and confidence until sales have started to drop, and then it’s often very hard to recover from that loss of good will.

Well, now that we live in the age of instant tweeting and blogging, it seems companies can be brought down by rumours spread over social media, online petitions by people who don’t even buy their products, or by a particularly nasty blogger. The mainline media, more concerned about repeating accusations and rumours, than in determining if they prove unfounded, jump into the fray and report tweets and online flamings as news. It’s getting ridiculous.

The real issue for business though is that competition and threats don’t just come from the traditional sources anymore. It used to be competitors, government, and unions were the big bad enemies. Well, now any environmentalist or concerned parent can start a online thread somewhere and the effects can be devastating for a company, even if there is no evidence the company did anything wrong. All that has to happen is an accusation that ‘maybe’ something is wrong…or it’s products are icky.

This is what has happened to BPI, an American meat packing company, as reported in the April 16th issue of Bloomberg Business Week. The company’s founder Eldon Roth about 30 years ago figured out a way to separate what remained of meat on pieces of beef carcass that had been butchered. The process Roth perfected basically uses centrifuges to separate the meat from the fat, which is then freezed and turned into a kind of ‘pink slime,’ as it is known by detractors, so it can then be added into other ground beef products to raise the meat content. Major clients of BPI have included McDonald’s, Taco Bell, and Walmart. To make his product as safe as possible, Roth treated it with an ammonia compound to kill bacteria. This was all approved by the US Department of Agriculture.

Now, BPI is on the verge of shutting down. Why? Because a lone blogger in Texas was concerned about the safety of BPI’s product. Apparently, it wasn’t so much the nature of the product itself, although it IS icky (that’s a technical term by the way). It’s supposedly the fact that it is treated by the ammonia compound, even though that particular process is approved by the USDA, is common in the meat packing industry, and is naturally occurring in beef anyway. BPI’s product isn’t contaminated or carcinogenic. It just happens to be, again, icky, and chemicals are used in its processing.

We could say ‘so what.’ So some company has come under attack for the nature of its product, and it will probably be forced out of business by the rumours that have been spreading on the web. The issue here is that companies can come under attack from quarters they hadn’t even thought of. We’re not talking about other companies, or politicians, or lawyers, or even customers abandoning the company because they no longer like the product. We’re talking about someone in the comfort of their home starting a string of rumours or tenuous accusations that then go viral on the internet and in the band of imitators in the news media.

I write about this phenomenon in my forthcoming book, Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles. Specifically, I write about this in the chapter on applying the logic of military intelligence to business intelligence. We never know who our real enemies can be, and where threats will come from. The solution is to assume that these threats exist and to take them seriously when they do occur, even if they are small. Even better, though, is to become proactive by going on the offensive. If you are sitting in your boardroom wondering what would happen if a blogger or an irate consumer found out something about your production process that could be interpreted in a less than stellar manner, even though you know that you are in the right, then there’s probably a good chance that that will occur at some point.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

Family Ties that Bind

Posted: April 16, 2012 in Business, Entrepreneurship, Exploiting Change, Leadership, Management, Personal Development, Small Business, Succession planning
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Tolstoy’s novel Anna Karenina starts with one of the most famous lines in all of modern literature: “All happy families are alike; each unhappy family is unhappy in its own way.” In the case of family businesses though, we can safely assert that most of the unhappy ones tend also to be unhappy in the same way. It usually boils down to who gets how much and who is in charge of what.

When the founder of a company brings family members into the business, this can increase the potential for internal conflict by a significant factor. One of the most common manifestations of this phenomenon occurs when the owner—usually, but not always, the father—offers management positions to some or all of his children. When the children are also part owners of the business, the problems compound. And when the company transitions to new leadership, as when the founder retires and selects one of the siblings to run the company, the potential for conflict goes through the roof.

Here is a case in point from my own consulting practice. A younger sibling was appointed as general manager of a small company while an older sibling continued in a subordinate managerial position within the structure. The older sibling was somewhat miffed at not being considered for a higher position, especially that of general manager. The older sibling was starting to take out that frustration on the younger sibling. Conversely, the younger one was starting to act in a dictatorial manner in order to make clear to everyone “who the boss is.” A rivalry that had been seething beneath the surface for years now had the potential to erupt into a volcano of disruption that the company could ill afford.

The younger sibling had the foresight to get my advice about managing the working relationship. My advice was simple: “You are the boss, so act like it. That doesn’t mean to be insensitive or harsh, but you are the one who has to answer to ownership for the company’s results, not your sibling. We need to talk together to ensure that you both know where you stand and the dynamics of your personal relationship don’t hinder the dynamics of your business relationship.” Is that a tall order? Perhaps, but what are the alternatives?

The key method I advocate for dealing with these issues is what I call ‘The Outsider Test of Behavior.’ Simply put, if a family member is behaving or performing in a manner that would be deemed unacceptable for an employee or manager that doesn’t have a familial relationship with the company’s ownership or senior leadership, then that behavior or performance is probably unacceptable, even though that person is one of the family.

Therefore, if family members have an ownership stake or occupy various management positions within the company hierarchy, they still have to let whoever is in management do their job, whether those people are family members or not. They can’t just decide to change things because they happen to have a familial relationship. Nor can they question the authority of other executives and managers, reverse decisions unilaterally, or otherwise disrupt the good functioning of the company, all simply because they happen to have the ‘right’ DNA.

The company has a fiduciary responsibility to employees, clients, suppliers, and financial backers (e.g. the bank and outside investors), and family members have to work within that reality. If they are part of ownership, they can exercise their responsibilities as shareholders through the board of directors (if they are a member) or at the annual meeting, just like any other shareholder. If they are part of management, they have to exercise their managerial functions and carry out their responsibilities in the same manner as any other manager in the company, all the while respecting proper rules of authority, responsibility, and decorum. They should also be held accountable for performance and behavior just like any other member of the company.

Of course, all this assumes that the family member who is in a managerial position within a family business is actually capable of exercising the functions of that position. If not, then the CEO or senior manager overseeing that person must work with the rest of the management team, ownership, and possibly the board, to ensure that that person is either removed from a position of authority, or removed completely from the company.

All of this can be very hard on the family member who has the ultimate leadership responsibilities, whether it is still the founding family member or the one who has succeeded the founder. It can also be hard on family members who are in positions or who have ownership stakes that they feel are unjust given their status within the family or self-perceived capabilities. But like I said above, what is the alternative, run the company into the ground?

Family members who are privileged to be involved in a successful business should realize how lucky they are to be in that position. Most people aren’t born on third base, much less second or first, so the situation must be seen for what it is: a great opportunity for individual and collective growth in a win-win dynamic, not a bone of contention within a scarcity mentality.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

Fighting for Talent

Posted: April 13, 2012 in Business, Leadership, Management
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We are all engaged in a fight for talent. Not only do we need to recruit the right people but, as my friend and expert in human capital strategies Roberta Matuson points out, we also need to keep the right people. The notion of ‘rightness’ is key. It is a question of attracting, working with, and associating with people who are appropriate given our goals. This plays out in our personal, professional, social, and political lives.

On a personal level, whom we associate with is critical. Anyone who has children, particularly adolescents, knows that their circle of friends is a key element in determining their activities, attitudes, and beliefs. The same goes with adults. We need to be careful about whom we associate with, whom we listen to, where and how we seek advice, what and with whom we learn.

On a professional level, companies are increasingly fighting to attract and retain the best people possible given their objectives, values, and strategies as organizations. The same goes for non-profits, associations, charities and foundations, governmental agencies, institutions of higher learning, etc. Any organization that is trying to provide value to others in society must have the optimal mix of the right people to get the job done. Consider the following:

  • A CEO client of mine points out that since 2010 they have put a few excellent performers in key positions of power and decision-making in her company and this has made a major difference in how they all interact, the quality of their decisions, the performance of the whole company, as well as customer satisfaction.
  • Another client of mine, who owns a small company, points out that he has a hard time finding individuals with the same drive and determination he does to grow the business they way he wants it to grow. He has created a business model around a certain type of employee and partner, but he now realizes that he needs to find a different type of person who is willing to be an employee but who is also entrepreneurial, willing to take risks, and also share in rewards. In other words, he can only attain his strategic objectives if he gets the right type of person.
  • Jim Collins and Jerry Porras in Good to Great noted that companies that made a transition to spectacular growth after decades of puttering along had two key characteristics. First, they were led by CEOs who had a kind of low-key transformational leadership they call “Level-5 Leadership.” Second, these companies were able to first “get the right people on the bus” and only then figure out where the bus needs to go.
  • My own considerable experience in organizations, first in the military, and now as a business consultant, is that nothing happens without sound leadership, management, and the right people.

Finally, on the highest level, entire societies and polities need the best people to function properly. Countries are competiting for talent like never before. Canada has always been a nation of immigrants, even to the point of now having the highest level of non-native born citizens in the world. However, the Canadian g0vernment has recently begun revamping immigration laws and regulations to make the country even more attractive to talented indidivuals from around the world. When questioned about this, Canadian Minister of Immigration Jason Kenney pointed out that Canada is in competition with Australia and New Zealand for talented immigrants. It takes 6 months for a highly-qualified university graduate in India to be accepted in Australia, whereas in Canada it can take years. Moreover, Canada has persistent structural unemployment in many areas of the country while simultaneously experiencing labour shortages in dozens of specialist trades and professions. Meanwhile, highly qualified immigrants are stuck in low-paying unskilled jobs while their considerable talents and qualifications go unrecognized. The time to act is now and that is what the government is doing.

In 1981, economist Julian Simon wrote a book called The Ultimate Resource, updated in 1996 as the The Ultimate Resource II. In these books, Simon congently argued for the fact that the ultimate resource is not mineral wealth or any other type of material resource, but rather human ingenuity. I agree wholeheartedly with that assessment.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

Using the Infiltration Principle to Your Advantage

Posted: April 12, 2012 in Brilliant Manoeuvres, Business, Enterprise Robustness, Exploiting Change, Management, Opportunity, Innovation and Adaptation, Strategy
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Yesterday I described the Infiltration Principle and how it can undermine businesses and structures. I compared the steady seepage of water caused by a ceaseless drip to the rot that occurs in organizations and businesses when they are unaware of changes in their internal and external environments that undermine their business models and structures.

Today I’m looking at how the Infiltration Principle can be used to advantage. If the steady ‘seepage’ of undetected change can undermine a solid business, it can be used intentionally to do it to others or to advance one’s own agenda.

For instance, if you want to enter a new market, you can try to go at it in a Big Bang manner. Or, you can try to build your presence slowly and deliberately. Companies can successfully build a new market presence over time by following this principle. In military terms, they start with a modest bridgehead, consolidate their presence there, and then expand from that secure base of operations in new territory.

This is basically what Canada’s TD Bank has done to expand in the US. They started small in the 90s and have built sequentially upon small successes. I describe this ‘bridgehead’ approach in detail in my forthcoming book, Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles.

A more tactical example can be seen in the area of sales. If you’re in B2B sales, you know that these depend on building strong relationships with buyers or key recommenders. While it’s possible to build a relationship quickly, in most cases, perhaps the vast majority, it takes time and effort to do so. The best way is to use the Infiltration Principle. Small and steady are the way to go. Start by becoming known to the buyer. Then you introduce yourself and provide free value in some way. Then you develop a one-on-one interaction, getting to know the buyer’s needs and wants and objectives. After a time, you can start proposing solutions to his or her business needs or to fulfill their business objectives. It’s exactly the same principle as the bridgehead approach I described above, but applied to personal interactions and relationships instead of overall business strategy.

There are many other ways to apply this principle. Jim Collins’s latest book Great by Choice (co-written with Morten T. Hansen), shows how some companies and executives have built successful businesses over time by adhering to a few simple principles and doing them relentlessly every day. What they are basically doing is describing the Infiltration Principle.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

Drip, Drip, Drip: The Principle of Infiltration

Posted: April 11, 2012 in Brilliant Manoeuvres, Business, Exploiting Change, Management, Opportunity, Innovation and Adaptation, Strategy
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We’ve all had to endure the endless drip, drip, drip of a water leak somewhere in our house or appartment. When it’s a tap, it drives you nuts, but at least you can see it and do something about it. The real problem is when the leakage is behind a wall, or under a floor. Water infiltrates and then rots the structures. This can end up costing a lot to repair, and can even undermine the most solid of buildings.

I call this the Infiltration Principle. Small changes accumulate, sometimes in full view, but mostly out of our view. Like water, they infiltrate our structures, and if nothing is done to stop the seepage, they cause them to fall apart from rot. In some cases they even undermine our structures.

This is usually what happens to companies’ competitive positions and business models. They are rarely destroyed by big attacks from the competition or major changes in the environment that everyone can see. Instead, they erode from the inside, as the slow infiltration of new tastes, evolving technology, and more aggressive business models turns them into a water-logged pile of rotting wood.

As I point out in my forthcoming book, Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles, this is exactly what happened to the newspaper industry. It’s a commonplace to blame the demise of print news on the Internet, but the first signs of water erosion actually occurred with the introduction of radio. When TV became the foremost source of news and entertainment in the 1950s, it eroded newspapers’ position further.

The Internet has simply been the coup de grâce. When the final assault occurred, it appeared to come from out of nowhere. The last bastion of newspaper strength was local advertising, and it was Google’s business model that destroyed it. Now the only newspapers that are still viable have to have an online component, and must provide some form of local content to offset the power of online search and content generation. That is why most newspapers are now no more than ‘home town gazettes,’ even in large cities.

The steady drip, drip, drip of new technology eroded and rotted newspapers’ originally dominant position from within. It infiltrated everyone’s lives while newspaper managers were focused on their own business models and competitors who were identical to them in all but a bit of their content.

That is the principle of infiltration in action to undermine one’s position and structure. Tomorrow I’ll examine how it can work to one’s advantage.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

 

How to Redefine Your Purpose

Posted: April 9, 2012 in Business, Exploiting Change, Management, Opportunity, Innovation and Adaptation, Strategy
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Last Friday I wrote about how successful companies are constantly redefining their purpose. I gave the example of how IBM has successfully redefined itself over the decades, initially from a company that was specialized in ‘business machines’ to a global powerhouse helping companies manage and leverage their knowledge assets.

IBM’s redefinition went from a particular type of knowledge and information management–the punch card reader–through progressively more general applications and approaches to knowledge management. In a sense, IBM’s strategic purpose become more general and abstract over time. This is what I propose companies must do to remain relevant and continue growing over time.

The key question in this redefinition is to ask what your current activities are an example of. For instance, IBM would have asked itself what a punch reader was an example of, and the answer would have been, it’s an example of a general purpose business machine. From there, it could have asked itself what other types of business machines there are. The answer would have been, cash register, typewriters, adding machines, etc. That would have led to a further spurt of growth through redefinition from a punch card reader company to a general use business machine company.

After that, the question is pertinent again. What is a general purpose business machine used for, or an example of? It’s an instance, of machines that are used to manipulate and manage information. What else can do this? Well, if it’s the 1950s, computers. Thus, IBM redefined itself again from a business machine company to an information management company. And so on, through the years. At this point, IBM has asked the question several times no doubt. In each iteration, its activities have become more generally applicable and less focused on specific solutions or instantiations. That is why IBM now defines itself as a knowledge management company.

This is basically what every company must do periodically, especially before its growth levels off. Management must ask itself what its current products, services, and activities are examples of, or alternatively what they are used for. This raises the level of abstraction and generality of its purpose, which in turn provides many more opportunities for growth by expanding its product offerings, extending its market reach, and diversifying into related fields.

© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

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