Posts Tagged ‘economic trend’

Military forces engaged in Iraq and Afghanistan over the last decade or so adjusted their structures, weaponry, and training to the exigencies of an originally unforeseen operational context. They went from Cold War based large mechanized formations to smaller, tailored units that could interact with local populations and government forces while keeping insurgent forces at bay.

The same applies to organizations and businesses in the public, private and non-profit sectors. How many organizations are still working within a framework that is no longer relevant to its new reality? I often say that the biggest challenge a small business faces is becoming a medium-sized business. The same goes for medium-sized organizations becoming large or multinational ones. Or vice versa, companies and institutions that must become smaller, more nimble, faster, and adjustable rapidly enough to remain relevant and continue thriving.


  • When is the last time you reviewed your organization, structures, systems, and processes to evaluate their relevance?
  • Do you have people and teams working on tasks and responsibilities that are low priorities while others working on high priorities and vital areas are starving for resources?
  • How often do you validate the relevance and effectiveness of your training and professional development?
  • Can you reconfigure teams quickly and effectively or does your organization meander aimlessly and sluggishly while the world changes?
  • Do you conduct regular after-action reviews with all stakeholders and people at all levels of your organization?
  • How quickly can lessons be learned and incorporated into your structures, equipment, training, processes, and systems?

Richard Martin is The Master Strategist. An expert on strategy and leadership, Richard brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2014 Richard Martin. Reproduction and quotes are permitted with proper attribution.

Many businesses are facing a new threat to how they’ve traditionally positioned and delivered value for customers. This applies in particular to service businesses, where companies have tended to rely on providing access to data and information.

Take the investment business as a case in point (this applies to most other service businesses however). In the past, when people wanted to invest and grow their money, they had to go through a stockbroker or some other intermediary. When they wanted to make a transaction or decide on whether to keep a stock or sell, they were almost completely reliant on the intermediary to provide up-to-date pricing data. Newspapers published daily closing prices on stocks, bonds, commodities and currencies, but that was about it. Then along came the Internet and the amount of data and information went through the roof.

In parallel with this came an explosion in knowledge and information that was available to the average investor about how to invest for growth, retirement, or just plain security. Nowadays, investors are much more sophisticated about tax deferment and other investment strategies. Just browsing through the business and finance section of any bookstore gives an idea of the amount of information and knowledge available at minimal cost.

All this has had the effect of undermining the traditional value proposition for investment advisors. Before, people had to go through them to get basic data and information and also to actually make their transactions. Internet brokers and access to a galaxy of information online has given a lot more power to individual investors. This has undermined the information-knowledge hierarchy that gave the strong position to investment advisors.

The concept of information or knowledge hierarchy is a product of information technology and information science. The most basic form of information is data. These are simple figures or symbols that represent any “differences that make a difference” (to quote information theorist Gregory Bateson). A stock price quote is an example of a datum. A car’s speed as indicated on its speedometer is also another type of datum. However, data such as these must be put in context to make them understandable and relevant. A car’s speed doesn’t tell us much unless it’s transformed by contextual information, such as the speed limit, the driver’s habits, and whether the speed is dangerous or prudent given the road conditions. The same applies to a stock price. Out of context, it’s fairly meaningless. But in context, such as whether it represents a price rise or drop, whether the overall trend is up or down, and what other stocks are doing in similar conditions, all of this information provides the necessary context to understand the value and import of the data. The two bottom runs of the information ladder are therefore composed of basic data and interpretive information to set it in context.

The next level up is knowledge. This is where the data and information are given wider meaning in the more abstract framework of a system. Speed data and speed limits are part of the wider system of driving techniques. With proper knowledge and expertise, drivers know when to speed up, when to slow down, where to go, how to get there, etc. Investment pricing data and contextual information are part of a general investment and wealth management system. If an investor is trying to protect her wealth, then the system must be oriented to security and value investing rather than growth. I’m simplifying obviously, but I’m just trying to show how knowledge uses data and information to make decisions and orient action.

The final level in the information is wisdom. This is the ability to make general decisions while considering multiple concrete factors. For instance, wisdom tells us that adolescents below 16 or 17 shouldn’t be allowed to drive, as they tend to lack the judgment and prudence to drive safely (notwithstanding the fact that many adults don’t drive safely). Wisdom is also involved in the decision to take a driver’s license away from someone who has poor vision and slow reflexes, such as the very elderly, or people who drive intoxicated. In the financial realm, wisdom will enable a person to make investment decisions in line with their life course, their objectives, and their personality, risk temperament, and overall political and economic conditions. In other words, wisdom sits on top of the information hierarchy, because it provides the overarching framework for all decisions and actions.

What does this mean for business strategy? The following diagram shows the relationship between each of the levels in the information hierarchy and the types of transactions and relationships with clients. The vertical access represents the total number of interactions between buyers and sellers. This can be expressed as bulk numbers of interactions or total number of clients/customers. The horizontal access represents monetary or non-monetary value for buyers and sellers. This is usually expressed in terms of monetary value. The further to the left we are on the graph, the less valuable the products or services, but the higher the overall costs: transaction costs, commoditized pricing and many competitors. As we progress to the right, value increases exponentially while the total number of transactions and clients falls significantly. However, the overall value per transaction is much higher because, even though there are many less transactions, they are worth much more to buyers and sellers because they are based on knowledge and wisdom, rather than simply data and information, which can be had much more easily. In other words, transactions on the left are based on “know what,” in the middle on “know how,” and on the right on “know why” and “know when.”

Value Curve

So if a company is facing increasing commoditization of its products and services, this forces it to adopt a cost-leadership strategy. This is much more precarious than a company that bases its value on differentiation and quality. If you’re faced with this situation, you can try to compete defensively by reducing prices and/or increasing volume, but in the long run this will only continue to erode your relative value. The preferred strategy should be to move to the right, into the area of knowledge, i.e., providing know how, or even better, into know why and know when, i.e., close relationships based on wisdom and personalized services.

© Alcera Consulting Inc. 2014. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

The economist Joseph Schumpeter is famous for saying that capitalism is a process of creative destruction. Actually I think the concept goes back to Karl Marx. The point is essentially that in a free society, human ingenuity will lead to new products, services, and ideas. Many, if not most, of these novelties will die, but many won’t, and eventually they overtake the products, services, and ideas of existing companies and organizations.

Just last week, Publicis and Omnicom, two of the largest advertising firms in the world, decided to merge in order to fight off the aggressive inroads of Google, Facebook, and other tech companies that provide highly variegated yet precision information to advertisers. The ability to gather detailed data on the habits and preferences of individuals can be transformed into precision-strike ads for their screens. The same process is occurring in digital cameras. According to the Wall Street Journal, sales of low-end point-and-click digital cameras by Japanese manufacturers are down about 45% in the last year. This is obviously due to the inclusion of still and video camera capabilities in smart phones, along with the ability to upload and transfer the images immediately.

But it’s not just new products and services that can be disruptive to incumbents. One of my clients has been facing a downturn in purchasing in its industry for close to five years now, with little end in sight to the belt-tightening. An acquaintance of mine in a completely unrelated industry is facing lengthening timelines on payment, with very large clients squeezing their suppliers and forcing them to finance their cash flow. A former client is in the financial industry. She works for a very profitable and growing company that is cutting budgets in order to increase profits and hoard cash. Finally, several insurance executives have told me that continued low interest rates have a major impact on the profitability of their business. All of these phenomena impact on business just as much as new competitors, substitute products, or new technologies.

We have to be constantly ready to recreate and reinvent ourselves whether things are going well or going poorly. Obviously, it’s best to make our own products, processes, and services obsolete before others do, especially when we have the wherewithal to do so. But it’s all the more important when in difficulty. IBM is one of the most successful at this process of reinvention over the decades. Throughout this evolution, IBM always built on its existing businesses and expertise in order to transition to new capabilities and markets. Meanwhile, companies like Dell and HP, while making significant gains in IT services, are struggling with their large dependence on hardware, particularly desktop computers.

How does a company make the transition from current business to future business? This is not an easy process, but there are a few principles that can guide in the evolution:

•    Build on successes and strengths. This is what IBM has done well over the years. Google is also masterful at offering new products and services that build on dominance, for example, the Android operating system, which incorporates features and usability that exploit its dominance in search and precision-strike advertising.
•    Proceed by trial and error. Google exemplifies this principle, with its constant experimentation, innovation, and extension of existing concepts and services. Most of the company’s innovation is generated as a result of private initiatives that compete internally for investment and reinforcement.
•    Reward and reinforce individual initiative. Revolution and evolution from above rarely if ever work. They are inherently unpredictable and percolate from the bottom up.
•    Stop what isn’t working. Obviously, we have to be persistent when something doesn’t work at first, but there comes a time when we have to ask ourselves if further investment in time, energy, and money will lead to growth of the initiative. A rule of thumb I use is that an initiative has to show at least some level of success when it is first mooted. For instance, if I introduce a new service as a consultant and nothing happens, then that is a good indication that it won’t work, no matter how much energy and resources I pour into it. On the other hand, any interest, no matter how small, shows at least some potential that can be built upon.
•    Revive and resuscitate. The Newton was Apple’s first attempt at a handheld computer, but it never really took off. Despite that, the company learned a lot from the experience. When technology evolved to the point that the concept could be explored anew, it led eventually to the iPad.
•    Offer new products and services to existing customers. This may be obvious, but I find that companies often put themselves through agonies to develop completely new products for markets that they’ve never touched before. This is very risky, as there is not only the risk associated with new products and everything that can entail in terms of suppliers, operations, distribution channels, marketing and advertising, but then you have to enter a market that you have very little knowledge of. You’re doubling the risk but no necessarily the reward potential.

I could go on with this list, but the point is to be willing to explore new possibilities. This entails accepting that your best successes and strengths of the past and present may not continue on into the future. We should all be constantly questioning our assumptions. This is something that I learned in my 26-year military career, and as a student of military and business history. All successes eventually become the source of a downfall, unless they are used as a springboard to continuous evolution and revolution.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© Alcera Consulting Inc. 2013. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

Brilliant Manoeuvre
You must shape the battlefield to create the conditions for your success.

If you’re passive, you get passed. You have to take the offensive in order to (re)gain the initiative and keep it. That is the essence of offense. But too many companies are content with the status quo and stay passive in the face of societal, economic, technical, and scientific change. Take life and health insurance companies. With all the medical and biotech innovations coming on line now and in the foreseeable future, they should be much more active in shaping the environment to their advantage. Instead, they are stuck within the same business model that has prevailed for decades: Wait till a new drug or procedure comes on the market, then determine whether it’s covered or not.

In the last week or so, I’ve read of new procedures and technologies that are enabling the growing of new organs from pluripotent stem cells; recreating tooth tissue and entirely new teeth from same; portable diagnostics in smart phones; and massively detailed images and 3D models of the brain. This is just the tip of the iceberg. Health insurance and life insurance providers should investigate these approaches to determine how to rein in health care and extended living costs. This could mean actively substituting higher performance procedures for lower efficiency and effectiveness ones. It could also mean taking an active role, with clients, in managing in their health and longevity. We don’t know the full extent of these changes and their effects, but they will no doubt lead to entirely new business models in insurance and health care, not to mention completely new businesses that don’t exist right now. What are you doing right now to shape this brave new world to your advantage, so you’re not stuck like a deer in the headlights?

You can’t just focus on what is in front of you at the present time. You must also watch the bigger picture in the future, assessing nascent and potential threats and opportunities as well as current ones.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2013 Richard Martin. Reproduction and quotes are permitted with proper attribution.

In his book, Ignorance: How it drives science, biochemist Stuart Firestein starts by quoting an old proverb, “It is very difficult to find a black cat in a dark room,” and adds “especially when there is no cat.”

Firestein notes that the pursuit of science appears to non-scientists as a very rational and systematic approach to discovery. In actuality, it’s much more like that old proverb than walking down a well-lighted path. The truth is that scientists have to explore many false paths and grope around in the dark room, hoping to find that black cat. But the dark room can be huge, and even endless, and there is no guarantee that there is even a cat in there.

I find that many things about business are very similar. We don’t know ahead of time if our new product ideas will work. Will customers respond the way we anticipate? Will competitors beat us to the punch? Will we be able to deliver on our promises? We can make assumptions about all of this, but that is just what they are, assumptions.

As I pointed out in my book, Brilliant Manoeuvres, assumptions must be validated and tested. Military strategy and tactics provide one model of the application of trial and error to discovery and success. But science also provides a useful model and template. As pointed out by philosopher Karl Popper, science is really a series of conjectures and refutations about the nature of the world and how it works. For instance, in physics, theorists propose new models of the world and experimentalists test them. Theories and hypotheses that have little or no empirical validation are cast aside in favour of those with experimental evidence. This process continues over and over until progress is achieved in understanding reality.

The same process applies in business. Innovation, whether new products and services, new markets, or new internal processes, is nothing but a form of conjecture about what will work in the real world of business. The marketplace is the crucible of experimentation that seeks empirical evidence to demonstrate that the conjecture is correct. Correct business models and innovations are successful to the extent that customers accept them.

Call it a form of un-natural selection. Companies and entrepreneurs put forth ideas based on their understanding of the market and competition, and then they are proved by the test of business success.

To carry this analogy further, businesses must apply the basic principles of innovation and trial and error experimentation.

•    A mechanism to generate new ideas. These can be innovative products and services, or they can also be new ways of viewing the market. For instance, before Henry Ford imagined the Model T, he was driven by the vision of automobiles for every average American family. Prior to the Model T, cars were hand-made toys for the rich. Henry Ford’s innovations explored new manufacturing techniques in order to make his car available to a market that up to then had been essentially ignored.

•    This generation mechanism must be wide-ranging and non-censoring. The perfect model for this is of course brainstorming, where you simply throw out ideas without initial regard for their apparent reasonability or feasibility. In fact, the more ideas appear initially irrational or unfeasible, the better they might be at disrupting the status quo, both internally and externally.

•    Good ideas can (and should) come from all levels and areas of the business. As an example, customer service agents and field service representatives often know more about customer concerns and suggestions for improvements than anyone else in the company. Sales people usually know what the competition is doing. Suppliers and distributors can often provide advance warning of changes in the marketplace and competition. These sources of ideas must be nurtured, encouraged and exploited.

•    Innovations can be external and internal. By this I mean that good ideas don’t just translate directly into new or improved products, services, or markets. It can be someone suggesting a new internal procedure that saves time and money. Or a production manager who finds a potential new supplier at lower cost for equivalent quality. In other words, everything is subject to innovation.

•    Selection should be reality based. Too often ideas are rejected or put out of bounds because ‘that’s not how we do things around here,’ or ‘that’s never worked before,’ or even, ‘because I said so.’ The latter is probably the worst one, but I’ve observed this type of innovation selection by fiat and nothing is more stultifying of growth and continuous improvement. The only truly effective selection mechanism is successful implementation in the external and internal competitive and organizational marketplace.

This is why I advocate trial and error in innovation and change management. No one can predict the future, what will work or not, before it is actually tried. For this reason, we need to find ways to try different ideas and approaches while managing the associated risk. What have you tried lately that is new and innovative?

© Alcera Consulting Inc. 2013. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

Data was published yesterday that PC sales are plummeting throughout the world.

It is obviously a result of a move to mobile communications and computing. Most people don’t need a powerful desktop or laptop computer for everyday tasks. Email, messaging, reading news, talking on the phone or through video conferencing, scheduling activities, budgeting, etc., they can all be done on mobile devices. Even the occasional memo or report can be produced on a tablet.

With the rise of ubiquitous voice recognition, artificial intelligence, and cloud based services, there is really a limited market for desktop computing. What we’re seeing is the realization of universal computing machines that can act as a multitude of useful devices. Most people can get by in their personal and professional lives without a dedicated computer.

There are still mainframe computers, but they are now highly specialized or focused on truly high powered applications. The desktop computing model will remain, but it will be increasingly marginalized to specialized applications and uses. Everything else will be mobile, always online, multimedia and multichannel, with embedded specialized AIs and interaction facilitators such as voice dictation, field of vision tracking, and various other forms of man-machine interfaces.

Microsoft, Dell, HP, etc., they all have business models that rely heavily on the desktop computing model. They’re trying to make the transition to cloud computing, mobile interactive online living, and various other manifestations of the universal computing machine model. But, it’s not easy.

This just shows how even the most successful companies can see their business models undermined. The only way to overcome this is to shape the future yourself. To take the initiative and to try to create the new business models, rather than just react to them. Microsoft, for instance, has been singularly unsuccessful at adapting to, and shaping, new business models. The company was highly successful at riding the wave of democratization and decentralization of computing, and even created it to a large extent by offering cheap and reasonably effective and usable operating systems and productivity software. But then it just stopped really innovating.

There are only a handful of companies that have operated in highly changing competitive markets that have been able to evolve and adapt, and even shape the changes around them. IBM is one, HP in its previous incarnations was another. Who will be able to adapt to, and shape the future business environments? Who will have the offensive mindset to seize and maintain the initiative? I’ve written about this extensively in my book, Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles.

© 2013 Richard Martin. Reproduction and quotes permitted with full and proper attribution.


Brilliant Manoeuvre
Use technology to move faster and make decisions faster than competitors.

Technology has always been a key factor in warfare. The side that is better able to exploit a new technology and do so faster and in greater numbers than potential or actual enemies will tend to prevail. The same applies in business. Technology is evolving at an accelerating rate. Visionary inventor and entrepreneur Ray Kurzweil calls this phenomenon the Law of Accelerating Returns. As an example, the speed and quality of genome sequencing basically doubles every year while the cost continues to drop rapidly. IBM’s Watson supercomputer, which last year won Jeopardy by beating the two best ever human competitors (with a score that surpassed their combined scores), is now being turned by IBM to the development of AI-based medical diagnosis. It is conceivable that within a few years we will have access to our own medical records and biometric information in a continual manner as well as near instant health monitoring and diagnosis. How will this change medical and healthcare practice? What does this mean for doctors, nurses, hospitals, pharmacies, pharma companies, and health and life insurance companies? If I were in these fields, I would be developing scenarios and finding ways to be at the forefront of technology and innovation so I could be in a better position to preempt competitors and occupy the rich economic terrain that will open up. I would be actively looking at the impact of technologies in all fields, even outside of my own, because new threats may arise or, more important, new opportunities WILL arise. I would want to be on the winning side by setting the conditions and shaping the battlefield to my advantage.

Be on the lookout for evolving technologies in all spheres of endeavour and seek ways to incorporate them into your business or to leverage them for competitive and strategic advantage.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2013 Richard Martin. Reproduction and quotes are permitted with proper attribution.

Brilliant Manoeuvre
The first and most important principle of war, and the only sure road to victory, is offense. Defense should only be used as a temporary measure while doing everything possible to (re)gain the initiative.

Too many companies (and even entire business sectors) have lost their relevance by assuming that their existing defensive posture would protect them from competition. Newspapers have been rendered almost irrelevant by web based media. The music industry was completely bypassed, first by Napster and other illegal copying methods, and then legally by iTunes. Television networks are struggling against the same reality, trying desperately to protect their control over programming, while teenagers barely watch TV anymore, preferring to watch their favourite shows on the web. Research in Motion (now Blackberry) thought its position in secure mobile communications made it invulnerable. When the iPhone came out, one of RIM’s co-CEOs pronounced it insignificant (or words to that effect). On the other hand, companies such as IBM, Bombardier, and Disney have continually reinvented themselves, or redefined their purpose in order to seek out and/or create new market positions. This keeps them ahead of competitors, and in some cases makes the competitors irrelevant.

Offensive business strategy succeeds best when companies make small, probing advances, experimenting with new products, services, processes, and business models. Once they see a successful incursion, they pour resources ‘into the breach’ in the hope of turning it into a breakthrough.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2013 Richard Martin. Reproduction and quotes are permitted with proper attribution.

1. Big box book retailers make the local bookstore irrelevant.

2. Amazon starts selling books online.

3. People browse for books in the big box retail store and then order the book online from Amazon.

4. Big box book retailers start their own online retail operations.

5. Amazon starts free shipping for orders above a certain price level.

6. Big box book retailers are forced to do the same.

7. Amazon introduces the Kindle e-reader. People start buying e-books.

8. People browse for books at the local big box book retailer then order the Kindle e-book on their iPhone while continuing to browse other books. When they get home, the book is on their Kindle.

9. Publishers can’t predict how many physical books will be sold anymore.

10. Big box book retailers start selling candles and towels, resembling more and more a Bed, Bath and Beyond.

I went to the local Cineplex movie complex yesterday evening to see Apollo 18. The movie itself was only so-so. In fact, judging by the reactions of others leaving the theatre I would guess it won’t last too long at the movie house. But the movie complex itself is an object lesson in how an old business that is under considerable competitive pressure can evolve to stay relevant, and perhaps even thrive.

With the Internet, pay TV, movies on demand, HBO, etc. etc. you would think that movie houses would have disappeared a long time ago. Why do they still exist? To me, the answer is clear: people still want to go out for entertainment. They want to laugh with others, cry with others, gasp in surprise with others. The movie complex provides the environment, even though it really no longer has any exclusivity on the content.

So what does Cineplex (and numerous other moviehouse chains) do? They repurpose the infrastructure. When you go into a Cineplex, they have up to 10 or 12 massive auditoriums with wall-to-wall giant screens and surround sound. They have an arcade. They allow self-serve ticket buying. They have online ticket buying so you can go right to your seat when you enter the theatre. In addition to all that, they now offer operas from the Metropolitan Opera in New York. Obviously, the Met is being innovative and exploiting all those have empty movie theatres. But the theatre chains are doing the same thing.

Further to that, there is obviously some creative experimentation going on to see what will work and get people into the building. For instance, my local Cineplex has scheduled a showing of Citizen Kane. It makes eminent sense that we would go to the movies to see a classic movie. There are plenty of those, so you can easily imagine them doing this on a regular basis. In the process, they are applying the repertoire approach to their large format. I don’t know if it will work, but it’s certainly worth a try.

In my mind, there are many other things they could be showing:

  • Classic TV shows such as Twilight Zone
  • Classic plays by playwrights such as Shakespeare
  • Car racing
  • Boxing matches
  • Big sporting matches such as World Cup soccer, major soccer games from overseas, NFL, NHL, etc.
  • Live coverage of major events such as the Olympics opening ceremonies

There is really no end to what could be shown. You could even imagine creating content for the movie house, such as unique series and movies. This is basically taking the HBO model and applying it to the large-scale public venue. I don’t know if any of these things would work, but they are worth investigating to see if the movie house can continue to be made vital and to thrive as a place of outsized entertainment experiences.

© 2011 Richard Martin. Reproduction and quotes permitted for non-commercial purposes with full and proper attribution.