Saturday, February 26, 2011
Thursday, February 24, 2011
What does that have to do with business? Well, ask yourself this question: Does your firm assume that high performance in an entry-level job is a good predictor of future success as a manager? Does it identify "high-potentials" at a very early stage? If so, this study offers a note of caution. Perhaps, early success at an entry-level job may not be a good predictor of future performance in all professions or in all organizations. Moreover, there may be some people who struggle early in their careers, but who blossom late.
What's the advice, then, for companies who are trying to identify high potentials? They must think about the skills and capabilities required to succeed in future leadership positions and look for signs of potential in those areas, rather than simply looking at task performance in the entry level job. After all, good technical skills often make you stand out in an entry-level job, but those capabilities don't mean you have great leadership potential. In addition, companies need to watch for the late bloomers, who perhaps take awhile to find their footing. Some young people may take a bit of time to get acclimated or to mature enough to succeed in the workplace.
Tuesday, February 22, 2011
If forward integration's benefits were as simple as "cutting out the margin made by retailers," then we would see many more firms owning their own stores. Naturally, we do not because firms don't eliminate that margin "for free" - they must invest a ton of capital. The shareholders expect a return on that investment. They will only tolerate a forward integration strategy if the return on capital invested makes sense.
What does explain Apple's ability to sell the iPad at such a competitive price? Chen argues that one has to look at Apple's vertical integration strategy in its entirety to understand its advantage. Moreover, one has to look at the money it can make off of its "ecosystem" - i.e. all the apps, music, etc.
However, I would go one step further. To understand Apple's advantage, you also must look at its HORIZONTAL integration. In other words, Apple has an advantage from the fact that it competes in multiple product markets - phones, MP3 players, personal computers, tablets, etc. Why is that? Well, Apple can share and leverage resources and capabilities across these product categories. As a simple example, consider the operating system that drives Apple products. An Apple computer operating system costs more than $1 billion to develop. If Apple only competed in personal computers, it would face a steep hill to climb to break even on that investment. However, Apple leverages those R&D expenses across all of its products. The basic elements of the Apple operating system underpin everything from its laptops to its phones and the iPad. That ability to spread its R&D investment and capability across so many categories provides a powerful competitive advantage.
Friday, February 18, 2011
Thursday, February 17, 2011
Hmmm... so the ads are not authentic at all! They may be very effective though. They link back to the brand's heritage, but in a humorous way. No one wants to bore young 25-35 year olds in the firm's target market with "history" commercials. These ads seem to walking a fine line, providing a bit of a "heritage" feel to the branding while keeping it hip and funny. They become the types of ads that probably play well in the social media space as well. The campaign does raise a challenge though. You want to be careful that you don't sacrifice the quality image of the brand by going for laughs. The firm also has to be mindful that such ads may bring accusations that the firm is targeting young underage drinkers. These are all interesting questions that these creative ads raise, and that other brands must consider as they try to walk this fine line between heritage branding and remaining hip.
Wednesday, February 16, 2011
What are the barriers to taking effective action in the face of a daunting new threat? One could build a very lengthy list. Let's focus on just a few key obstacles. First, firms make commitments as part of their strategy. They commit to certain physical assets, types of human capital, contracts and relationships, and organizational cultures. These commitments often prove very rigid. One cannot easily undo major commitments to a physical infrastructure, such as Borders' brick and mortar stores. One also cannot easily undo major "soft" commitments such as the culture, mentality, and skills of the executive team.
Second, companies have a hard time determining the appropriate pace of the transition from the old business model to a new one. How quickly can and should we abandon our brick and mortar strategy and move toward a digital one? The pace question proves difficult because one cannot decimate an old revenue stream before a new one fully emerges.
Third, firms face certain exit barriers and exit costs associated with an old business model. Do we have expenses that will be substantial if we shut down old operations very quickly? Those expenditures might include lease termination fees, asset writedowns, severance costs, and the like. While firms perhaps should just bite the bullet on these types of costs, we know that executives sometimes have a hard time doing so. They feel pressure to make short term earnings targets.
Finally, firms simply don't like to shrink in size. Sometimes, making a transition to a new business model means having to shrink in the near term so as to grow profitably in the future. However, managers have a hard time with the size and scope of a firm. We know that executive compensation in larger firms often exceeds that in smaller firms. Morever, a certain level of prestige sometimes comes with running a larger firm.
Tuesday, February 15, 2011
Interestingly, many of the examples in the article relate to exclusive product lines tied to a particular celebrity. The stars include Selena Gomez, Jennifer Lopez, Tony Hawk, and Sean Combs. What's the risk of this strategy? By promoting these celebrity product lines, the retailers tie their brand to these stars. What if these stars engage in some inappropriate or unlawful action? How might they damage the retailer's brand? Will the retailer be stuck with a line that suddenly becomes very unpopular?
The notion of exclusivity deserves attention. Retailers do need to differentiate. However, I think retailers need to think beyond celebrities, and they must find other ways to offer exclusive products that are appealing and that draw customers to their store. Beyond that, retailers need to think about the shopping experience. Customers don't simply choose retailers because of the products they sell. They choose an environment and an experience. In some ways, a truly differentiated experience can be much harder to imitate than product moves are. In the end, creating an inimitable experience will be one of the most substantial ways to create and defend competitive advantage.
Monday, February 14, 2011
How do they work? In a business "war game" companies create multiple teams, each representing a competitor or potential entrant into their industry. Then, the teams develop strategic alternatives, trying to generate ideas for how rivals might act in the near future. Then, the company can put some people to work thinking about how the firm might respond to these various moves. In a war game, you ask managers to step into the shoes of the leaders of rival firms. You want them to think and act like them. To the extent possible, you don't simply want a team to think about a rival as a monolithic organization. You want them to really get into the heads of the competitor's executives. What do they care about, and what drives them? What are their backgrounds and how might that influence their future strategies?
You need to be creative, considering multiple scenarios for the future... not just one possible outcome. While the idea may be simple, few firms actually engage in this type of game in a serious way. I've found that the firms that commit to these kinds of role reversal exercises find great benefit in them.
Friday, February 11, 2011
Thursday, February 10, 2011
In nearly every business school on earth, students learn about Michael Porter's "five forces" model of industry analysis. However, many students develop a key misunderstanding about the model. They come to think of industry structure as something that is imposed on companies within a particular market. It's as if industry structure falls from the sky, landing on a particular set of industry rivals. In reality, of course, companies can and should shape their industry structure to their advantage. This article reminds us of that important idea.
In this case, the cat groomers, tattoo artists, and others are trying to build more significant barriers to entry in their markets. If they succeed, they will enhance their ability to earn high profits. We can quarrel over whether these state licensing requirements are beneficial for society, but we should all recognize that these firms are trying to shape industry structure to their advantage, rather than simply accepting their external environment as fixed. Good companies shape their environment. Every strategist must remember that notion.
Wednesday, February 09, 2011
In this article on MSNBC's website, study co-author Michael Kraus offers his interpretation:
Kraus says that's likely because people from lower-economic backgrounds may have to rely on others for help. “You turn to people, it’s an adaptive strategy,” he says. “You develop this sort of heightened independence with other individuals as a way to deal with not having enough individual resources." Upper-class people, on the other hand, don’t need to ask for help that often. “One of the negative side effects of that is that they’re less concerned and less perceptive of other people’s needs and wishes. They show a deficit in empathic accuracy.”On the Chief Learning Officer website, Dr. Casey Mulqueen, explains how these findings are consistent with other research: “This new study is consistent with other research showing that people in positions of leadership or influence often have performance blind spots or shortcomings in their ability to work effectively with others. Fortunately, emotional intelligence and interpersonal effectiveness skills can be learned and developed with practice.”
Tuesday, February 08, 2011
Monday, February 07, 2011
- U.S. manufacturing output is twice as high as it was in the early 1970s.
- American manufacturing output exceeds China's production by by nearly 46 percent.
- The U.S. share of world manufacturing output is essentially the same as it was in 1990.
- America manufactured more goods in 2009 than the combined total of Japan, Germany, Italy, and the UK.
Friday, February 04, 2011
Thursday, February 03, 2011
Why has BJ's ended up in this predicament? On the one hand, the company has improved its financial position in many ways over the past few years. Specifically, the firm has established a much stronger balance sheet, with an elimination of most long term debt and an increase in cash on hand. On the other hand, investors have clamored for faster growth, something that the firm has been unable to deliver. Recently, the firm has taken some actions to try to mollify investors; for instance, it has shut several underperforming stores. However, investors want more substantial change.
Here's the irony: BJ's has actually made itself much more attractive to a private equity firm because of its strengthened balance sheet. Putting itself on more stable financial footing has now meant that they may lose control of the firm.
Can the firm improve its performance, perhaps under different ownership? It certainly has great potential, but one wonders about the disadvantages that the firm faces because it cannot exploit the same economies of scale available to Sam's Club and Costco. For years, the firm has walked a fine line, by trying to offer great value to consumers, while at the same time attempting to do some things to differentiate from their bigger rivals. BJ's knows that it cannot simply compete in a head-to-head battle against its rivals in terms of price because of lack of scale. However, differentiating successfully, particularly against the Costco, can be very challenging. Costco achieved such success in this market, even more than Sam's Club, because it created a retail concept that was more than just about having low prices.
Wednesday, February 02, 2011
Tuesday, February 01, 2011
Moskowitz and Wertheim provide very convincing evidence that the omission bias plays a role in how we judge referees, as well as in how referees act. The omission bias would suggest that we would judge a referee much more negatively if he or she made a bad call than if that person simply did not make a call at all in a particular situation... even if that non-call was just as egregious.
Does evidence from sports demonstrate the potential existence of omission bias? Indeed, the authors claim that it does. The authors use data from the Pitch FX system that documents the speed and location of every pitch in all major league ballparks to conduct their study. First, they point out that umpires are generally very accurate overall in major league baseball. However, accuracy lags in a few situations. They show, for instance, that baseball umpires call fewer strikes than they should when the hitter already has two strikes. In other words, the strike zone shrinks. On the other hand, if the count is 3 balls and no strikes, the umpire tends to not call ball four as often as he should. In other words, the strike zone expands. The umpires tend to make bad "non-calls" rather than possibly make the incorrect "active call" that would take the "bat out of the player's hands."
Does omission bias affect business leaders, as well as those who observe and evaluate them? It certainly does. Consider these questions: Do we tend to come to harsh conclusions about the leader who hired the wrong person? Are we just as tough on the leader who passed on the chance to hire a terrific individual? Do we even know about these bad "non-calls" that leaders make? In many instances, outside observers, such as journalists, don't even know about these bad "non-calls" in business situations.