Teaching Yourself New Ideas & New Skills

When is the last time you taught yourself a new skill or body of knowledge?  How did it make you feel?  During the process, you probably felt mighty uncomfortable, perhaps even stressed out.  Few of us enjoy making mistakes, struggling to understand a concept, or failing to master a new skill.  When we have achieved mastery, though, we usually feel extremely good about ourselves.  More importantly, we may have cultivated a new skill that helps us thrive in our careers.  

Writing in Psychology Today, Carlin Flora explains, "To survive in the knowledge economy, we must all become self-taught learners, whatever our formal training was or will be."  Flora explains some of the benefits of teaching ourselves: "The rewards of becoming an autodidact, though, include igniting inner fires, making new connections to knowledge and skills you already have, advancing in your career, meeting kindred spirits, and cultivating an overall zest for life and its riches."

Being self-taught doesn't mean we don't attend workshops, watch YouTube tutorials, or listen to experts at a conference.  However, it does mean organizing our own learning journey, and not relying solely on the passive process of listening to others explain something to us. We have to read voraciously, find opportunities to practice new skills, and experiment with new methods and techniques. 

I must admit that I don't love being a novice at something. Author James Marcus Bach explains that, for many people, "feelings of inadequacy stop curiosity." Yet, curiosity is at the heart of learning.  While teachers hopefully fostered our curiosity as students, we need to cultivate our own curiosity as adult learners.  We need to take the time to ask interesting questions, acknowledge what we don't know, and seek out sources of new information.  In many cases, we won't truly learn something new in a 60-second video.  It will take sustained attention and the reduction of distraction.  Finding the time to focus will be key if we wish to become more proficient at teaching ourselves something new.  

You Can't Make It Up on Volume!

Have you ordered groceries online? If you have, you may have found it incredibly convenient. However, new research confirms my intuition, namely that many retailers struggle to make online grocery sales profitable. Knowledge@Wharton recently featured research by Professors Marshall Fisher and Santiago Gallino on this topic. The two scholars published an article in Harvard Business Review titled "How Grocery Stores Should Respond to the Growth of Online Markets."  Interestingly, the authors point out that Trader Joe's does not offer online grocery sales.  Having written a case study about Trader Joe's, I love how they buck the conventional wisdom and profit greatly by doing so.  

Why are online grocery sales unprofitable for many retailers?  The authors found that, "Traditional in-store shopping requires 30 minutes of employee labor per customer. When a customer comes inside the store to pick up an online order, an additional 27 minutes of labor is needed. Curbside pickup adds 32.6 minutes, and delivery adds 37 minutes."  These labor costs are hard to recoup.   Given thin margins and intense price competition in the industry, retailers struggle to charge enough to offset these costs. 

Some retailers seemed to think that they would eventually become profitable through economies of scale.  However, the problem is that a key cost driver is the labor involved in serving the online customer in grocery stores.  That cost is largely variable, and it does not come down as you scale up.  Gallino explains: “Many grocery retailers have been pushing for this with the hope that scale will bring profitability. But we’ve been in this effort for a number of years now, and it’s not true. There is a physical reality that scale is not going to fix. Broadly speaking, it’s very challenging to make a profit.”  In short, the research confirms the old joke that, "you can't make it up on volume."  If variable costs exceed price, then no amount of scale is going to make you profitable.  

Companies should take a key lesson away from this research, and it extends well beyond online grocery sales. Firms need to have a good handle on fixed vs. variable costs, and they must understand the contribution margin per item. If the contribution margin is negative, then economies of scale will not likely save you. How might increasing volume lead to lower costs and more profits? If variable costs come down through something such as volume discounts in procurement, that would be helpful. Or, if variable costs come down because of a steep learning curve, that could make a service or product more profitable as volume increases.

Simplify, Simplify, Simplify

Source: New England Patriots

Last night marked the end of opening weekend in the National Football League. My beloved New England Patriots lost their opening game against the Las Vegas Raiders. The debate has raged in the aftermath of the loss. Did offensive coordinator Josh McDaniels make his strategy and scheme too complex for his young quarterback, Drake Maye? Or, did Maye execute the gameplan poorly and make costly mistakes? As fans, we have no way of knowing which explanation is closer to the truth.

As I listened to this debate rage on sports radio, television, and the web yesterday, I began to think about the lesson for business leaders.  Many enterprises face incredibly complex challenges, particularly in today's turbulent economic and geopolitical climate. Yet, the most effective leaders simplify their strategies and the operating plans. They provide clear, concise direction. They focus on a few key metrics, rather than trying to constantly shift attention among many different performance indicators. They don't pursue dozens of major initiatives; instead, they rally people around a few important endeavors. These leaders understand the power of small wins too, rather than only measuring success at the end of long, complicated initiatives.

Steve Jobs put it best when he said, "Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains."

Breaking up Kraft Heinz: When Will Executives Learn?

Another corporate breakup. Ho-hum. Another mega-merger that is being unwound. Ho-hum. When will CEOs ever learn? Today's news: Kraft Heinz will split into two companies. As Jesse Newman reports in the Wall Street Journal, "The food giant said it plans to split its business into two companies, unwinding an industry megamerger that married two packaged-food behemoths."  

Why the breakup? We read a few explanations in the Wall Street Journal article:

• Miguel Patricio, Executive Chairman of Kraft Heinz: “We can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance."
• TD Cowen analyst Robert Moskow: “Food companies have found that their breadth of influence in the grocery store does not necessarily yield the advantages they expected."
• Kraft Heinz CEO Carlos Abrams-Rivera: “Scale by itself is not the answer, but having scale along with focus creates opportunities."

For me, the lessons are simple, yet many leaders do not seem to recognize them as they rush headlong into these megamergers:

1. CEOs often overestimate the economies of scale and scope, and they discount or downplay the diseconomies. 
2. Leaders often overestimate the extent to which more market power will lead to huge benefits as they bargain with suppliers and buyers.  
3. The benefits of simplicity and focus are often underrated by executives. 
4. Merging two companies with inherent weaknesses does not automatically make them stronger together. 
5. The challenges of merger integration often overwhelm top management teams and distract them from giving critical strategic issues the attention they need and deserve.