An Exercise to Get Your Team Thinking Differently

Posted by Leonard Fuld

Jan 23, 2015 11:00:00 AM

Source: Harvard Business Review

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Thinking about the future is hard, mainly because we are glued to the present. Daniel Kahneman, the Nobel Prize-winning economist and author of Thinking, Fast and Slow, observed that decision makers get stuck in a memory loop and can only predict the future as a reflection of the past. He labels this dynamic the “narrative fallacy” – you see the future as merely a slight variation on yesterday’s news. A way around this fallacy, we’ve found, is a speed-dating version of scenario planning, one that takes hours rather than months.

Consider the experiment we recently ran with an expert panel to jump-start fresh thinking about the future. Our guinea pigs consisted of life sciences executives from big pharma, biotech entrepreneurs, and academics.

The question we asked: How might a shortage of science, technical, engineering, and math (STEM) talent affect the growth of life sciences companies? The high-speed scenario workshop involved three steps: 1) Identify key story elements or drivers of the STEM talent “story” to be explored; 2) conceive a plausible future by combining the elements; and 3) explore this future to understand its implications for their businesses.

Participants chose three drivers — forces that could be expected to shape the future of the life science industries: Science education, federal investment in life sciences, and private investment. They then identified extremes for each driver that were far from their current state. For example, the group defined the education driver as “the degree to which US elementary through higher education has developed curricula to produce science and technical talent.” Participants decided that in their future story, the US education system would substantially weaken, resulting in relatively few new science graduates, and that government funding, the second driver, would drop precipitously. Meanwhile, the group suggested that large-scale private investment in life sciences would soar.

Building a scenario based on the imagined future state of these drivers, the experts painted a picture of a world in which investor-funded technology companies would transform the traditional life sciences industry. In this world, life-science research draws more on big-data analytics than lab-bench experiments, and virtual talent easily supplants large supplies of scientists married to one location. The result is a more efficient and cost-effective industry.

By helping the group break free of the narrative fallacy, the exercise allowed them to rapidly build a scenario that stood in sharp contrast to their initial assumptions about the future — that a science-graduate shortage could only harm their industry.

Next, we asked participants to consider the strategic implications of this single future story. Here are a few of the provocative ideas the group advanced:

    • Pharmaceutical and biotech firms will make smaller bets, and more of them. Private money – not government grants – will fuel these bets.
    • There will be more R&D partnerships between private organizations like the Gates Foundation and biotech firms, as well as Big Pharma. Private foundations will supplement, but not replace, anemic government funding.
    • Crowd sourcing will become a fundamental R&D engine. This will allow corporations to continue to pursue R&D at near current levels without but at lower cost.
    • Big Data and analytics companies such as Google will re-shape life-sciences R&D, shifting the emphasis from hands-on laboratory experimentation to virtual research facilitated by ever-increasing computing power.

While a two-hour exercise could never substitute for a full-bore, months-long scenario planning activity, our experiment did get participants out of their usual frame of reference, opening their eyes to a possible future that would require very different types of investment and research. That this shift can happen in a matter of hours shows how workshops like this one can unstick executive thinking.

To make exercises like this work, a disciplined facilitator must prepare and guide the participants. They don’t need to be given a formal write-up, but relevant research materials must be handy (in our case, these included a handful short articles on life sciences growth trends, as well as a few news reports on STEM talent); and the facilitator must serve as an editor, pruning and clarifying the flood of ideas the group will generate. Given the tight constraints on such exercises, the facilitator has to carefully balance the time devoted to imagining a future world, and to “living” in it – that is, exploring how the envisioned future might actually affect participants’ businesses and industry.

Obviously, a brief workshop like this one shouldn’t be used to shape strategy; that requires true scenario planning. But we’ve found that such exercises work well to dislodge narrow thinking about the future, neutralize Kahneman’s narrative fallacy, and kick-start a strategy conversation.

 

Read Original Article Here:
https://hbr.org/2015/01/an-exercise-to-get-your-team-thinking-differently-about-the-future

Topics: Harvard Business Review, Lenny's Corner

Victory, One Slice at a Time

Posted by Leonard Fuld

Jan 13, 2015 10:00:00 AM

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VICTORY, ONE SLICE AT A TIME

Read a story about the CMO of one of the world's largest casinos and how he won back a piece of a very competitive market during difficult times. See how David Norton discarded much of the same-old, same-old way of competing in favor of analytics.

C-Suite executives like to think “big.” But what if big is not the solution? What if the blockbuster drug, the industry-shaping iPhone is not a reality for you, your company and its circumstances? What if the market turns, trashing your payday plans? That is when you need to think incrementally, according to David Norton, former CMO of Harrah’s and Caesars casinos.

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In his 13 years as the CMO of one of the world’s great casino and entertainment organizations, Norton helped transform Harrah’s/Caesars into one of the top marketing organizations in the world. He relied on his skills with numbers to help him to solve growth challenges. He is a “quant,” a numbers guy who lets the numbers talk to him and argue with him.

With the failure of Lehman Brothers in September 2008, the world’s financial system nearly collapsed, delivering a shock to the gaming and entertainment industries. Travel slowed. Consumer discretionary spending nearly came to a halt. Norton witnessed a sudden sharp drop in spend at Caesars fifty-plus worldwide resorts and casino properties with the parent company, Caesars Entertainment, suffering double-digit revenue declines in 2009. The numbers no longer talked to Norton, they screamed.

As CMO, Norton had to convince the organization that there were ways to at least remedy some of the revenue shortfall – and that the drop off was not all because of the poor economy. Norton turned to analytics, reviewing the entirety of Caesars loyalty program. He mined the data to uncover new customer segments or different ways to approach existing customers. He was looking for new ways to win back revenue that would drive incremental profit.

“After the worldwide financial collapse, we were desperate for revenue,” says Norton. “Prior to the crisis, we were focused on gamblers and not necessarily cash-paying customers at Caesars. What I was proposing was counter to our culture, our focus on gamblers, though it was a natural evolution leveraging our great assets and VIP service.”

The number crunching revealed that beyond high rollers there were groups of people who traveled to casinos for all sorts of reasons. The one common denominator? They traveled in groups and they spent money. These were not gambling VIPs whose money mostly went into betting. Instead, they were often people who saw the casino properties as a great location for celebrations and get-togethers.

“We began to research what these groups do on specific occasions,” says Norton. “Who was planning the trip and how much pressure was there to get everything right? We asked ourselves, what if we could give them the same or similar treatment received by a VIP gambler.”

He concluded that “If a group of friends or family could spend close to $10,000 for the group under several scenarios such as a guys’ golf weekend or a girls’ getaway weekend they deserved VIP treatment which is mysterious to the average Vegas visitor.”

“At first, many of the operators at Caesars 51 properties resisted this new strategy because we were still running at a very high occupancy. However, the last 10% of those rooms were booked through Expedia, Travelocity or others and were marginally profitable. We convinced them that Total Experiences was driving significant incremental revenue by providing a high touch experience and capturing a larger percentage of their dining, shopping and entertainment spend.”

Caesars Total Experience website (www.totalexperience.com) makes its message very clear: We at Caesars want you, the consumer, to have a good time with friends or family – and we are the ones that will show you the way, take care of the details. Says the website:

  1. Gain tips and access to the best Vegas has to offer
  2. Make your planning hassle-free
  3. Get treated like a VIP
  4. Pay no extra cost for our service
  5. Deal directly with experts

“Before long,” Norton recalls, “We created a much better experience for our customers and improved profits for our operators. For example, if it was a wedding party, we would help plan the entire trip beyond the ceremony, including spa appointments and the rehearsal dinner. . We became, in effect, a wedding planner.”

Caesars operators began to embrace the Total Experience concept. Weddings, bachelor parties, a “Girls Getaway,” birthdays were all newly minted packages the organization marketed. Arguably, it was also an aha moment for the gambling industry with Norton’s program leading the way. The Total Experience program became a $10-15 million business in the first year and was profitable.

Analytics – along with a very driven CMO – were the heroes of this particular Great Recession story. Blockbusters certainly have their place in industry; they change markets and even economies. No doubt every company wants to produce an equivalent of the iPhone or Lipitor. But when you fail to discover a blockbuster concept and you find your company challenged, demanding fast action to steer toward recovery or growth, think about slices. Think incrementality.

David Norton is currently EVP Customer Analytics and Insights at MDC Partners, headquartered in New York City.

Topics: competitive intelligence, strategy, Lenny's Corner

The Next Generation of Retail Healthcare

Posted by Martha Culver

Dec 17, 2014 10:00:00 AM

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The healthcare industry is becoming increasingly more retail-oriented, and healthcare providers and payers must anticipate and respond to these market changes to remain successful. The trend goes beyond on-site clinics to include a number of actual and potential healthcare options in diverse retail locations.

It's easy to envision an extreme scenario in the next 5-10 years, in which discount healthcare providers have set up shop in a variety of retail centers: not just in CVS and Walgreens, but in Kohl's, Home Depot, Lowe's, Costco, BJ's, and major suburban malls. Marriott has added healthcare centers to its Marriott, Courtyard and Residence Inn properties in major cities. The scope of these healthcare centers extends far beyond the basic services of Minute Clinic and includes full check-ups, screening tests, long-term management of chronic diseases, and even minor surgery. A large portion of middle- and working-class individuals and families use these centers for most of their healthcare needs, given their convenient hours and locations, and competitive, transparent pricing.



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The shift in healthcare toward a retail model is no mere hypothetical exercise. Beyond the pharmaceutical industry's direct consumer campaigns and the rise of WebMD and other health information sources:


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Even without the extreme retailization as depicted in the above scenario, the ongoing shift toward retail in the healthcare sector will have a number of more subtle consequences:

  • Heightened competition from traditional and non-traditional healthcare players. Aetna, Cigna and other health plans are moving into adjacent spaces, such as health technology, as their traditional revenues and profits are capped through ACA, and non-traditional healthcare players will continue to proliferate.
  • Increasing advertising for traditional and non-traditional players through a variety of different channels.
  • Proliferation of agents and service agencies to help consumers navigate and choose healthcare providers and health plans. These agents could be individuals or online educational sites fueled by advertising, similar to Edmunds.com or Kelley Blue Book for car buying.
  • Increased demand from increasingly better informed consumers for comprehensive, transparent information about both pricing and quality of health services.

What to do? Regardless of what happens, health providers need to consider the following:

  • As competition increases, think of your organization the way a retail company would, asking and answering questions about market segmentation, value proposition and customer messaging.
  • Consider partnerships with health plans, financial services companies, health agents, entities that will help you reach new customer segments and better serve existing customer groups.
  • Consider restructuring offerings and attendant pricing to meet demands for transparency from those with HDHPs and CDHPs, as well as those with traditional insurance plans. This will help providers remain competitive and maintain margins.
  • Begin to track (or continue tracking) activities of both traditional competitors and potential new market entrants as part of an organized external intelligence program.

The shift in healthcare to retail is happening, and the industry is unlikely to return to its previous structure. Healthcare companies can't stop these trends, but they can anticipate and address them to stay relevant and competitive in the new healthcare world.

Topics: competitive intelligence, strategy, healthcare, Original Research, Fuld Folk

Are Short CEO Tenures the Reason Companies Don't See Industry Disruptions Coming?

Posted by Leonard Fuld

Dec 2, 2014 10:00:00 AM

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ARE SHORT CEO TENURES THE REASON COMPANIES DON'T SEE INDUSTRY DISRUPTIONS COMING?

Organizations are not allowing CEOs to fulfill a big part of their mission: To help their firms avoid major long-term disruptions and potentially catastrophic failure. The key to fixing this problem is to ensure CEOs integrate the long-term plan into everyday operations, as well as give CEOs a long-enough tenure to execute their plans.

As it stands today, why should CEOs in many instances with an average tenure of half dozen years spend their time on multi-decade challenges that far exceed their stewardship?

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During a question-and-answer period at a recent talk I gave about anticipating long-term disruptions, one individual asked a simple but enlightening question that broke open this very corporate soul-searching issue: He asked, “And why should they care about the next decade? CEOs receive incentives that are relatively short term and the public companies they run have to answer to investors each quarter.”

Coincidentally, this past summer I interviewed a series of big-company C-level executives about their strategic horizons. Nearly every CEO, COO, CFO or CMO I spoke with said their strategic horizon projected out no more than three to five years. That was the practical limit for them. The reasons they gave made sense and were generally based on industry cycles. A couple of CEOs said that their industry standards change roughly in five-year periods. Another cited the fact that dramatic new product developments seem to emerge every three to five years. Those are all reasonable answers but they ignore the great, devastating industry shocks that do not follow a normal industry cycle. Just look at the various oil shocks and US automakers, the iPhone or smart phones in general and Nokia or Blackberry’s miss here, or digital photography and Kodak.

A longer tenure is just part-one of the solution. It gives the CEO time. Part-two has to do with how CEOs manage that time, manage the long-term, and protect a company against disruptions.

McKinsey consultant, Mehrdad Baghai, outlined in his book, The Alchemy of Growth, the reasons CEOs need to constantly see this long-term goal and act upon it each and every day. According to Baghai, management must simultaneously work on three distinct but complementary time horizons in order to manage their overall business portfolio: Incubating the new business (Horizon 3), Horizon 2 on-boarding the next generation of high-growth opportunities, to Horizon 1, managing the short-term, the current fiscal year. I believe where many CEOs and their managements fail is accomplishing Horizon 2. That is, CEOs may pose the future opportunity but then do not on-board the new opportunities (Horizon 2). One likely reason for this is their short tenure.

I’m not sure it is realistic for me to advocate for long-term CEO tenures (this has been a subject for lots of board room debate for many years) but let me tilt at windmills for a moment and consider the benefits of extending CEOs’ terms. At least in a few cases such commanding CEO lifers have looked at the far horizon and managed their firms across the second horizon outlined by Baghai. Recently retired Daniel Vasella, CEO of Novartis for nearly two decades was one of them.

Vasella was one of the first pharma CEOs to embrace the threat of generics by entering that market, seeing this next generation opportunity and at the same time helping Novartis overcome a perceived existential danger. He also massively expanded the company’s R&D in “smart” therapeutic classes, making Novartis one of the most successful life sciences companies of all time.

When I interviewed Vasella, years before his retirement, he commented on how he saw long-term and short-term horizons as one continuum.

“Of course everything we do (or don’t do) today impacts the long-term in some way,” Vasella stated. “I am constantly asking myself: Where do we want to be? What do we have to do in order to get there? And when?

He regularly “bit checked” his future strategy by roaming Novartis’ labs, as well as speaking with politicians and industry thought leaders on their opinions and insights. In doing so, he made sure to adjust for second horizon as he moved his plans to the first horizon.

“One has to have a base case, a strategic plan base case, outlining the objectives, direction and actions.  Then you must account for negative or positive events, to elaborate possible strategies that go beyond this base case,” he commented on how he made the adjustments.

“The planning is structured, but it needs to have flexibility.”

In effect he supported Bahgai’s assertion that management must simultaneously plant the seeds for the long term while executing today’s business.

At the end of the day, tracking potential disruptions falls squarely within management’s jurisdiction. The question therefore remains: Are CEOs given the incentive or are they even prepared to manage this process? I would suggest that the answer is a bit of “yes,” and “no.” Yes, it is their job and yes they may even lay out the plans for future options. The reality, though, indicates that “no”, overall CEOs often are not fulfilling their long-view responsibilities.

By giving CEOs the time they need, they could leave their companies with the legacy of watching the far horizon and integrating lessons learned into management’s everyday planning activities – long after their departure.

Topics: competitive intelligence, strategy, Lenny's Corner

Ignore Dogma...Often It's Better To Go With Your Gut

Posted by Leonard Fuld

Nov 11, 2014 10:00:00 AM

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IGNORE DOGMA...OFTEN IT'S BETTER TO GO WITH YOUR GUT!

An interview with Dave Senay, President and CEO of FleishmanHillard

Dave Senay is President and CEO of FleishmanHillard, one of the world's oldest and best known public relations and communications agencies. PRWeek named the firm the 2014 Global Agency of the Year award and Dave the PR Professional of the Year. When I first met him over a decade ago, he had begun to transform FleishmanHillard from a traditional public relations firm into a far broader communications company. He began by ignoring the conventional rules that PR agencies typically followed. For instance, rather than simply compile news feeds for his clients, he wanted to apply competitive intelligence to help his clients better anticipate competitive threats and opportunities. He wanted FleishmanHillard to serve his clients by informing them ahead of the market, not just reacting to events.

Knowing that Dave enjoyed the role of iconoclast, I asked him this time around – over a decade later – what strategic rules need challenging? He immediately attacked strategy models and consulting dogma.

"I have a library full of management books that people have given me," he began, "but I can count on one hand how many of those books I've even opened. There is so much bloviating – better known as hot air – out there. At the same time, I hate to come across as Luddite."

Business school professors and consultants with the latest business self-help books just do not excite him. In fact, he laces into what he sees as jargon or old ideas repackaged. "Take Michael Porter," he says of the creator of modern day competitive strategy. "He talks about value creation. As I understand it, value creation is creating a product that is close to your core and fulfills a societal need. Why is creating a product that meets a societal need considered a breakthrough? In fact the one example Porter still uses is a 20 year-old case around needle sticks, HIV, and AIDS prevention. I'm wary of people wrapping a new ribbon around the obvious. I'm very suspicious of academics bearing gifts."

In his view, avoiding success formulas and embracing common sense supported by experience is a much better way to run a company.

"I've always felt that the mark of a good company and leadership is that you see clearly," he says. "Poor companies obscure the brutal truth and therefore never deal with it. Anything that gets in the way of clarity is the enemy. If I'm caught up in some management dogma, without a clear understanding of how it truly helps, then I'm wary."

He says that the poster child for dogma in his industry is NPS Net Promoter Score. NPS is a scale that purports to measure customer loyalty. This tool, he says, designed for one purpose, has now taken on a much larger role than he believes it should, giving birth to an entire mini-consulting and product industry.

"Suddenly," Dave says, "you have entire organizations incentivized by NPS. Even the books around NPS, will tell you not to build your entire organization's incentives around NPS. Doing so closes the door on other options, other tools and approaches. It also ignores other areas of the organization that have no connection with NPS, such as quality. Even if quality is a primary driver for your company, it may not affect your job directly and is therefore meaningless. For example, if a chef produces a terrible dish, what is the waiter supposed to do?"

Dave does cite a few books he likes. Not surprisingly, one of them is called First, Break All The Rules Among the lessons this book taught him: don't waste any time playing to your weaknesses when it is tough enough to make the most of your strengths.

He also mentions a few other favorites on communications, government and politics and even anthropology, including, The Strategy of Desire, Ernest Dichter's 1960 work that explores ways to solve larger societal problems by influencing change. Always the pragmatist and always the opponent of dogma, Dave sees Dichter's book as a thought-provoking work of anthropology.

"I see what we do as applied anthropology," he muses. "What drives people's behavior is central to what we do."

Dave's advice suggests a number of questions:

  • How many times have you bought the latest "hot" self-help business book, only to realize that some of the advice rang false, or proved misleading months or years later? (Remember how many of the companies cited in the classic best-seller, In Search of Excellence, lost their luster less than a half-dozen years after publication?) 
  • How readily do you believe executives latch onto the latest management theory and incorporate it into company operations or company strategy only to discover some months or years later that it failed?
  • Why do certain somewhat flimsy management concepts take hold in your company, when other more substantial, but perhaps "boring," ones, such as Total Quality Management (a 1980s-1990s movement), eventually fall by the wayside? Is it possibly the concept's integration cost and investment that drives failure?

Topics: strategy, Lenny's Corner, Innovations

Sometimes Being First-To-Market Is The Last Thing You Want!

Posted by Leonard Fuld

Oct 21, 2014 9:30:00 AM

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SOMETIMES BEING FIRST-TO-MARKET IS THE LAST THING YOU WANT!

An interview with Will Ethridge, former CEO of Pearson Education North America

For many CEOs, driving their companies to be first-to-market is at the center of their strategy  and for good reason. According to innovation guru and Harvard Business School Professor Clayton Christensen in his groundbreaking book, The Innovator's Dilemma, first movers in new or emerging markets have a distinct advantage over their rivals. Will Ethridge, former CEO of Pearson Education North America, a global education services company, appreciates Christensen's concepts but disagrees  at least in part  with Christensen's almost unconditional view of first mover advantage.

"I often believe it is useful being first-to-market  when it works  because you're ahead of the market," says Ethridge. "However, in certain circumstances it's often better to be second or third to market."

Ethridge does consider  at least in theory  Christensen's view that first-to-market can make customer switching costs difficult. First movers, Christensen believes, do indeed create stickiness with customers who have already invested in your system and do not want to reinvest in order to switch.

As former head of this Pearson division, Ethridge needed to also consider the innovator’s pressure – the need to execute well if you want to be first to market. Execution is a major challenge and one where you can often trip up, according to Ethridge. He sees “first mover” as a tale of two cities.

It was the best of times: “We were first-to-market with homework applications enabled by computer technology. In that instance, being first in the market gave us increasing returns. People got used to our homework system which also made it harder for others to take this market,” he recalls.

It was so-so times: Based on his experience with another product launch that did not achieve the same market trajectory as the tech-homework product, he urges caution when considering being first with a bold new market entry. In this instance, the product was aimed at an undefined, emerging market with no clear leader. “We did not implement well,” he says, “and someone else got to the market sooner and did a better job on execution.” 

He concedes that often you have a tough choice to make. You can try to become first mover and capture a healthy share of a high-growth market, or you can decide to be a strong second or even third entrant. By coming to market later you may initially cede the category to someone else but also benefit by learning from mistakes made by your predecessors. Apple and its iPod provide a shining example. Even though the iPod arrived late to the party, it greatly improved on the first generation set of MP3 players and became the defining product in the category.

This is exactly where Clayton Christensen and Will Ethridge begin to part ways. Christensen says that companies need to innovate and disrupt themselves in the quest to maintain market leadership. Ethridge generally agrees with Christensen’s innovation philosophy. Nonetheless, Ethridge raises a red flag of caution for all businesses who believe they can – and should – become first movers. Consider the rewards that being first mover can deliver and then balance them against your need to execute with precision and on time.

And there are other critical questions to consider:

  • Are you too cautious to be bold? Is there too much at risk – or at least your perception of risk – for you to become a first mover? 
  • What do you know about the new set of competitors you will encounter in this new market?
  • What is their market fortitude – their ability to withstand nail-biting and perhaps long-term financial losses?
  • How deep are their investment pockets or their expertise at converting ideas into innovative products or services?

First mover advantage sounds good, sounds smart, but is it for everyone? Rule-breaking innovation also sounds good but can you execute on all cylinders, from R&D to launch? Will Ethridge will tell you that beyond having a good product, first-mover advantage also hinges on good execution.

A note on Will Ethridge: Before he became CEO of Pearson Education North America, Will Ethridge also served as President and CEO of Pearson Higher Education, International, President of Prentice Hall’s Engineering and Science and Math Divisions, and Publisher, Business Publishing Addison-Wesley Publishing Company.

Topics: competitive intelligence, strategy, Market Share, Acquistions, Pricing Strategy, Strategically Irreverent, Mergers

Strategically Irreverent: Throw out market share!

Posted by Leonard Fuld

Sep 30, 2014 11:16:00 AM

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THROW OUT MARKET SHARE!

An interview and discussion with Pat O'Keefe, former CEO of Watts Water Technologies

 “I believe market share drives very little. Because five times in my career I got to buy the competitor, and in every case my management team overestimated our market share and their team overestimated their market share. Everyone overestimates their share. I am a harsh critic of market share.”

Those are the words of a plain-spoken Pat O’Keefe, retired CEO of Watts Water Technologies, who spent a decade growing his company through smart acquisitions and pricing strategy. Today Watts has net sales totaling more than $1.4 billion.

During his tenure, he saw pricing – not market share – as a reflection of value and market conditions. When necessary, he would raise prices to what he and his management team felt was appropriate – even if it meant losing share points.

“At Watts we took the market lead on pricing, generally pushing pricing increases according the cost of raw materials,” he says. “We would be the first to move and the rest of the industry trailed us. A number of our competitors would try to lower prices [to capture some share as a short-term gain] but eventually they would have to follow our lead.

“I knew,” he adds, “that in fact we were not the market leader in terms of market share.”

Share, O’Keefe concluded, can distract and impair management’s views of its competition, negotiation prowess, and even overall pricing strategy. Along those lines, he offers executives two other pieces of advice:

  • Ask your management team to challenge share estimates very carefully. “I nearly always went outside Watts to independently verify share,” he says. Even with these precautions, O’Keefe believes that easy access to internal estimates versus the nearly impossible access to a rival’s estimates certainly biases market share in favor of the home team’s own thinking. That is why O’Keefe strongly urges adjusting downward your team’s share estimate. “Don’t trust your management to give you accurate market share data,” he warns.

  • Beware of negotiation illusions. One plus one does not necessarily add up to two in terms of market share growth, according to Pat O’Keefe’s experience acquiring competitors and folding them into the Watts organization. Don’t get fooled by the often cited term “synergies,” promising a great gain in market share, as well as cost savings via acquisition.

"I have [acquired and merged companies into Watts] a number of times,” says O’Keefe. “The harder part of the acquisition equation is that you discover that the acquired company’s particular product may have had a better reputation than yours in the marketplace, or vice versa. As a result, you discover the buyers of those products just don’t switch."

"In the plumbing industry,” he explains, “you have habitual buyers who learned from their fathers or uncles to buy the Watts brand or another brand. So you have psychological barriers [among your client base that will prevent you] from achieving cost reductions. The acquirer tends to overestimate the savings they get by eliminating product lines – even though you do get the cost savings by reducing overhead."

Market share is just one measure of success and not a very good one, according to O’Keefe. He advises management to focus instead on value as reflected by margins and profitability, dynamics far more critical to success than pure share growth.

 

Topics: competitive intelligence, strategy, Market Share, Acquistions, Pricing Strategy, Strategically Irreverent, Mergers

Time to break the rules! Introducing "Strategically Irreverent"

Posted by Leonard Fuld

Sep 30, 2014 10:30:00 AM

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Occupants of the C-Suite often succeeded not because they followed the rules but because they broke them. We can learn a lot from these leaders and that is why I have chosen to interview former CEOs and former company presidents for this new blog, Strategically Irreverent.

Every executive has experienced crises that have tested his or her mettle. Most have emerged whole because they and their management have had to experiment with new models that solved a novel problem, one they had never before faced. These executives can teach us a lot about strategy, about marketing, about business fundamentals that you cannot learn in a classroom or from some best-selling advice book.

Every few weeks, I will be interviewing executives from around the globe from a variety of industries, both manufacturing and service. Some names you will recognize, others you will not. What you will recognize, though, is a pattern, a pattern of hard-won lessons and advice. You will read about the savvy, insightful views – sometimes iconoclastic – that helped shape their companies.

I invite you on this blogging journey and look forward to your comments.

All the best,

Leonard

 

Topics: competitive intelligence, strategy, Market Share, Pricing Strategy, Strategically Irreverent, Mergers, Acquisitions

Announcing the New, Insight-Rich Fuld + Company Website

Posted by Leonard Fuld

Aug 26, 2014 11:30:00 AM

It's here!  We are proud to announce the release of our brand new website for Fuld + Company. Visit www.fuld.com to see the fresh look, user friendly navigation, and to check out the latest in competitive intelligence and strategic insight events, services, and content. The insight-rich website will help decision makers find the resources they need when thinking about new markets and competitive options.


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Some of the new features include:

  • Unique thought pieces and Blogs.  Learn about the latest thinking in competitive intelligence, including such topics as how to anticipate long-term disruptions, acquisitions in life sciences, as well as how and why to embrace your competitor’s strategy.

  • Robust Cases Studies.  Select from dozens of cases specifically tailored to help you consider creative and practical solutions to the strategic challenges you face each day. 

  • Solutions-based Services.  From competitive and market intelligence, to brand insights, war games, market analysis and market sizing to long-term solutions centered around scenario planning, you will find concepts to help your company think about its market and competition in a new light.

  • Innovation Resource Center.  View our white papers, industry analyses and pinpoint articles on conversation-starting topics like, telemedicine, war games, and long-term competitive and strategic issues.

  • Coming Soon – “Strategically Irreverent,” a new, somewhat irreverent blog interviewing senior executives about where decision makers should dramatically bend the rules or break with strategic dogma.

Take a few minutes to tour around the site and subscribe to our blogs for the exciting ideas to come. I welcome your feedback. 

 

 

CEOs, Get to Know Your Rivals

Posted by Leonard Fuld

Jul 25, 2014 12:25:00 PM

Source: Harvard Business Review

HBR_BlogPost_CEOsRivals

In an interview, Cisco CEO John Chambers once remarked on his intimate knowledge of rival CEOs. He claimed that based on this insight he could anticipate their market moves one or even two steps in advance. I thought he might be exaggerating, making good copy but lacking substance.

I decided to test his claim by interviewing current and former C-suite executives, including Bob Crandall, former CEO of American Airlines; David Norton, former CMO of Harrah’s casinos; Will Ethridge, CEO of Pearson Education; and Pat O’Keefe, former CEO of Watts Water Technologies. From plumbing equipment to casinos, these executives all agreed: what Chambers said was not only true but almost an understatement. In fact, I began to see four different strategies for keeping track of — and out-maneuvering — rivals:

Look for weaknesses that present opportunities. “It’s important to understand your rival’s weak spots and strategy,” says Will Ethridge, Pearson Education’s former CEO. “I knew one rival whose CEO was focused on driving profitability and bringing up margins. I knew that meant he would be relatively focused on short-term results while mostly ignoring product development. I also realized he would go after our top sales people to meet those short-term sales goals. So we worked extra hard to protect our key sales people. At the same time, we continued to invest in long-term product development and overseas markets, knowing it was unlikely he could follow us in the short term.”

Play to your strengths, not your rival’s. David Norton, former CMO and SVP of Harrah’s/Caesars points out that you must appreciate your counterpart’s competencies and weaknesses, as well as your own. Gary Loveman, then CEO of Harrah’s, was an MIT-trained economist. He had recruited other quant experts, such as Norton, formerly of American Express. They saw the casino business as a great numbers experiment. Among their rivals was Sheldon Adelson, CEO of Las Vegas Sands Corporation, who they believed operated from gut feel. He made a killing by opening casinos in Macau and Singapore.

Adelson’s bold move in Asia had outflanked Harrah’s. But Norton says the executive team didn’t conclude that they should abandon their quantitative strengths in favor of big rolls of the dice. Instead, Loveman decided to apply their deep quantitative knowledge of customer behavior in casinos and double down on U.S. expansion, out-maneuvering Adelson in the domestic market.

“We used data to personalize our marketing and become more efficient in attracting and holding onto customers,” says Norton. “And when it came to expanding our presence in the U.S. market we knew no one else would go to the extent we did, investing heavily in analytics, training and so on to build a comprehensive loyalty program.”

Encourage employees to monitor rivals, too. Former American Airlines CEO Bob Crandall, like Chambers, watched his counterparts, but more broadly he encouraged the entire corporation to watch the competition at all levels.

“It’s like running a national intelligence network,” he says. “If you are running it right, everyone is aware that anything and everything is important, and lots of information trickles up to management. For example, if a ticket agent in Chicago hears from an agent at another airline that the rival airline is looking for additional gate space, she should tell the local manager, who calls the division head who feeds it up the line. Senior management could then make some guesses about what the rival is up to, and could either add flights to use existing gates more intensively or take other action to blunt the success of whatever the rival might do.”

Meet the competition in person. You don’t have to watch your rivals from afar – or engage in deception to get close to them. In fact, face to face contact can pay off in unexpected ways. Pat O’Keefe was CEO of Watts Water Technologies, a global plumbing, water safety, and control equipment company. According to O’Keefe, his mandate was to grow Watts, largely through acquisitions. He spent most of his time seeking out and learning about acquisition candidates.

“I was personally obsessed with looking at our competitors,” said O’Keefe. “I wanted to know more about them than other bidders, when and if the time came to make them an offer. But there was no point in deceiving them. Their CEOs all knew who I was and they would very willingly show me their products. I visited them regularly to ask if they might like to join the Watts family of companies.

No matter the industry, John Chambers is right. CEOs not only can, but should, be watching their counterparts closely, assessing their strengths, weaknesses and predilections, and developing counter-measures accordingly.

 

Read Original Article Here:
http://blogs.hbr.org/2014/07/ceos-get-to-know-your-rivals/

Topics: competitive intelligence, leonard fuld, blog, article, CI, Harvard Business Review, competitive strategy, marketing, customer service, sales, Fuld+Company

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