Theme restaurants, shoppertainment and other marketing ideas have been around for a while and some deployments have done well consistently. Others, sometimes not. The question is … if you make it fun will they come? We intuitively have thought so. Now, perhaps we have some proof.

With funding from Volkswagen, TheFunTheory.com has been “testing” some novel ideas about making things people normally won’t do fun to see you can modify their behavior. Things like taking the stairs instead of the escalator, recycling plastic bottles, and throwing trash in a bin rather than on the ground.

To see how it can be done check out these three short videos.

Mitch

A recent issue of the Harvard Business Review had a special section titled “What Would Peter Drucker Think?” focused on the current financial issues.  It was refreshing to see Drucker so fondly remembered in the HBR, where he had published many articles.  Drucker died several years ago, but he was THE management guru to generations of managers.  In recent years it has become a bit trendy to dismiss him as old hat and now irrelevant.  That’s ridiculous.  It’s like saying that Frank Sinatra is an outdated and irrelevant singer.

Drucker invented the field of management, and many of his insights are now part and parcel of what we take for granted in management—that’s hardly irrelevant.  Also, he was one of the few people who could consistently be 20 years ahead of their time and still be lionized during the present.  He was unique and will be missed.  We could do a whole lot worse today than to look back on his wisdom.

Ralph

The September issue of the Harvard Business Review has feature article titled “How Strategy Shapes Structure.”  We’ll reprint its opening paragraphs here, with the issue we have with it in bold:

When executives develop corporate strategy, they nearly always begin by analyzing the industry or environmental conditions in which they operate. They then assess the strengths and weaknesses of the players they are up against. With these industry and competitive analyses in mind, they set out to carve a distinctive strategic position where they can outperform their rivals by building a competitive advantage. To obtain such advantage, a company generally chooses either to differentiate itself from the competition for a premium price or to pursue low costs. The organization aligns its value chain accordingly, creating manufacturing, marketing, and human resource strategies in the process. On the basis of these strategies, financial targets and budget allocations are set.

The underlying logic here is that a company’s strategic options are bounded by the environment. In other words, structure shapes strategy. This “structuralist” approach, which has its roots in the structure-conduct-performance paradigm of industrial organization economics¹, has dominated the practice of strategy for the past 30 years. According to it, a firm’s performance depends on its conduct, which in turn depends on basic structural factors such as number of suppliers and buyers and barriers to entry. It is a deterministic worldview in which causality flows from external conditions down to corporate decisions that seek to exploit those conditions.

Even a cursory study of business history, however, reveals plenty of cases in which firms’ strategies shaped industry structure, from Ford’s Model T to Nintendo’s Wii. For the past 15 years, we have been developing a theory of strategy, known as blue ocean strategy, that reflects the fact that a company’s performance is not necessarily determined by an industry’s competitive environment. The blue ocean strategy framework can help companies systematically reconstruct their industries and reverse the structure-strategy sequence in their favor.

The article goes on from there to talk about how “traditional” strategies—those that come from competitive analysis—are different from disruptive strategies, and how different kinds of organizations are required to execute each.

We disagree with much of this line of argument for the following reasons:

•  Even in a traditional, non-disruptive prone industry, there are many strategies other than low-cost or product differentiation that are available.  Channel strategies, for example, come immediately to mind.
• The notion that disruptive, or “restructuralist”, strategies can’t come from traditional environmental analyses is wrong.  Both of us come from the high-tech industry where competitive/environmental analysis always included the disruptive threats on the horizon, and the firms in our industry were always re-making themselves to take advantage of them.  Indeed we explicitly include disruptive factors in our model of product/market strategy, the Customer Manufacturing System.  Disruptive factors don’t come out of the blue – they appear over a period of time and can be seen and acted upon.   
• A structuralist approach to mature business lines can co-exist with a restructuralist approach to new opportunities in the same firm.  If an industry is always changing — frequently subject to what Christiansen calls the innovators dilemma—this kind of co-existence is a necessity, and is quite possible.  For example, a firm that managed the transition from mainframes to mini-computers to microprocessor-based computers is IBM.  An example of a firm that didn’t manage the transition is the old Digital Equipment: they failed to make the transition to micro-processor based computing.

Bottom line: we feel that the distinction between these kinds of strategies is valid, but the implication that a single organization can’t integrate both into its ongoing business model if flawed.

Ralph

I was reading the business section of the San Jose Mercury today and found two side by side (well they were in a column so technically one was above the other) articles that struck me.

The first was titled “Price cuts, new products boost P&G.” The article noted that P&G “sees budget conscious consumers … responding to price cuts and new products to give them more for their money.” P&G reported better than expected 1Q results. They cut prices by about 10% across the board and saw sales fall about 6% thus suggesting an increase in unit sales. Profit was off 1%, but that was better than expected. Their CEO’s stated goal was to win back market share and the increase in unit sales may suggest that is happening.

The second article was focused on a P&G competitor, Colgate-Palmolive. The title of the article: “Price increases lift Colgate in Q3.” The article started out noting that “…higher prices have continued to stick helping …[the] company post an 18% higher 3Q profit.” (To be clear the two companies are on different fiscal years but the time period of interest is the same.)

While Colgate may not be able to raise prices further, which company do you think is doing better?

Mitch

We’ve all heard the story about how if the railroads had understood they were in the transportation business rather than in the railroad business, they would have owned the airlines and the trucking companies. (Not necessarily great businesses to own, but you get my point.) How many times have you sat in a meeting discussing new products or services and had somebody seriously say, “we can’t do that it will kill off our most profitable product/service”?

Wil Durant is the only horse drawn buggy maker that transitioned to cars (General Motors). (And it’s not his fault idiots spent the last 60 years killing it.) Too often the market moves and we refuse to see it. Maybe not so with Hallmark (“When you care enough to send the very best.”)

They not only creating a capability for sending free e-cards a while back as part of their main website, they also now have a mobile greeting service to allow you to send greetings from your mobile device. Considering that most people are glued to those things 24/7, what better way to get a greeting in front of someone.

Unlike Kodak which almost completely missed the digital revolution trying to protect silver halide profits, Hallmark seems to be “with it” and moving with their market.

Mitch

As I mentioned in a recent post, I went to the Half Moon Bay Pumpkin Festival a week ago. While the La Bamba experience sucked, I did see a great sign in a jewelery store that I wanted to share with you.

The gist of the announcement was that their people would have a great attitude, provide great service and make sure you had a great experience in their store (did I say “great”). On the assumption they are delivering on this promise as opposed to following what my friend George Nelson used to call the NATO policy (No Action, Talk Only), they should be succeeding even in this economy. From the looks of their store, I believe they are.

My congrats.

Mitch

I have mentioned in previous posts that companies which focus tend to do better. Case in point today is Allegiant Air. What do they do? They fly from out-of-the-way cities to desirable destinations … dirt cheap. Based in Las Vegas they fly from places like Bangor ME, (hi Joanie), Fargo, ND, Great Falls, MT and Monterey, CA to Las Vegas, Orlando, Tampa, etc. One way from Monterey to Las Vegas is $30!! How do they make money?

Simple. They don’t fly a lot so their planes are full. They have no competition to speak of from the airports they serve. (They have competition on about 5 routes). And they make money by also selling you hotel rooms and car rentals when you arrive. Some of you pricing experts might suggest they are “leaving money on the table” if they have no competition and price low anyway. You might be right, but they are profitable, which is more than most other airlines can say.

In truth their actual name tells you what you need to know about the company: Allegiant Travel Co. They are about travel, of which air is just one part. Focus and win.

Mitch

Last Saturday we went to the Half Moon Bay Pumpkin Festival. To avoid sitting in 2 hours of traffic we leave the house at 7:00am drive over and eat breakfast in Half Moon Bay prior to the festival opening. We went to the same restaurant for breakfast this year we went to a few years ago, though it had changed hands and was now called La Bamba. Good looking breakfast menu and my only real concern was that last time we had to wait an hour to get in and this time we could just walk in. (Not necessarily a good sign, but we decided maybe we had come later last time.)

Anyway, after being seated we discovered why they may not have been as crowded as before. The wait person was clearly not interested in providing any level of service at all. He actually seemed to be moving in slow motion. We sat for 45 minutes while we waited for our breakfast to show up and watched the limited number of new people wait 10 minutes plus to be seated in an empty restaurant and 15 minutes more to be waited on.

When our food finally arrived it was cold (obviously been sitting waiting for Mr. SlowMo to bring it to us). So why am I confused?

The unemployment rate in California is over 15%. Why on earth would the owner/manager put up with that kind of performance from an employee when there are 6.8 people (on average) applying for every open position. You might suggest that the restaurant was making lots of money by charging for parking that day, so they did not care, but they were driving off customers (and given the lack of them, this was not a first).

In today’s economy you should be making sure you have the best possible team in place. Customers are spending their money where they get the best value. People make the biggest difference in your company’s ability to be excellent. With a labor pool full of talented people sitting on the bench, it is past time to trade up.

Mitch

Over the years I have posed a question to my audiences and clients that comes in two forms:

1. If you could start your business all over again today, what would the new business look like?

2. If you were to set up a new business today to compete with your existing company, what would it look like?

The purpose for these questions is to get people thinking about how competitors might come after them, and more importantly, to determine if their business model is still right for the market. Harvard Business Review published an article last December, “Reinventing Your Business Model,” which talked about ideas around how to think about that subject.

The authors noted that 50% of executives surveyed believed that business model innovation was going to be more important than product or service innovation. They cite the success of the Apple iPod as a business model innovation that included iTunes as the reason for its success. (We concur.)

The issue is “what is a business model?” And how can you understand how to innovate a business model. Several years ago, during the dotcom bust, we wrote a paper entitled, “Is Your Business Model Right For Tomorrow”s Market?” If you are interested in understanding how to think about a business model and the levers to innovating a business model, we commend this paper to you as well.

Mitch

Most business processes are people dependent. That is, people are required to make the process work. However, some business processes are person-dependent, and that is limiting. To know if a process is person-dependent you just have to ask yourself what happens if that person, specifically, is not available temporarily, or permanently? Will the process fail? Clearly, some people are better at certain functions than others, but if the process fails without a specific individual available, you have built a flawed process because it is person-dependent.

Most of us have worked in companies where this is an issue within our purview. However, when it extends to the most senior levels of the company, it can be limiting if not damaging. General Motors has for MANY years missed major trends in the auto industry. Where they were once a trend setter, they are now a slow follower. The reason is not lack of talent, but rather a business process that requires too much time to approve a project. GM’s solution to this problem was Bob Lutz. As far as one person goes, he did a GREAT job at moving new product ideas through GM faster than previously. However, Mr. Lutz wanted to retire at the end of this year. He can’t. Why? Because the processes in place at GM are still “Lutz dependent.” If GM does not fix this before Mr. Lutz must retire, they will not be any more viable than they have been. And this is not unique to GM.

Steve Jobs was on leave from Apple for quite a while this year due to illness. Many experts opined that a protracted absence by Mr. Jobs could be an “issue” for the company. If this is true, then as many people believe, Mr. Jobs is a critical, part of the Apple process and without him their performance may suffer greatly. This makes the process person-dependent. As I said earlier, great people make a difference, but if you go from great to a lost cause because of the loss of one person, that is not good business management.

When Steve Jobs originally handed the company off to John Sculley, Apple suffered. And no other CEO was able to get them back on track. Similar things can be seen with Howard Schultz at Starbucks, Arthur Blank at Home Depot, Michael Dell at Dell, etc. Walt Disney, Sam Walton and other legendary CEOs built business processes that were not dependent on them personally, so I will not buy the notion that some CEOs are just so good they are irreplaceable.

Great people are always valuable, but building robust processes that are not person-dependent allows for a sustainable business.

Mitch