The roll-up or roll-over of mid-sized companies

Our team member, Rick Hubbard, found this clever video recently. (Click on the link and scroll down in the article to find the video). It was produced to spotlight the conglomeration of smaller ad agencies and what can happen to them. We liked it because it is not just ad agencies that get acquired and “changed.”

In the November 30, 2019 issue of Forbes, they had an article featuring Bigelow Tea. The article, “High Tea“, talks about this family owned business, which is actually run as a B Corporation, a For Benefit enterprise. It’s socially conscious focus is an integral part of its ‘being,’ and allowed it to become a B Corporation.

Cindi Bigelow is the second generation family member, who is grooming a third generation. Their fame is originally from the Constant Comment tea, which was developed by her grandmother, and is a secret recipe. (Kinda like Coca Cola).

They are constantly “hit on” to be bought out, which is not happening because, like this video, (click on the link and scroll down in the article to find the video) they know what would happen.

Mitch

Assumptions That Can End You

Last week we posted regarding assumptions and how they can lead to a company’s demise. We got a large example of this right after our post, when Dean Foods filed for bankruptcy. Dean is the largest milk company in the US, and their failure to accept and adapt to changing consumer trends doomed them.

The NY Times published a piece on Dean which included this excerpt: “Long ago, the public figured out that diets do just fine without milk and no, we don’t have to drink three glasses a day,” said Marion Nestle, a food studies professor at New York University. “Maybe plant-based milks are the coup de grâce, but this industry just can’t seem to keep up with changing tastes.”

Did arrogance play a part in their missteps? Don’t know, but if not that, how can you miss the trends that have been going on for years, unless you just don’t talk to customers or pay attention.

And Dean is just one example. The Times cites Kraft Heinz as well. “Like Kraft Heinz, Dean Foods has watched from the sidelines as smaller rivals dominated the growing market for trendy alternatives, like almond milk and plant-based dairy products. In fact, in 2012, the company started spinning off its units that made such alternatives — a move that in retrospect looks like a strategic error.”

In addition, channel concentration has caused these companies to also have to deal with private brands and their increasing power. Again, not a surprise, if one talks to customers and accepts what the market is showing.

Other trends that were easy to spot if one was not blinded by arrogance were the shift away from cereal for breakfast to breakfast bars, which aren’t consumed with milk. Yogurt has seen an increase in consumption, something Dean does not produce, and Starbucks shifted to almond milk for many of its customers who prefer it. The signs were there.

As we said last week, if you listen to the customers trends are obvious. If not, your successors will deal with the fallout.

Mitch & Neil

Under What Assumptions Do You Operate That Are Not Accurate?

We believe this is a fundamental question that can make or break your strategy. As Mark Twain famously said, “It ain’t what you don’t know that gets you in trouble. It’s what you know that ain’t so.”

A brief review of strategic thinking and the approach to effective strategy notes that you start with assumptions. Assumptions about the future; the economy; your market; your competitors, etc. Assumptions that are invalid lead to failure.

What checks do you have in place regarding your assumptions? An article entitled Hubris in Leadership: A peril of unbridled intuition? delved into the issue.

“Leaders, CEOs and entrepreneurs by virtue of their position and power do not have as many ‘social correctives’ as do other employees: they are, in their relative isolation, especially vulnerable to hubris. Take Lehman Brothers under the leadership of Richard Fuld as one example of CEO hubris leading to extreme performance.

However, independent financial analyst Charles Peabody argued that Fuld, a 30-year veteran of the company, overlooked the potential effects of real estate loans and other toxic assets on the balance sheet with ‘the typical hubris that a long term CEO has: ‘‘I built this thing, and it’s got more value than the marketplace understands.’’

CEOs may be aware of the perils of hubris, but may be blind to it themselves; for example, enquired of a group of NASDAQ CEOs in a workshop ‘what was the thing that led to most executive failures?’ The unequivocal response was ‘hubris’. Ironically Richard Fuld himself commented prophetically to Euromoney magazine in 2005 that ‘I worry that we could get arrogant. If you get arrogant, you lose your way, and start making mistakes’.

It is also a tragedy for Mr. Fuld, in the classical Greek sense. He had devoted so much of his life and his personality into molding the bank, he could not accept its decline. If he had sold out earlier, Lehman might have survived but he was too proud. It was hubris, followed by nemesis.”

We have found that one of the benefits of an effective CEO Roundtable Group like Vistage, TAB and others is the ability to have peers call you on your assumptions. In addition, we believe there is a very effective method to help prevent assumption bias.

We recommend leaders spend 25% of their time meeting with your market: customers and prospects and listening to them. What is driving their business? What can you do to help? What else do they need? What are their concerns? And those are just a few of the things you can learn. This is qualitative and experiential. And it works.

In addition, you can gain a clear understanding of the size of your market. Measure whether you are growing faster than your market, and most importantly, listen for what you’re not doing.

This will always help you keep your Revenue Production System strategy properly aligned with your market, and help you from having invalid assumptions.

Neil & Mitch

United to Become More Customer Centric … Sure

United Airlines had its first ever global media event last week to kick off a “new United.” The CEO wants the media to start asking what’s next instead of what’s wrong. Maybe.

According to the Chicago Business Journal, a group of United’s top execs explained in great detail how the airline is evolving into a customer-centric carrier. Given that airlines are my go-to example of how to be non-customer-centric, this seems beyond a stretch goal for the airline.

They mentioned five key things they are going to do and I accept that at least two of them are actually customer-centric. The other three are also customer-centric, but they will impact fewer passengers.

The one that got my attention is bigger overhead bins to allow more bags to be carried on. I might add that the headline for the article in the Journal was about bigger overhead bins,

They also are using their brains to figure out if they can hold an outbound flight to allow late arriving, connecting passengers to make that connection without impacting the flight. They tout this as a big deal. Readers of this blog will note that Southwest does that often, as I cited in an example.

They are going to introduce a new, hot breakfast item, wow. A redesigned business class and developing more sustainable fuels. That’s nice.

I commend them for their efforts. Are they really becoming more customer-centric? Don’t know. If they don’t change the metrics by which they manage, it won’t really matter. But time will tell.

Mitch

Metrics That Don’t Matter

As you may know, US airlines keep track of actual on time arrival and departure information and it is publicly available. Late flights arriving or departing are tracked.

A belief exists that this information helps the public select flights. The reality is that most delays are weather or traffic related and all airlines serving airports with weather or traffic problems will have similar results. Thus we have a metric that doesn’t matter.

And yet it drives behavior of the airlines. I have personally had a gate agent close the door in my face because the flight had to leave on time and she was not going to reopen the door to board me. Flight crews and ground personnel obsess about this metric to the detriment of passengers.

Recently I watched Southwest, create a delay of 20 minutes on three flights (the metric is 15 minutes is defined as late). They did this by swapping aircraft to prevent one flight from being 1 hour late and screwing up passengers on that flight from making their connections. Those 20 minute delays (which actually may have resulted in less upon arrival) dinged them on 3 flights, but allowed virtually all passengers to make their connections.

The fact that Southwest exclusively flies 737 aircraft also makes it easier for them to make that swap.

Congrats to Southwest for allowing passengers to come before metrics that don’t matter.

Mitch

Product Marketing vs Product Management

The terms Product Marketing and Product Management are often interchanged, misused and/or misunderstood. They are two of the four roles of Marketing. This video helps to clarify the important distinctions between these two roles.

Mitch & Ralph

Aligning Marketing and Sales

The challenge of creating alignment between Marketing and Sales is decades old … and on-going. We believe the issue continues because people have been looking for a solution in the wrong place. This short video, suggests a real solution.

Ralph and Mitch