More Confirmation That Innovation is a Team Sport

A recent study by the Wharton School confirms that innovation is a team sport. The study was prompted by the apparent reduction in innovation during the Covid-19 pandemic, and the work from home regime.

Productivity overall has not really suffered as a result of working from home, but innovation has. We are not surprised as we have noted for years that innovation is a team event and working in isolation, even with Zoom and other conferencing tools, causes innovation to suffer when people are not together.

Many have the impression that innovation comes from “innovative people.” All people are innovative, it is just where in the innovation process they are best able to provide value. Too many people confuse ideas/creativity with innovation. Creativity is but one part of the innovation process and without the others, innovation fails.

For more input on this subject feel free to download our free white paper: Managing for Innovation.

Mitch

What’s The Purpose Anymore?

I was recently driving thru Oregon and stopped for gas. Before I could get the pump started an attendant came up to me and offered his assistance. I then remembered that it is against the law to pump your own gas in Oregon. (Same is true in New Jersey I believe.)

Obviously I allowed him to proceed, whereupon he asked me if I was paying at the pump or inside. At the pump I said. He helped me navigate the somewhat different screens involved in so doing and then he was at it. I went inside to get some snacks and when I came back the car was full, the hose was back on the pump and fuel door was closed. The attendant was not there and neither was my receipt, so I left.

As I entered the roadway I noticed that my windshield was still dirty, which I had intended to clean while the I was fueling the car, but that process was changed for me. Apparently, at least at this station, they do pump your gas but don’t clean your windshield.

My question is what value does the attendant add? Answer, at least for me, nothing. However he does add to the cost of the fuel I paid for and he does have a non-value-added job.

In my opinion, non-value-added jobs are bad for the economy if they are required and bad for a company if they don’t recognize it. How could this become a value-added job? Pretty simple: look back at what those attendants did when they were the norm and people didn’t pump their own gas and do the things they did: clean the windshield, check tire pressure, ask if the oil level needs to be checked. And like my local 7-11 pump screen does, up-sell me for snacks, drinks, etc.

If the only purpose of the job is because the government mandates it, how can you turn it into an advantage for your company?

Mitch

Customer Experience

As I have noted in prior posts, customer experience is the competitive weapon of the future. Clearly, if you can’t get your marketing right, which is aligning your company with the current and future needs of your customers, all bets are off. But assuming you get that right, then customer experience is how you differentiate.

It’s amazing to me how many companies just don’t get that. My current example is Toll Brothers, the home builder. Well to be precise, per their tag line, America’s Luxury Home Builder. They are a highly rated company that builds a better than average house. They appear to compete on that value proposition. The problem is their customer experience does not align with their value proposition.

My current example is personal, though I have heard from many Toll homeowners that I am not remotely unique. We currently own a home built by Toll. They did a good job with the home and while the experience was not perfect, they made good on their promises and warranties. As with most new homes, they offer a one-year warranty on virtually all items/workmanship.

We recently discovered, after having lived there for 18 months that we did not have a screen for one of our windows. It had never been installed. We have never opened the window, so we never knew, and the home warranty inspector apparently missed it also. Upon finding that the screen was missing, I asked the local office if they would replace it. Their swift answer was no. I pretty much expected that as our community was sold out and they don’t apparently need to care about us anymore.

Not to be deterred, I simply went to their corporate website and logged a complaint with their customer service team. I got an automated email telling me that my issue was important to them and they would respond shortly. After a week of no contact, I tried again. It has now been two weeks since the second contact which was also acknowledged as being important, but still no response.

Clearly, their customer experience lasts only as long as construction and the warranty period. Given how many homes Toll is building just in my town, you would think they would want happy customers and referrals. Not getting one here, and frankly don’t know anyone who would say anything other than their product is better than average.

In a world where customer experience is the competitive advantage, they may be finding difficult times ahead, especially if other builders decide to compete with their product.

Mitch

 

Destroying Brand Integrity and With it … Brand Value

Many people have been skeptical for decades or longer as to the real difference between one brand of gasoline and another. Many suggest that one of the reasons no brand can charge much more than a private brand, much less more than each, other is because there is no real difference.

Others will suggest that it is in the additives, which are mixed in at the station in the underground tanks. Seems suspicious and dubious to me.

And then to make it even easier to doubt a brand’s credibility you have this situation pictured below. A private brand tanker, labeled as such, delivering gasoline to a “high value” branded gas station. But it is full of Chevron with Techron … of course it is, they were just too cheap to brand the delivery truck. Right!

 

 

 

 

 

Mitch

 

 

 

Location, Location, Location

Those three words are often advice given to people looking to gain a competitive advantage. We hear the term in real estate a lot. It is also used for “small real estate” as well; namely location within a retail store. Many large retailers will charge a fee for a premium location like an end-cap or a side stack. These locations are known to help companies sell more of their goods, and the retailer makes more money from increased sales as well as the fee.

Well that’s how it usually works. Not necessarily though.

I recently saw/experienced an example of this while shopping in a grocery store during the CCP virus crisis. Many things are sold out for unknowable reasons such as toilet paper, canned goods, pasta and pasta sauce, to name a few. I was looking for pasta sauce and found almost none in the aisle. As the picture below shows.

 

 

 

 

 

 

However, one aisle over, on a side-stack at the end of the aisle, what do I find? A full display of pasta sauce from a “local” supplier. They had obviously paid for this “premium” location, which back-fired during the stressed-out times shoppers find themselves in today. People look for items “where they belong” and this was not where it belonged so nobody saw it; as evidenced by a nearly full display. (See the picture below)

 

 

 

 

 

 

 

Exceptions to every rule.

Mitch

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